Exhibit 10.1

 

 

 

CREDIT AND SECURITY AGREEMENT

dated as of September 28, 2012

by and among

UNIVERSITY GENERAL HOSPITAL, LP,

UGHS HOSPITALS, INC., and

UNIVERSITY HOSPITAL SYSTEMS, LLP,

UGHS SUPPORT SERVICES, INC.,

UGHS AUTIMIS BILLING, INC.,

UGHS AUTIMIS CODING, INC., AND

SYBARIS GROUP, INC.

as Borrowers,

and

MIDCAP FINANCIAL, LLC,

as Administrative Agent and as a Lender,

and

THE ADDITIONAL LENDERS

FROM TIME TO TIME PARTY HERETO

 

LOGO [g419396g41a29.jpg]

 

 

 

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CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (as the same may be amended, supplemented,
restated or otherwise modified from time to time, the “Agreement”) is dated as
of September 28, 2012 by and among UNIVERSITY GENERAL HOSPITAL, LP, a Texas
limited partnership (“University General Hospital”), UGHS HOSPITALS, INC., a
Texas corporation (“UGHS Hospitals”), UNIVERSITY HOSPITAL SYSTEMS, LLP, a
Delaware limited liability partnership (“UGHS Hospital Systems”) , UGHS SUPPORT
SERVICES, INC., a Texas corporation (“UGHS Support”), UGHS AUTIMIS BILLING,
INC., a Texas corporation (“Autimis Billing”), UGHS AUTIMIS CODING, INC., a
Texas corporation (“Autimis Coding”), SYBARIS GROUP, INC., a Texas corporation
(“Sybaris”), and any additional borrower that may hereafter be added to this
Agreement (collectively, with University General Hospital, UGHS Hospitals, UGHS
Hospital Systems, UGHS Support, Autimis Billing, and Autimis Coding, each
individually as a “Borrower”, and collectively as “Borrowers”), MIDCAP
FINANCIAL, LLC, a Delaware limited liability company, individually as a Lender,
and as Agent, and the financial institutions or other entities from time to time
parties hereto, each as a Lender.

RECITALS

Borrowers have requested that Lenders make available to Borrowers the financing
facilities as described herein. Lenders are willing to extend such credit to
Borrowers under the terms and conditions herein set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Borrowers, Lenders and Agent agree as follows:

ARTICLE 1—DEFINITIONS

Section 1.1 Certain Defined Terms. The following terms have the following
meanings:

“Acceleration Event” means the occurrence of an Event of Default (a) in respect
of which Agent has declared all or any portion of the Obligations to be
immediately due and payable pursuant to Section 10.2, (b) pursuant to
Section 10.1(a), and in respect of which Agent has suspended or terminated the
Revolving Loan Commitment pursuant to Section 10.2, and/or (c) pursuant to
either Section 10.1(e) and/or Section 10.1(f).

“Account Debtor” means “account debtor”, as defined in Article 9 of the UCC, and
any other obligor in respect of an Account.

“Accounts” means, collectively, (a) any right to payment of a monetary
obligation, whether or not earned by performance, (b) without duplication, any
“account” (as defined in the UCC), any accounts receivable (whether in the form
of payments for services rendered or goods sold, rents, license fees or
otherwise), any “health-care-insurance receivables” (as defined in the UCC), any
“payment intangibles” (as defined in the UCC) and all other rights to payment
and/or reimbursement of every kind and description, whether or not earned by
performance, (c) all accounts, “general intangibles” (as defined in the UCC),
Intellectual Property, rights, remedies, Guarantees, “supporting obligations”
(as defined in the UCC), “letter-of-credit rights” (as defined in the UCC) and
security interests in respect of the foregoing, all rights of enforcement and
collection, all books and records evidencing or related to the foregoing, and
all rights under the Financing Documents in respect of the foregoing, (d) all
information and data compiled or derived by any Borrower or to which any
Borrower is entitled in respect of or related to the foregoing, and (e) all
proceeds of any of the foregoing.

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“Acquisition” means the acquisition by any Person, in a single transaction or in
a series of related transactions, of (i) all or any substantial portion of any
properties or assets, whether real, personal or mixed of another Person, or of a
division or other business segment, line or unit of another Person, or (ii) at
least a majority of the voting shares, interests, participations or other
equivalents of capital stock, member interests, partner interests or equivalent
ownership interests of another Person, in each case whether or not involving a
merger or consolidation with such other Person and whether for cash, property,
services, assumption of Debt, securities or otherwise.

“Additional Tranche” means an additional amount of Revolving Loan Commitment
equal to $10,000,000 (it being acknowledged that multiple Additional Tranches
are permitted pursuant to Section 2.1(c) in minimum amounts of $1,000,000 each
for a total Revolving Loan Commitment of up to $25,000,000).

“Agent” means MCF, in its capacity as administrative agent for itself and for
Lenders hereunder, as such capacity is established in, and subject to the
provisions of, Article 11, and the successors and assigns of MCF in such
capacity.

“Affiliate” means, with respect to any Person, (a) any Person that directly or
indirectly controls such Person, (b) any Person which is controlled by or is
under common control with such controlling Person, and (c) each of such Person’s
(other than, with respect to any Lender, any Lender’s) officers or directors (or
Persons functioning in substantially similar roles) and the spouses, parents,
descendants and siblings of such officers, directors or other Persons. As used
in this definition, the term “control” of a Person means the possession,
directly or indirectly, of the power to vote five percent (5%) or more of any
class of voting securities of such Person or to direct or cause the direction of
the management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

“Affiliated Financing Documents” means any credit, loan, letter of credit or
related documents which are, by their terms and by the terms of this Agreement,
cross-defaulted with the Financing Documents, and for which a Credit Party
hereunder is liable or contingently liable for payment or as security for which
a Credit Party hereunder has pledged, assigned or subjected any assets to the
Agent, a Lender or an Affiliate of the Agent or a Lender.

“Affiliated Obligations” means all “Obligations”, as such term is defined in the
Affiliated Financing Documents.

“Amegy Debt” means Debt incurred pursuant to that certain Loan Agreement dated
as of March 27, 2006 (as amended, restated, modified or supplemented from time
to time), between University General Hospital and Amegy Bank National
Association (“Amegy”) subject to that certain Subordination Agreement (the
“Amegy Subordination Agreement”), dated as of the date hereof, by and among
Amegy, the Agent and the Borrowers.

“Anti-Terrorism Laws” means any Laws relating to terrorism or money laundering,
including, without limitation, Executive Order No. 13224 (effective
September 24, 2001), the USA PATRIOT Act, the Laws comprising or implementing
the Bank Secrecy Act, and the Laws administered by OFAC.

“Applicable Margin” means, (a) with respect to Revolving Loans and all other
Obligations (other than Term Loans), two and one-half percent (2.5%), and
(b) with respect to any Term Loan, four and one-half percent (4.5%).

 

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“Asset Disposition” means any sale, lease, license, transfer, assignment or
other consensual disposition by any Credit Party of any asset.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”, as the same may be amended, modified or supplemented from time to
time, and any successor statute thereto.

“Base LIBOR Rate” means, for each Interest Period, the rate per annum,
determined by Agent in accordance with its customary procedures, and utilizing
such electronic or other quotation sources as it considers appropriate (rounded
upwards, if necessary, to the next 1/100%), to be the rate at which Dollar
deposits (for delivery on the first day of such Interest Period or, if such day
is not a Business Day on the preceding Business Day) in the amount of $1,000,000
are offered to major banks in the London interbank market on or about 11:00 a.m.
(Eastern time) two (2) Business Days prior to the commencement of such Interest
Period, for a term comparable to such Interest Period, which determination shall
be conclusive in the absence of manifest error.

“Base Rate” means a per annum rate of interest equal to the greater of (a)(i)
with respect to Revolving Loans and all other Obligations (other than Term
Loans), two percent (2.0%), and (ii) with respect to any Term Loan, two and
one-half percent (2.5%), and (b) the rate of interest announced, from time to
time, within Wells Fargo Bank, N.A. (“Wells Fargo”) at its principal office in
San Francisco as its “prime rate,” with the understanding that the “prime rate”
is one of Wells Fargo’s base rates (not necessarily the lowest of such rates)
and serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto and is evidenced by the recording
thereof after its announcement in such internal publications as Wells Fargo may
designate; provided, however, that Agent may, upon prior written notice to
Borrower, choose a reasonably comparable index or source to use as the basis for
the Base Rate.

“Blocked Person” means any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) owned or controlled
by, or acting for or on behalf of, any Person that is listed in the annex to, or
is otherwise subject to the provisions of, Executive Order No. 13224, (c) with
which any Lender is prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law, (d) that commits, threatens or conspires
to commit or supports “terrorism” as defined in Executive Order No. 13224, or
(e) that is named a “specially designated national” or “blocked person” on the
most current list published by OFAC or other similar list or is named as a
“listed person” or “listed entity” on other lists made under any Anti-Terrorism
Law.

“Borrower” and “Borrowers” mean the entity(ies) described in the first paragraph
of this Agreement and each of their successors and permitted assigns.

“Borrower Representative” means UGHS Hospitals, Inc., in its capacity as
Borrower Representative pursuant to the provisions of Section 2.9, or any
successor Borrower Representative selected by Borrowers and approved by Agent.

“Borrowing Base” means:

(a) the product of (i) eighty-five percent (85%) multiplied by (ii) the
aggregate net amount at such time of the Eligible Accounts; minus

(b) the amount of any reserves and/or adjustments provided for in this
Agreement.

 

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provided, however, that at no time shall Accounts that have not been billed or
invoiced to the appropriate Account Debtor exceed ten percent (10%) of the
aggregate net amount at such time of the Eligible Accounts as described in
clause (a)(ii) above.

“Borrowing Base Certificate” means a certificate, duly executed by a Responsible
Officer of Borrower Representative, appropriately completed and substantially in
the form of Exhibit C hereto.

“Business Day” means any day except a Saturday, Sunday or other day on which
either the New York Stock Exchange is closed, or on which commercial banks in
Washington, DC and New York City are authorized by law to close.

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as the same may be amended
from time to time.

“Change in Control” means any of the following events: (a) any Person or two or
more Persons acting in concert shall have acquired beneficial ownership,
directly or indirectly, of, or shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon consummation, will
result in its or their acquisition of or control over, voting stock of any
Borrower (or other securities convertible into such voting stock) representing
40% or more of the combined voting power of all voting stock of any Borrower or
(b) University General Health System, Inc. ceases to own, directly or
indirectly, 100% of the capital stock of any Credit Party; (c) the Borrower
ceases to own, directly or indirectly, 100% of the capital stock of any of its
Subsidiaries, or (d) the occurrence of a “Change of Control”, “Change in
Control”, or terms of similar import under any document or instrument governing
or relating to Debt of or equity in such Person. As used herein, “beneficial
ownership” shall have the meaning provided in Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934.

“Closing Date” means the date of this Agreement.

“CMS” means the federal Centers for Medicare and Medicaid Services (formerly the
federal Health Care Financing Administration), and any successor Governmental
Authority.

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

“Collateral” means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of, Agent, for
the benefit of Agent and Lenders, pursuant to this Agreement and the Security
Documents, including, without limitation, all of the property described in
Schedule 9.1 hereto.

“Commitment Annex” means Annex A to this Agreement.

“Commitment Expiry Date” means the date that is three (3) years following the
Closing Date.

“Common Stock” means the common stock of University General Hospital, par value
$0.001 per share.

“Compliance Certificate” means a certificate, duly executed by a Responsible
Officer of Borrower Representative, appropriately completed and substantially in
the form of Exhibit B hereto.

 

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“Consolidated Subsidiary” means, at any date, any Subsidiary the accounts of
which would be consolidated with those of “parent” Borrower (or any other
Person, as the context may require hereunder) in its consolidated financial
statements if such statements were prepared as of such date.

“Contingent Obligation” means, with respect to any Person, any direct or
indirect liability of such Person: (a) with respect to any Debt of another
Person (a “Third Party Obligation”) if the purpose or intent of such Person
incurring such liability, or the effect thereof, is to provide assurance to the
obligee of such Third Party Obligation that such Third Party Obligation will be
paid or discharged, or that any agreement relating thereto will be complied
with, or that any holder of such Third Party Obligation will be protected, in
whole or in part, against loss with respect thereto; (b) with respect to any
undrawn portion of any letter of credit issued for the account of such Person or
as to which such Person is otherwise liable for the reimbursement of any
drawing; (c) to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement; or (d) for any
obligations of another Person pursuant to any Guarantee or pursuant to any
agreement to purchase, repurchase or otherwise acquire any obligation or any
property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to preserve the solvency, financial condition or
level of income of another Person. The amount of any Contingent Obligation shall
be equal to the amount of the obligation so Guaranteed or otherwise supported
or, if not a fixed and determinable amount, the maximum amount so Guaranteed or
otherwise supported.

“Controlled Group” means all members of any group of corporations and all
members of a group of trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA.

“Credit Exposure” means, at any time, any portion of the Revolving Loan
Commitment or Term Loan Commitment that remains outstanding; provided, however,
that no Credit Exposure shall be deemed to exist solely due to the existence of
contingent indemnification liability, absent the assertion of a claim, or the
known existence of a claim reasonably likely to be asserted, with respect
thereto.

“Credit Party” means any Guarantor under a Guarantee of the Obligations or any
part thereof, any Borrower and any other Person (other than Agent, a Lender or a
participant of a Lender), whether now existing or hereafter acquired or formed,
that becomes obligated as a borrower, guarantor, surety, indemnitor, pledgor,
assignor or other obligor under any Financing Document; and “Credit Parties”
means all such Persons, collectively.

“Debt” of a Person means at any date, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services, except
trade accounts payable arising and paid on a timely basis and in the Ordinary
Course of Business, (d) all capital leases of such Person, (e) all
non-contingent obligations of such Person to reimburse any bank or other Person
in respect of amounts paid under a letter of credit, banker’s acceptance or
similar instrument, (f) all equity securities of such Person subject to
repurchase or redemption other than at the sole option of such Person, (g) all
obligations secured by a Lien on any asset of such Person, whether or not such
obligation is otherwise an obligation of such Person, (h) “earnouts”, purchase
price adjustments, profit sharing arrangements, deferred purchase money amounts
and similar payment obligations or continuing obligations of any nature of such
Person arising out of purchase and sale contracts, (i) all Debt of others
Guaranteed by such Person, (j) off-balance sheet liabilities and/or Pension Plan
or Multiemployer Plan liabilities of such Person, (k) obligations arising under
non-compete agreements, and (l) obligations arising under bonus, deferred
compensation, incentive compensation or similar arrangements, other than those
arising in the Ordinary Course of Business. Without duplication of any of the
foregoing, Debt of Borrowers shall include any and all Loans.

 

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“Default” means any condition or event which with the giving of notice or lapse
of time or both would, unless cured or waived, become an Event of Default.

“Deposit Account” means a “deposit account” (as defined in Article 9 of the
UCC), an investment account, or other account in which funds are held or
invested for credit to or for the benefit of any Borrower.

“Deposit Account Control Agreement” means an agreement, in form and substance
satisfactory to Agent, among Agent, any Borrower and each financial institution
in which such Borrower maintains a Deposit Account, which agreement provides
that (a) such financial institution shall comply with instructions originated by
Agent directing disposition of the funds in such Deposit Account without further
consent by the applicable Borrower, and (b) such financial institution shall
agree that it shall have no Lien on, or right of setoff or recoupment against,
such Deposit Account or the contents thereof, other than in respect of usual and
customary service fees and returned items for which Agent has been given value,
in each such case expressly consented to by Agent, and containing such other
terms and conditions as Agent may require, including as to any such agreement
pertaining to any Lockbox Account, providing that such financial institution
shall wire, or otherwise transfer, in immediately available funds, on a daily
basis to the Payment Account all funds received or deposited into such Lockbox
or Lockbox Account.

“Deposit Account Restriction Agreement” means an agreement, in form and
substance satisfactory to Agent, among Agent, a Borrower and each bank in which
such Borrower maintains a Deposit Account and into which Deposit Account
proceeds of Accounts from Governmental Account Debtors are paid directly by the
Governmental Account Debtor, and which agreement provides that (a) such bank
shall not enter into an agreement with respect to such Deposit Account pursuant
to which the bank agrees to comply with instructions originated by any Person,
other than the Borrower that owns the Deposit Account, directing disposition of
the funds in such Deposit Account, and (b) such bank shall agree that it shall
have no Lien on, or right of setoff or recoupment against, such Deposit Account
or the contents thereof, other than in respect of usual and customary service
fees and returned items for which Agent has been given value, in each such case
expressly consented to by Agent, and containing such other terms and conditions
as Agent may require, including as to any such agreement pertaining to any
Lockbox Account, providing that such bank shall wire, or otherwise transfer, in
immediately available funds, on a daily basis to the Payment Account and/or a
Lockbox Account subject to a Deposit Account Control Agreement (as Agent shall
elect and direct at the time such agreement is signed) all funds received or
deposited into such Lockbox Account and associated Lockbox unless the applicable
Borrower shall otherwise instruct the bank in writing, subject to the
limitations set forth in the Deposit Account Restriction Agreement and the other
Financing Documents.

“Dollars” or “$” means the lawful currency of the United States of America.

 

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“Eligible Account” means, subject to the criteria below, an account receivable
of University General Hospital, UGHS Support, Autimis Billing, Autimis Coding or
Sybaris (each an “Eligible Account Borrower”), which was generated in the
Ordinary Course of Business, which was generated originally in the name of an
Eligible Account Borrower and not acquired via assignment or otherwise, and
which Agent, in its good faith credit judgment and discretion, deems to be an
Eligible Account. The net amount of an Eligible Account at any time shall be
(a) the face amount of such Eligible Account as originally billed minus all cash
collections and other proceeds of such Account received from or on behalf of the
Account Debtor thereunder as of such date and any and all returns, rebates,
discounts (which may, at Agent’s option, be calculated on shortest terms),
credits, allowances or excise taxes of any nature at any time issued, owing,
claimed by Account Debtors, granted, outstanding or payable in connection with
such Accounts at such time, and (b) adjusted by applying percentages (known as
“liquidity factors”) by payor and/or payor class based upon such Eligible
Account Borrower’s actual recent collection history for each such payor and/or
payor class in a manner consistent with Agent’s underwriting practices and
procedures. Such liquidity factors may be adjusted by Agent from time to time as
warranted by Agent’s underwriting practices and procedures and using Agent’s
good faith credit judgment. Without limiting the generality of the foregoing, no
Account shall be an Eligible Account if:

(a) the Account remains unpaid more than one hundred and fifty (150) days past
the claim or invoice date (but in no event more than one hundred and eighty
(180) days after the applicable goods or services have been rendered or
delivered);

(b) the Account is subject to any defense, set-off, recoupment, counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance, or adjustment
of any kind (but only to the extent of such defense, set-off, recoupment,
counterclaim, deduction, discount, credit, chargeback, freight claim, allowance,
or adjustment), or University General Hospital is not able to bring suit or
otherwise enforce its remedies against the Account Debtor through judicial
process;

(c) if the Account arises from the sale of goods, any part of any goods the sale
of which has given rise to the Account has been returned, rejected, lost, or
damaged (but only to the extent that such goods have been so returned, rejected,
lost or damaged);

(d) if the Account arises from the sale of goods, the sale was not an absolute,
bona fide sale, or the sale was made on consignment or on approval or on a
sale-or-return or bill-and-hold or progress billing basis, or the sale was made
subject to any other repurchase or return agreement, or the goods have not been
shipped to the Account Debtor or its designee or the sale was not made in
compliance with applicable Laws;

(e) if the Account arises from the performance of services, the services have
not actually been performed or the services were undertaken in violation of any
law or the Account represents a progress billing for which services have not
been fully and completely rendered;

(f) the Account is subject to a Lien other than a Permitted Lien, or Agent does
not have a first priority, perfected Lien on such Account;

(g) the Account is evidenced by Chattel Paper or an Instrument of any kind, or
has been reduced to judgment, unless such Chattel Paper or Instrument has been
delivered to Agent;

(h) the Account Debtor is an Affiliate or Subsidiary of a Credit Party, or if
the Account Debtor holds any Debt of a Credit Party;

(i) except for Accounts owed by Medicare or Medicaid programs, more than fifty
percent (50%) of the aggregate balance of all Accounts owing from the Account
Debtor obligated on the Account are ineligible under subclause (a) above (in
which case all Accounts from such Account Debtor shall be ineligible);

(j) without limiting the provisions of clause (i) above, fifty percent (50%) or
more of the aggregate unpaid Accounts from the Account Debtor obligated on the
Account are not deemed Eligible Accounts under this Agreement for any reason;

 

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(k) except for Accounts owed by Medicare or Medicaid programs, the total unpaid
Accounts of the Account Debtor obligated on the Account exceed twenty percent
(20%) of the net amount of all Eligible Accounts owing from all Account Debtors
(but only the amount of the Accounts of such Account Debtor exceeding such
twenty percent (20%) limitation shall be considered ineligible);

(l) any covenant, representation or warranty contained in the Financing
Documents with respect to such Account has been breached in any respect;

(m) the Account is unbilled for more than thirty (30) days after the date of
service or has not been invoiced to the Account Debtor within thirty (30) days
after the date of service in accordance with the procedures and requirements of
the applicable Account Debtor; provided, however, that Accounts that are
unbilled or not invoiced shall be properly recorded on University General
Hospital’s accounting systems at all times; and provided, further, for the
avoidance of doubt, that Accounts that are unbilled for thirty (30) or fewer
days from the date of service shall not be ineligible pursuant to this clause
(m);

(n) except for Accounts owed by Medicare or Medicaid programs, the Account is an
obligation of an Account Debtor that is the federal, state or local government
or any political subdivision thereof, unless Agent has agreed to the contrary in
writing and Agent has received from the Account Debtor the acknowledgement of
Agent’s notice of assignment of such obligation pursuant to this Agreement;

(o) the Account is an obligation of an Account Debtor that has suspended
business, made a general assignment for the benefit of creditors, is unable to
pay its debts as they become due or as to which a petition has been filed
(voluntary or involuntary) under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or the Account is an Account as to which
any facts, events or occurrences exist which could reasonably be expected to
impair the validity, enforceability or collectibility of such Account or reduce
the amount payable or delay payment thereunder;

(p) the Account Debtor has its principal place of business or executive office
outside the United States;

(q) the Account is payable in a currency other than United States dollars;

(r) the Account Debtor is an individual;

(s) University General Hospital has not signed and delivered to Agent notices,
in the form requested by Agent, directing the Account Debtors to make payment to
the applicable Lockbox Account;

(t) the Account includes late charges or finance charges (but only such portion
of the Account shall be ineligible);

(u) the Account arises out of the sale of any Inventory upon which any other
Person holds, claims or asserts a Lien; or

(v) the Account or Account Debtor fails to meet such other specifications and
requirements which may from time to time be established by Agent in its good
faith credit judgment and discretion.

 

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“Environmental Laws” means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
governmental directives or requirements, as well as common law, 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 that apply to any Borrower or any
Project and relate to Hazardous Materials, 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 Occupational
Safety and Health Act (29 U.S.C. § 651 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 and judicial interpretations thereof.

“Environmental Liens” means all Liens and other encumbrances imposed pursuant to
any Environmental Law, whether due to any act or omission of any Borrower or any
other Person.

“ERISA” means the Employee Retirement Income Security Act of 1974, as the same
may be amended, modified or supplemented from time to time, and any successor
statute thereto, and any and all rules or regulations promulgated from time to
time thereunder.

“ERISA Plan” means any “employee benefit plan”, as such term is defined in
Section 3(3) of ERISA (other than a Multiemployer Plan), which any Borrower
maintains, sponsors or contributes to, or, in the case of an employee benefit
plan which is subject to Section 412 of the Code or Title IV of ERISA, to which
any Borrower or any member of the Controlled Group may have any liability,
including any liability by reason of having been a substantial employer within
the meaning of Section 4063 of ERISA at any time during the preceding five
(5) years, or by reason of being deemed to be a contributing sponsor under
Section 4069 of ERISA.

“Event of Default” has the meaning set forth in Section 10.1.

“Federal Healthcare Programs” means the Medicare, Medicaid and TRICARE programs.

“Fee Letter” means that certain letter agreement between Agent and Borrowers
relating to fees payable to Agent, for its own account, in connection with the
execution of this Agreement.

“Financing Documents” means this Agreement, any Notes, the Security Documents,
the Fee Letter, any subordination or intercreditor agreement pursuant to which
any Debt and/or any Liens securing such Debt is subordinated to all or any
portion of the Obligations and all other documents, instruments and agreements
related to the Obligations and heretofore executed, executed concurrently
herewith or executed at any time and from time to time hereafter, as any or all
of the same may be amended, supplemented, restated or otherwise modified from
time to time.

“GAAP” means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the date
of determination.

 

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“General Intangible” means any “general intangible” as defined in Article 9 of
the UCC, and any personal property, including things in action, other than
accounts, chattel paper, commercial tort claims, deposit accounts, documents,
goods, instruments, investment property, letter-of-credit rights, letters of
credit, money, and oil, gas or other minerals before extraction, but including
payment intangibles and software.

“Governmental Account Debtor” means any Account Debtor that is a Governmental
Authority, including, without limitation, Medicare and Medicaid.

“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 stock or capital ownership or otherwise) by any of the foregoing,
whether domestic or foreign.

“Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise), or
(b) entered into for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided, however, that
the term Guarantee shall not include endorsements for collection or deposit in
the Ordinary Course of Business. The term “Guarantee” used as a verb has a
corresponding meaning.

“Guarantor” means any Credit Party, including, without limitation, University
General Health System, Inc., that has executed or delivered, or shall in the
future execute or deliver, any Guarantee of any portion of the Obligations.

“Hazardous Materials” means petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives, flammable
materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos-containing
materials; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which on the Project is
prohibited by any Environmental Laws; toxic mold, any substance that requires
special handling; and any other material or substance now or in the future
defined as a “hazardous substance,” “hazardous material,” “hazardous waste,”
“toxic substance,” “toxic pollutant,” “contaminant,” “pollutant” or other words
of similar import within the meaning of any Environmental Law, including:
(a) any “hazardous substance” defined as such in (or for purposes of) CERCLA, or
any so-called “superfund” or “superlien” Law, including the judicial
interpretation thereof; (b) any “pollutant or contaminant” as defined in 42
U.S.C.A. § 9601(33); (c) any material now defined as “hazardous waste” pursuant
to 40 C.F.R. Part 260; (d) any petroleum or petroleum by-products, including
crude oil or any fraction thereof; (e) natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel; (f) any “hazardous
chemical” as defined pursuant to 29 C.F.R. Part 1910; (g) any toxic or harmful
substances, wastes, materials, pollutants or contaminants (including, without
limitation, asbestos, polychlorinated biphenyls (“PCB’s”), flammable explosives,
radioactive materials, infectious substances, materials containing lead-based
paint or raw materials which include hazardous constituents); and (h) any other
toxic substance or contaminant that is subject to any Environmental Laws or
other past or present requirement of any Governmental Authority.

 

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“Hazardous Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.

“Healthcare Laws” means all applicable Laws relating to the possession, control,
warehousing, marketing, sale and distribution of pharmaceuticals, the operation
of medical or senior housing facilities (such as, but not limited to, nursing
homes, skilled nursing facilities, rehabilitation hospitals, intermediate care
facilities and adult care facilities), patient healthcare, patient healthcare
information, patient abuse, the quality and adequacy of medical care, rate
setting, equipment, personnel, operating policies, fee splitting, including,
without limitation, (a) all statutes, rules, regulations, and guidance relating
to any Federal Healthcare Program, (b) all federal and state fraud and abuse
laws, including, without limitation, the federal Anti-Kickback Statute (42
U.S.C. §1320a-7b(6)), the Stark Law (42 U.S.C. §1395nn), the civil False Claims
Act (31 U.S.C. §3729 et seq.), (c) the Patient Protection and Affordable Care
Act (P.L. 111-1468), (d) The Health Care and Education Reconciliation Act of
2010 (P.L. 111-152), (e) quality, safety and accreditation standards and
requirements of all applicable state laws or regulatory bodies, (f) all laws,
policies, procedures, requirements and regulations pursuant to which Healthcare
Permits are issued, (g) all state and federal laws governing patient
confidentiality and privacy, and (g) any and all other applicable health care
laws, regulations, manual provisions, policies and administrative guidance, each
of (a) through (h) as may be amended from time to time.

“Healthcare Permit” means a Permit (a) issued or required under Healthcare Laws
applicable to the business of any Borrower or any of its Subsidiaries or
necessary in the possession, ownership, warehousing, marketing, promoting, sale,
labeling, furnishing, distribution or delivery of goods or services under
Healthcare Laws applicable to the business of any Borrower or any of its
Subsidiaries, (b) issued by any Person from which any Borrower has, as of the
Closing Date, received an accreditation, and/or (c) issued or required under
Healthcare Laws applicable to the ownership or operation of any business
location of a Borrower.

“Instrument” means “instrument”, as defined in Article 9 of the UCC.

“Intellectual Property” means, with respect to any Person, all patents, patent
applications and like protections, including improvements divisions,
continuation, renewals, reissues, extensions and continuations in part of the
same, trademarks, trade names, trade styles, trade dress, service marks, logos
and other business identifiers and, to the extent permitted under applicable
law, any applications therefore, whether registered or not, and the goodwill of
the business of such Person connected with and symbolized thereby, copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative works, whether published or unpublished,
technology, know-how and processes, operating manuals, trade secrets, computer
hardware and software, rights to unpatented inventions and all applications and
licenses therefor, used in or necessary for the conduct of business by such
Person and all claims for damages by way of any past, present or future
infringement of any of the foregoing.

“Interest Period” means any period commencing on the first day of a calendar
month and ending on the last day of such calendar month.

“Inventory” means “inventory” as defined in Article 9 of the UCC.

 

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“Investment” means any investment in any Person, whether by means of acquiring
(whether for cash, property, services, securities or otherwise), making or
holding Debt (including any intercompany Debt), securities, capital
contributions, loans, time deposits, advances, Guarantees or otherwise. The
amount of any Investment shall be the original cost of such Investment plus the
cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect
thereto.

“Laws” means any and all federal, state, provincial, territorial, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, injunctions, permits, governmental agreements
and governmental restrictions, whether now or hereafter in effect, which are
applicable to any Credit Party in any particular circumstance. “Laws” includes,
without limitation, Healthcare Laws and Environmental Laws.

“Lender” means each of (a) MCF, in its capacity as a lender hereunder, (b) each
other Person party hereto in its capacity as a lender hereunder, (c) each other
Person that becomes a party hereto as Lender pursuant to Section 11.17, and
(d) the respective successors of all of the foregoing, and “Lenders” means all
of the foregoing.

“LIBOR Rate” means, for each Loan, a per annum rate of interest equal to the
greater of (a)(i) with respect to Revolving Loans and all other Obligations
(other than Term Loans), two percent (2.0%), and (ii) with respect to any Term
Loan, two and one-half percent (2.5%), and (b) the rate determined by Agent
(rounded upwards, if necessary, to the next 1/100th%) by dividing (i) the Base
LIBOR Rate for the Interest Period, by (ii) the sum of one minus the daily
average during such Interest Period of the aggregate maximum reserve requirement
(expressed as a decimal) then imposed under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor thereto) for
“Eurocurrency Liabilities” (as defined therein).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, in respect of such asset. For the
purposes of this Agreement and the other Financing Documents, any Borrower or
any Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.

“Litigation” means any action, suit or proceeding before any court, mediator,
arbitrator or Governmental Authority.

“Loan Account” has the meaning set forth in Section 2.6(b).

“Loan(s)” means the Term Loan, the Revolving Loans and each and every advance
under the Term Loan, or any combination of the foregoing, as the context may
require. All references herein to the “making” of a Loan or words of similar
import shall mean, with respect to the Term Loan, the making of any advance in
respect of a Term Loan.

“Lockbox” has the meaning set forth in Section 2.11.

“Lockbox Account” means an account or accounts maintained at the Lockbox Bank
into which collections of Accounts are paid, which account or accounts shall be,
if requested by Agent, opened in the name of Agent (or a nominee of Agent).

“Lockbox Bank” has the meaning set forth in Section 2.11.

 

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“Material Adverse Effect” means with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, (a) a material
adverse change in, or a material adverse effect upon, any of (i) the condition
(financial or otherwise), operations, business, properties or prospects of any
of the Credit Parties, (ii) the rights and remedies of Agent or Lenders under
any Financing Document, or the ability of any Credit Party to perform any of its
obligations under any Financing Document to which it is a party, (iii) the
legality, validity or enforceability of any Financing Document, (iv) the
existence, perfection or priority of any security interest granted in any
Financing Document, (v) the value of any material Collateral, (vi) any Credit
Party’s or Operator’s ability to accept, admit and/or retain patients or
residents, (vii) the rate at which any Third Party Payor reimburses a Credit
Party for goods or services provided by such Credit Party, (viii) the use or
scope of any Healthcare Permits, (ix) the continued participation by any Credit
Party in the Medicaid or Medicare programs or any other Third Party Payor
Program at then current rate certifications or levels; (b) an impairment to the
likelihood that Eligible Accounts in general will be collected and paid in the
Ordinary Course of Business of any Borrower and upon the same schedule and with
the same frequency as such Borrowers’ recent collections history; or (c) the
imposition of a fine or penalty against or the creation of any similar liability
of any Credit Party or Operator to any Governmental Authority under any
Healthcare Law in excess of $200,000.00.

“Material Contracts” has the meaning set forth in Section 3.17.

“Maximum Lawful Rate” has the meaning set forth in Section 2.7.

“MCF” means MidCap Financial, LLC, and its successors and assigns.

“Medicaid” means the medical assistance programs administered by state agencies
and approved by CMS pursuant to the terms of Title XIX of the Social Security
Act, codified at 42 U.S.C. 1396 et seq.

“Medicare” means the program of health benefits for the aged and disabled
administered by CMS pursuant to the terms of Title XVIII of the Social Security
Act, codified at 42 U.S.C. 1395 et seq.

“Multiemployer Plan” means a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA to which any Borrower or any other member of the
Controlled Group (or any Person who in the last five years was a member of the
Controlled Group) is making or accruing an obligation to make contributions or
has within the preceding five plan years (as determined on the applicable date
of determination) made contributions.

“Notes” has the meaning set forth in Section 2.3.

“Notice of Borrowing” means a notice of a Responsible Officer of Borrower
Representative, appropriately completed and substantially in the form of
Exhibit D hereto.

“Obligations” means all obligations, liabilities and indebtedness (monetary
(including post-petition interest, fees, obligations for costs and expense and
indemnity obligations,, whether or not allowable or allowed) or otherwise) of
each Credit Party under this Agreement or any other Financing Document, in each
case howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due.

“OFAC” means the U.S. Department of Treasury Office of Foreign Assets Control.

 

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“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

“Operative Documents” means the Financing Documents, Subordinated Debt
Documents, and any documents effecting any purchase or sale or other transaction
that is closing contemporaneously with the closing of the financing under this
Agreement.

“Operator” means the singular or collective (as the context requires) reference
to the following Persons: (a) any Borrower that is properly licensed to operate
a Project, or is otherwise providing or furnishing goods or services, or is
otherwise providing or furnishing goods or services (other than the mere leasing
of a Project as a lessor and the collection of rentals in connection therewith)
from a Project, and/or (b) any Person with whom a Borrower has contracted for
management or other services for a Project.

“Ordinary Course of Business” means, in respect of any transaction involving any
Credit Party, the ordinary course of business of such Credit Party, as conducted
by such Credit Party in accordance with past practices.

“Organizational Documents” means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability company or members agreement), including any and
all shareholder agreements or voting agreements relating to the capital stock or
other equity interests of such Person.

“Payment Account” means the account specified on the signature pages hereof into
which all payments by or on behalf of each Borrower to Agent under the Financing
Documents shall be made, or such other account as Agent shall from time to time
specify by notice to Borrower Representative.

“Payment Notification” means a written notification substantially in the form of
Exhibit E hereto.

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

“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code
or Title IV of ERISA.

“Permits” means all governmental licenses, authorizations, provider numbers,
supplier numbers, registrations, permits, drug or device authorizations and
approvals, certificates, franchises, qualifications, accreditations, consents
and approvals of a Credit Party required under all applicable Laws and required
for such Credit Party in order to carry on its business as now conducted,
including, without limitation, Healthcare Permits.

“Permitted Affiliate” means with respect to any Person (a) any Person that
directly or indirectly controls such Person, and (b) any Person which is
controlled by or is under common control with such controlling Person. As used
in this definition, the term “control” of a Person means the possession,
directly or indirectly, of the power to vote eighty percent (80%) or more of any
class of voting securities of such Person or to direct or cause the direction of
the management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

 

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“Permitted Acquisition” means an Acquisition (a) for which projections (prepared
by Borrowers in good faith and on assumptions believed by such Borrower to be
fair and reasonable in light of current business conditions) show a full
recovery of Permitted Investments made in connection with such Acquisition
within twelve (12) months from the date of such Acquisition, and (b) approved by
Agent in advance in writing, provided, that Agent shall act in good faith and
exercise commercially reasonable judgment in reviewing such proposed
Acquisition, including, without limitation, considering (i) projections and
financial statements giving pro forma effect to such proposed Acquisition,
(ii) final copies of all Acquisition documentation and such other documents and
information requested by Agent, including, without limitation, documents and
information necessary to analyze such Acquisition’s compliance with all
Healthcare Laws, and (iii) Agent’s internal analysis of such Acquisition’s
effects on the creditworthiness of the Borrowers individually or in the
aggregate.

“Permitted Asset Dispositions” means the following Asset Dispositions, provided,
however, that at the time of such Asset Disposition, no Default or Event of
Default exists or would result from such Asset Disposition: (a) dispositions in
the Ordinary Course of Business and not pursuant to any bulk sale,
(b) dispositions approved by Agent, (c) dispositions to any Borrower, and
(d) other dispositions of assets (other than Accounts) for not less than the
fair market value thereof, provided, that the aggregate consideration for all
assets disposed of in reliance on this clause (d) shall not exceed $100,000 in
any fiscal year and at least fifty percent (50%) of such aggregate consideration
shall be payable in cash.

“Permitted Contest” means, with respect to any tax obligation or other
obligation allegedly or potentially owing from any Borrower or its Subsidiary to
any governmental tax authority or other third party, a contest maintained in
good faith by appropriate proceedings promptly instituted and diligently
conducted and with respect to which such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made on the
books and records and financial statements of the applicable Credit Party(ies);
provided, however, that (a) compliance with the obligation that is the subject
of such contest is effectively stayed during such challenge; (b) Borrowers’ and
its Subsidiaries’ title to, and its right to use, the Collateral is not
adversely affected thereby and Agent’s Lien and priority on the Collateral are
not adversely affected, altered or impaired thereby; (c) Borrowers have given
prior written notice to Agent of a Borrower’s or its Subsidiary’s intent to so
contest the obligation; (d) the Collateral or any part thereof or any interest
therein shall not be in any danger of being sold, forfeited or lost by reason of
such contest by Borrowers or its Subsidiaries; (e) Borrowers have given Agent
notice of the commencement of such contest and upon request by Agent, from time
to time, notice of the status of such contest by Borrowers and/or confirmation
of the continuing satisfaction of this definition; and (f) upon a final
determination of such contest, Borrowers and its Subsidiaries shall promptly
comply with the requirements thereof.

“Permitted Contingent Obligations” means (a) Contingent Obligations arising in
respect of the Debt under the Financing Documents; (b) Contingent Obligations
resulting from endorsements for collection or deposit in the Ordinary Course of
Business; (c) Contingent Obligations outstanding on the date of this Agreement
and set forth on Schedule 5.1 (but not including any refinancings, extensions,
increases or amendments to the indebtedness underlying such Contingent
Obligations other than extensions of the maturity thereof without any other
change in terms); (d) Contingent Obligations incurred in the Ordinary Course of
Business with respect to surety and appeal bonds, performance bonds and other
similar obligations not to exceed $25,000 in the aggregate at any time
outstanding; (f) Contingent Obligations arising under indemnity agreements with
title insurers to cause such title insurers to issue to Agent mortgagee title
insurance policies; (g) Contingent Obligations arising with respect to customary
indemnification obligations in favor of purchasers in connection with
dispositions of personal property assets permitted under Section 5.6;
(h) Contingent Obligations approved by Agent incurred in connection with a
Permitted Acquisition; and (i) other Contingent Obligations not permitted by
clauses (a) through (h) above, not to exceed $25,000 in the aggregate at any
time outstanding.

 

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“Permitted Debt” means: (a) Borrowers’ and their Subsidiaries’ Debt to Agent and
each Lender under this Agreement and the other Financing Documents; (b) Debt
incurred as a result of endorsing negotiable instruments received in the
Ordinary Course of Business; (c) purchase money Debt not to exceed $500,000 at
any time (whether in the form of a loan or a lease) used solely to acquire
equipment used in the Ordinary Course of Business and secured only by such
equipment; (d) Debt existing on the date of this Agreement and described on
Schedule 5.1 (but not including any refinancings, extensions, increases or
amendments to such Debt other than extensions of the maturity thereof without
any other change in terms); (e) Debt in the form of insurance premiums financed
through the applicable insurance company; (f) trade accounts payable arising and
paid on a timely basis and in the Ordinary Course of Business; (g) Subordinated
Debt, and (h) Debt approved by Agent incurred in connection with a Permitted
Acquisition.

“Permitted Distributions” means the following Restricted Distributions:
(a) dividends by any Subsidiary of any Borrower to such parent Borrower;
(b) dividends payable solely in common stock; (c) repurchases of stock of former
employees, directors or consultants pursuant to stock purchase agreements so
long as an Event of Default does not exist at the time of such repurchase and
would not exist after giving effect to such repurchase, provided, however, that
such repurchase does not exceed $50,000 in the aggregate per fiscal year; and
(d) dividends paid on University General Health System, Inc.’s Series C
Convertible Preferred Stock, provided, however, that such dividends shall not
exceed $80,000 per fiscal quarter.

“Permitted Investments” means: (a) Investments shown on Schedule 5.7 and
existing on the Closing Date; (b) (i) cash equivalents, and (ii) any similar
short term Investments permitted by Borrowers’ and its Subsidiaries’ investment
policies, as amended from time to time, provided, however, that such investment
policy (and any such amendment thereto) has been approved by Agent;
(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the Ordinary Course of
Business; (d) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the Ordinary Course of
Business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrowers or their Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrowers’ Board of
Directors (or other governing body), but the aggregate of all such loans
outstanding may not exceed $50,000 at any time; (e) Investments (including debt
obligations) received in connection with the bankruptcy or reorganization of
customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the Ordinary Course of
Business; (f) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the Ordinary Course of Business, provided, however, that this
subpart (f) shall not apply to Investments of Borrowers in any Subsidiary;
(g) Investments consisting of deposit accounts in which Agent has received a
Deposit Account Control Agreement; (h) Investments by any Borrower in any other
Borrower made in compliance with Section 4.11(c); (i) Investments among
Subsidiaries that are not Credit Parties, (j) Investments approved by Agent in
connection with Permitted Acquisitions; and (k) other Investments in an amount
not exceeding $100,000 in the aggregate.

 

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“Permitted Liens” means: (a) deposits or pledges of cash to secure obligations
under workmen’s compensation, social security or similar laws, or under
unemployment insurance (but excluding Liens arising under ERISA) pertaining to a
Borrower’s or its Subsidiary’s employees, if any; (b) deposits or pledges of
cash to secure bids, tenders, contracts (other than contracts for the payment of
money or the deferred purchase price of property or services), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the Ordinary Course of Business; (c) carrier’s, warehousemen’s,
mechanic’s, workmen’s, materialmen’s or other like Liens on Collateral, other
than any Collateral which is part of the Borrowing Base, arising in the Ordinary
Course of Business with respect to obligations which are not due, or which are
being contested pursuant to a Permitted Contest; (d) Liens on Collateral, other
than Accounts, for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or the subject of a Permitted
Contest; (e) attachments, appeal bonds, judgments and other similar Liens on
Collateral other than Accounts, for sums not exceeding $100,000 in the aggregate
arising in connection with court proceedings; provided, however, that the
execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are the subject of a Permitted Contest; (f) with respect
to real estate, easements, rights of way, restrictions, minor defects or
irregularities of title, none of which, individually or in the aggregate,
materially interfere with the benefits of the security intended to be provided
by the Security Documents, materially affect the value or marketability of the
Collateral, impair the use or operation of the Collateral for the use currently
being made thereof or impair Borrowers’ ability to pay the Obligations in a
timely manner or impair the use of the Collateral or the ordinary conduct of the
business of any Borrower or any Subsidiary and which, in the case of any real
estate which is part of the Collateral, are set forth as exceptions to or
subordinate matters in the title insurance policy accepted by Agent insuring the
lien of the Security Documents; (g) Liens and encumbrances in favor of Agent
under the Financing Documents; (h) Liens on Collateral, other than Collateral
which is part of the Borrowing Base, existing on the date hereof and set forth
on Schedule 5.2; (i) Liens on property of a Person existing at the time such
Person becomes a Borrower or is merged into or consolidated with any Borrower in
a Permitted Acquisition securing Debt (in the aggregate for all such Persons at
any time) of less than $250,000, provided such Liens (1) were not created in
contemplation of such merger, consolidation or acquisition, (2) do not extend to
Accounts (3) do not extend to any assets other than those of the Person merged
into, consolidated with, or acquired by such Borrower, and (4) would be
Permitted Liens under the other provisions hereof; (j) Liens on tangible assets
acquired in Permitted Acquisitions to secure Debt (in the aggregate for all such
Permitted Acquisitions at any time) of less than $1,000,000 to sellers as
consideration for such Permitted Acquisitions, provided such Liens (1) do not
extend to Accounts and (2) are subject to a Subordination Agreement, (k) any
Lien on any equipment securing Debt permitted under subpart (c) of the
definition of Permitted Debt, provided, however, that such Lien attaches
concurrently with or within twenty (20) days after the acquisition thereof; and
(l) Liens and encumbrances in favor of the holders of the Affiliated Financing
Documents.

“Permitted Modifications” means (a) such amendments or other modifications to a
Borrower’s or Subsidiary’s Organizational Documents as are required under this
Agreement or by applicable Law and fully disclosed to Agent within thirty
(30) days after such amendments or modifications have become effective, and
(b) such amendments or modifications to a Borrower’s or Subsidiary’s
Organizational Documents (other than those involving a change in the name of a
Borrower or Subsidiary or involving a reorganization of a Borrower or Subsidiary
under the laws of a different jurisdiction) that would not adversely affect the
rights and interests of the Agent or Lenders and fully disclosed to Agent within
thirty (30) days after such amendments or modifications have become effective.

“Person” means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any Governmental Authority.

“Project” means any facility from which a Borrower provides or furnishes goods
or services, including, without limitation, any hospital or similar facility,
and includes, without limitation, any business location of a Borrower which is
subject to any Healthcare Permit.

 

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“Pro Rata Share” means (a) with respect to a Lender’s obligation to make
advances in respect of a Term Loan and such Lender’s right to receive payments
of principal and interest with respect to the Term Loans, the Term Loan
Commitment Percentage of such Lender, (b) with respect to a Lender’s obligation
to make Revolving Loans and such Lender’s right to receive the unused line fee
described in Section 2.2(b), the Revolving Loan Commitment Percentage of such
Lender, (c) with respect to a Lender’s right to receive payments of principal
and interest with respect to Revolving Loans, such Lender’s Revolving Loan
Exposure with respect thereto; and (d) for all other purposes (including,
without limitation, the indemnification obligations arising under Section 11.6)
with respect to any Lender, the percentage obtained by dividing (i) the sum of
the Revolving Loan Commitment Amount and Term Loan Commitment Amount of such
Lender (or, in the event the Revolving Loan Commitment and Term Loan Commitment
shall have been terminated, such Lender’s then existing Revolving Loan
Outstandings or then outstanding principal advances of such Lender under the
Term Loan, as applicable), by (ii) the sum of the Revolving Loan Commitment and
Term Loan Commitment Amount (or, in the event the Revolving Loan Commitment or
Term Loan Commitment shall have been terminated, the then existing Revolving
Loan Outstandings or then outstanding principal advances of such Lenders under
the Term Loan, as applicable) of all Lenders.

“Required Lenders” means at any time Lenders holding (a) sixty-six and two
thirds percent (66 2/3%) or more of the sum of the Revolving Loan Commitment and
the Term Loan Commitment (taken as a whole), or (b) if the Revolving Loan
Commitment or Term Loan Commitment has been terminated, sixty-six and two thirds
percent (66 2/3%) or more of the then aggregate outstanding principal balance of
the Loans.

“Responsible Officer” means any of the Chief Executive Officer, Chief Financial
Officer or any other officer of the applicable Borrower acceptable to Agent.

“Restricted Distribution” means as to any Person (a) any dividend or other
distribution (whether in cash, securities or other property) on any equity
interest in such Person (except those payable solely in its equity interests of
the same class), (b) any payment by such Person on account of (i) the purchase,
redemption, retirement, defeasance, surrender, cancellation, termination or
acquisition of any equity interests in such Person or any claim respecting the
purchase or sale of any equity interest in such Person, or (ii) any option,
warrant or other right to acquire any equity interests in such Person, (c) any
management fees, salaries or other fees or compensation to any Person holding an
equity interest in a Borrower or a Subsidiary of a Borrower (other than
(i) payments of salaries to individuals, (ii) directors fees, and (iii) advances
and reimbursements to employees or directors, all in the Ordinary Course of
Business), an Affiliate of a Borrower or an Affiliate of any Subsidiary of a
Borrower, (d) any lease or rental payments to an Affiliate or Subsidiary of a
Borrower, or (e) repayments of or debt service on loans or other indebtedness
held by any Person holding an equity interest in a Borrower or a Subsidiary of a
Borrower, an Affiliate of a Borrower or an Affiliate of any Subsidiary of a
Borrower unless permitted under and made pursuant to a Subordination Agreement
applicable to such loans or other indebtedness.

“Revolving Lender” means each Lender having a Revolving Loan Commitment Amount
in excess of zero (or, in the event the Revolving Loan Commitment shall have
been terminated at any time, each Lender at such time having Revolving Loan
Outstandings in excess of zero).

“Revolving Loan Availability” means, at any time, the Revolving Loan Limit minus
the Revolving Loan Outstandings.

“Revolving Loan Borrowing” means a borrowing of a Revolving Loan.

 

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“Revolving Loan Commitment” means, as of any date of determination, the
aggregate Revolving Loan Commitment Amounts of all Lenders as of such date.

“Revolving Loan Commitment Amount” means, as to any Lender, the dollar amount
set forth opposite such Lender’s name on the Commitment Annex under the column
“Revolving Loan Commitment Amount” (if such Lender’s name is not so set forth
thereon, then the dollar amount on the Commitment Annex for the Revolving Loan
Commitment Amount for such Lender shall be deemed to be zero), as such amount
may be adjusted from time to time by (a) any amounts assigned (with respect to
such Lender’s portion of Revolving Loans outstanding and its commitment to make
Revolving Loans) pursuant to the terms of any and all effective assignment
agreements to which such Lender is a party, and (b) any Additional Tranche(s)
activated by Borrowers. For the avoidance of doubt, the aggregate Revolving Loan
Commitment Amount of all Lenders on the Closing Date shall be $15,000,000 and if
the Additional Tranche is fully activated by Borrowers pursuant to the terms of
the Agreement such amount shall increase to $25,000,000.

“Revolving Loan Commitment Percentage” means, as to any Lender, (a) on the
Closing Date, the percentage set forth opposite such Lender’s name on the
Commitment Annex under the column “Revolving Loan Commitment Percentage” (if
such Lender’s name is not so set forth thereon, then, on the Closing Date, such
percentage for such Lender shall be deemed to be zero), and (b) on any date
following the Closing Date, the percentage equal to the Revolving Loan
Commitment Amount of such Lender on such date divided by the Revolving Loan
Commitment on such date.

“Revolving Loan Exposure” means, with respect to any Lender on any date of
determination, the percentage equal to the amount of such Lender’s Revolving
Loan Outstandings on such date divided by the aggregate Revolving Loan
Outstandings of all Lenders on such date.

“Revolving Loan Limit” means, at any time, the lesser of (a) the Revolving Loan
Commitment and (b) the Borrowing Base.

“Revolving Loan Outstandings” means, at any time of calculation, (a) the then
existing aggregate outstanding principal amount of Revolving Loans, and (b) when
used with reference to any single Lender, the then existing outstanding
principal amount of Revolving Loans advanced by such Lender.

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

“SEC” means the United States Securities and Exchange Commission.

“Securities Account” means a “securities account” (as defined in Article 9 of
the UCC), an investment account, or other account in which investment property
or securities are held or invested for credit to or for the benefit of any
Borrower.

“Securities Account Control Agreement” means an agreement, in form and substance
satisfactory to Agent, among Agent, any applicable Borrower and each securities
intermediary in which such Borrower maintains a Securities Account pursuant to
which Agent shall obtain “control” (as defined in Article 9 of the UCC) over
such Securities Account.

“Securities Act” means the Securities Act of 1933, as amended.

 

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“Security Document” means this Agreement and any other agreement, document or
instrument executed concurrently herewith or at any time hereafter pursuant to
which one or more Credit Parties or any other Person either (a) Guarantees
payment or performance of all or any portion of the Obligations, and/or
(b) provides, as security for all or any portion of the Obligations, a Lien on
any of its assets in favor of Agent for its own benefit and the benefit of the
Lenders, as any or all of the same may be amended, supplemented, restated or
otherwise modified from time to time.

“Solvent” means, with respect to any Person, that such Person (a) owns and will
own assets the fair saleable value of which are (i) greater than the total
amount of its liabilities (including Contingent Obligations), and (ii) greater
than the amount that will be required to pay the probable liabilities of its
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it;
(b) has capital that is not unreasonably small in relation to its business as
presently conducted or after giving effect to any contemplated transaction; and
(c) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.

“Subordinated Debt” means (i) the Amegy Debt, and (ii) any Debt of Borrowers
incurred pursuant to the terms of the Subordinated Debt Documents and with the
prior written consent of Agent, all of which documents must be in form and
substance acceptable to Agent in its sole discretion.

“Subordinated Debt Documents” means any documents evidencing and/or securing
(i) the Amegy Debt, including, without limitation the Amegy Subordination
Agreement, and (ii) Debt governed by a Subordination Agreement, all of which
documents must be in form and substance acceptable to Agent in its sole
discretion.

“Subordination Agreement” means any agreement between Agent and another creditor
of Borrowers, as the same may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms thereof, pursuant to
which the Debt owing from any Borrower(s) and/or the Liens securing such Debt
granted by any Borrower(s) to such creditor are subordinated in any way to the
Obligations and the Liens created under the Security Documents, the terms and
provisions of such Subordination Agreements to have been agreed to by and be
acceptable to Agent in the exercise of its sole discretion. For the avoidance of
doubt, Agent has approved the Amegy Subordination Agreement.

“Subsidiary” means, with respect to any Person, (a) any corporation of which an
aggregate of more than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, capital stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of more than fifty percent (50%) of such
capital stock whether by proxy, agreement, operation of law or otherwise, and
(b) any partnership or limited liability company in which such Person and/or one
or more Subsidiaries of such Person shall have an interest (whether in the form
of voting or participation in profits or capital contribution) of more than
fifty percent (50%) or of which any such Person is a general partner or may
exercise the powers of a general partner. Unless the context otherwise requires,
each reference to a Subsidiary shall be a reference to a Subsidiary of a
Borrower.

“Taxes” has the meaning set forth in Section 2.8.

“Termination Date” means the earlier to occur of (a) the Commitment Expiry Date,
(b) any date on which Agent accelerates the maturity of the Loans pursuant to
Section 10.2, or (c) the termination date stated in any notice of termination of
this Agreement provided by Borrowers in accordance with Section 2.12.

 

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“Term Loan” has the meaning set forth in Section 2.1(a).

“Term Loan Commitment” means the sum of each Lender’s Term Loan Commitment
Amount, which is equal to $4,000,000.

“Term Loan Commitment Amount” means, (a) as to any Lender that is a Lender on
the Closing Date, the dollar amount set forth opposite such Lender’s name on the
Commitment Annex under the column “Term Loan Commitment Amount”, as such amount
may be adjusted from time to time by any amounts assigned (with respect to such
Lender’s portion of Term Loans outstanding and its commitment to make advances
in respect of the Term Loan) pursuant to the terms of any and all effective
assignment agreements to which such Lender is a party, and (b) as to any Lender
that becomes a Lender after the Closing Date, the amount of the “Term Loan
Commitment Amount(s)” of other Lender(s) assigned to such new Lender pursuant to
the terms of the effective assignment agreement(s) pursuant to which such new
Lender shall become a Lender, as such amount may be adjusted from time to time
by any amounts assigned (with respect to such Lender’s portion of Term Loans
outstanding and its commitment to make advances in respect of the Term Loan)
pursuant to the terms of any and all effective assignment agreements to which
such Lender is a party.

“Term Loan Commitment Percentage” means, as to any Lender, (a) on the Closing
Date, the percentage set forth opposite such Lender’s name on the Commitment
Annex under the column “Term Loan Commitment Percentage” (if such Lender’s name
is not so set forth thereon, then, on the Closing Date, such percentage for such
Lender shall be deemed to be zero), and (b) on any date following the Closing
Date, the percentage equal to the Term Loan Commitment Amount of such Lender on
such date divided by the Term Loan Commitment on such date.

“Third Party Payor” means the Federal Healthcare Programs, commercial insurers,
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 program administered pursuant to 10 U.S.C. Section 1071 et.
seq), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and
the regulations promulgated pursuant to such statutes.

“UCC” means the Uniform Commercial Code of the State of Maryland or of any other
state the laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.

“United States” means the United States of America.

“Warrant” means that certain warrant registered in the name of MCF to purchase
shares of Common Stock, in the form attached hereto as Exhibit F.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrant.

 

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Section 1.2 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder (including, without limitation, determinations made
pursuant to the exhibits hereto) shall be made, and all financial statements
required to be delivered hereunder shall be prepared on a consolidated basis in
accordance with GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of each Borrower and its Consolidated
Subsidiaries delivered to Agent and each of the Lenders on or prior to the
Closing Date. If at any time any change in GAAP would affect the computation of
any financial ratio or financial requirement set forth in any Financing
Document, and either Borrowers or the Required Lenders shall so request, the
Agent, the Lenders and Borrowers shall negotiate in good faith to amend such
ratio or requirement to preserve the original intent thereof in light of such
change in GAAP (subject to the approval of the Required Lenders); provided,
however, that until so amended, (a) such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and
(b) Borrowers shall provide to the Agent and the Lenders financial statements
and other documents required under this Agreement which include a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP. Notwithstanding any other provision contained
herein, all terms of an accounting or financial nature used herein shall be
construed, and all computations of amounts and ratios referred to herein shall
be made, without giving effect to any election under Statement of Financial
Accounting Standards 159 (or any other Financial Accounting Standard having a
similar result or effect) to value any Debt or other liabilities of any Credit
Party or any Subsidiary of any Credit Party at “fair value”, as defined therein.

Section 1.3 Other Definitional and Interpretive Provisions. References in this
Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits”, or “Schedules” shall
be to Articles, Sections, Annexes, Exhibits or Schedules of or to this Agreement
unless otherwise specifically provided. Any term defined herein may be used in
the singular or plural. “Include”, “includes” and “including” shall be deemed to
be followed by “without limitation”. Except as otherwise specified or limited
herein, references to any Person include the successors and assigns of such
Person. References “from” or “through” any date mean, unless otherwise
specified, “from and including” or “through and including”, respectively. Unless
otherwise specified herein, the settlement of all payments and fundings
hereunder between or among the parties hereto shall be made in lawful money of
the United States and in immediately available funds. References to any statute
or act shall include all related current regulations and all amendments and any
successor statutes, acts and regulations. All amounts used for purposes of
financial calculations required to be made herein shall be without duplication.
References to any statute or act, without additional reference, shall be deemed
to refer to federal statutes and acts of the United States. References to any
agreement, instrument or document shall include all schedules, exhibits, annexes
and other attachments thereto. As used in this Agreement, the meaning of the
term “material” or the phrase “in all material respects” is intended to refer to
an act, omission, violation or condition which reflects or could reasonably be
expected to result in a Material Adverse Effect. References to capitalized terms
that are not defined herein, but are defined in the UCC, shall have the meanings
given them in the UCC. All references herein to times of day shall be references
to daylight or standard time, as applicable.

Section 1.4 Time is of the Essence. Time is of the essence in Borrower’s and
each other Credit Party’s performance under this Agreement and all other
Financing Documents.

ARTICLE 2—LOANS

Section 2.1 Loans.

(a) Term Loans.

(i) Term Loan Amounts. The Term Loan shall be funded in one advance on the
Closing Date. Borrowers shall deliver to Agent a Notice of Borrowing with
respect to the proposed Term Loan advance, such Notice of Borrowing to be
delivered no later than noon (Eastern time) on the Closing Date.

 

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(ii) Scheduled Repayments; Mandatory Prepayments; Optional Prepayments.

(A) There shall become due and payable, and Borrowers shall repay the Term Loan
through, scheduled payments as set forth on Schedule 2.1 attached hereto.
Notwithstanding the payment schedule set forth above, the outstanding principal
amount of the Term Loan shall become immediately due and payable in full on the
Termination Date.

(B) There shall become due and payable and Borrowers shall prepay the Term Loan
in the following amounts and at the following times:

(i) Unless Agent shall otherwise consent in writing, on the date on which any
Credit Party (or Agent as loss payee or assignee) receives any casualty proceeds
in excess of $25,000 with respect to assets upon which Agent maintained a Lien,
an amount equal to one hundred percent (100%) of such proceeds (net of
out-of-pocket expenses and repayment of secured debt permitted under clause
(c) of the definition of Permitted Debt and encumbering the property that
suffered such casualty), or such lesser portion of such proceeds as Agent shall
elect to apply to the Obligations;

(ii) an amount equal to any interest that is deemed to be in excess of the
Maximum Lawful Rate (as defined below) and is required to be applied to the
reduction of the principal balance of the Loans by any Lender as provided for in
Section 2.7;

(iii) unless Agent shall otherwise consent in writing, upon receipt by any
Credit Party of the proceeds of any Asset Disposition that is not made in the
Ordinary Course of Business, an amount equal to one hundred percent (100%) of
the net cash proceeds, if any, of such asset disposition (net of out-of-pocket
expenses and repayment of secured debt permitted under clause (c) of the
definition of Permitted Debt and encumbering such asset), or such lesser portion
as Agent shall elect to apply to the Obligations; and

(iv) unless Agent shall otherwise consent in writing, upon receipt by any
Borrower of any extraordinary receipts or the proceeds from the incurrence of
Debt or issuance and sale of any Debt or equity securities (except to the extent
such receipts or proceed are used to fund, in whole or in part, the
consideration for a Permitted Acquisition within six (6) months of such
incurrence, sale or issuance), an amount equal to one hundred percent (100%) of
such extraordinary receipts, or such lesser portion as Agent shall elect to
apply to the Obligations.

Notwithstanding the foregoing and so long as no Event of Default or Default then
exists: (1) any such casualty proceeds in excess of $250,000 (other than with
respect to Inventory and any real property, unless Agent shall otherwise elect)
may be used by Borrowers within one hundred eighty (180) days from the receipt
of such proceeds to replace or repair any assets in respect of which such
proceeds were paid so long as (x) prior to the receipt of such proceeds,
Borrowers have delivered to Agent a reinvestment plan detailing such replacement
or repair acceptable to Agent in its reasonable discretion and (y) such proceeds
are deposited into an account with Agent promptly upon receipt by such Borrower;
and (2) proceeds of personal property asset dispositions that are not made in
the Ordinary Course of Business (other than Collateral upon which the Borrowing
Base is calculated or Intellectual Property, unless Agent shall otherwise elect)
may be used by Borrowers within one hundred eighty (180) days from the receipt
of such proceeds to purchase new or replacement assets of comparable value,
provided, however, that such proceeds are deposited into an account with Agent
promptly upon receipt by such Borrower. All sums held by Agent pending
reinvestment as described in subsections (1) and (2) above shall be deemed
additional collateral for the Obligations and may be commingled with the general
funds of Agent.

 

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(C) Borrowers may from time to time, with at least two (2) Business Days prior
delivery to Agent of an appropriately completed Payment Notification, prepay the
Term Loan in whole or in part; provided, however, that each such prepayment
shall be in an amount equal to $100,000 or a higher integral multiple of $25,000
and shall be accompanied by any prepayment fees required hereunder, including,
without limitation, the Exit Fee pursuant to Section 2.2(f).

(iii) All Prepayments. Except as this Agreement may specifically provide
otherwise, all prepayments of the Term Loan shall be applied by Agent to the
Obligations in inverse order of maturity. The monthly payments required under
Schedule 2.1 shall continue in the same amount (for so long as the Term Loan
and/or (if applicable) any advance thereunder shall remain outstanding)
notwithstanding any partial prepayment, whether mandatory or optional, of the
Term Loan.

(iv) LIBOR Rate.

(A) Except as provided in subsection (C) below, the Term Loan shall accrue
interest at the LIBOR Rate plus the Applicable Margin.

(B) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such
Lender of maintaining or obtaining any eurodollar deposits or increased costs,
in each case, due to changes in applicable Law occurring subsequent to the
commencement of the then applicable Interest Period, including changes in tax
laws (except changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), which additional or increased costs
would increase the cost of funding loans bearing interest based upon the LIBOR
Rate; provided, however, that notwithstanding anything in this Agreement to the
contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (ii) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “change in applicable Law”, regardless of the date
enacted, adopted or issued. In any such event, the affected Lender shall give
Borrowers and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt of
the notice from the affected Lender, Borrowers may, by notice to such affected
Lender (I) require such Lender to furnish to Borrowers a statement setting forth
the basis for adjusting such LIBOR Rate and the method for determining the
amount of such adjustment, or (II) repay the Loans bearing interest based upon
the LIBOR Rate with respect to which such adjustment is made.

 

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(C) In the event that any change in market conditions or any law, regulation,
treaty, or directive, or any change therein or in the interpretation of
application thereof, shall at any time after the date hereof, in the reasonable
opinion of any Lender, make it unlawful or impractical for such Lender to
maintain Loans bearing interest based upon the LIBOR Rate or to continue such
maintaining, or to determine or charge interest rates at the LIBOR Rate, such
Lender shall give notice of such changed circumstances to Agent and Borrowers
and Agent promptly shall transmit the notice to each other Lender, (I) in the
case of the pro rata share of the Term Loan held by such Lender and then
outstanding, the date specified in such Lender’s notice shall be deemed to be
the last day of the Interest Period of such portion of the Term Loan, and
interest upon such portion thereafter shall accrue interest at the Base Rate
plus the Applicable Margin, and (II) such portion of the Term Loan shall
continue to accrue interest at the Base Rate plus the Applicable Margin until
such Lender determines that it would no longer be unlawful or impractical to
maintain such Term Loan at the LIBOR Rate.

(D) Anything to the contrary contained herein notwithstanding, neither Agent nor
any Lender is required actually to acquire eurodollar deposits to fund or
otherwise match fund any Obligation as to which interest accrues based on the
LIBOR Rate.

(b) Revolving Loans.

(i) Revolving Loans and Borrowings. On the terms and subject to the conditions
set forth herein, each Lender severally agrees to make loans to Borrowers from
time to time as set forth herein (each a “Revolving Loan”, and collectively,
“Revolving Loans”) equal to such Lender’s Revolving Loan Commitment Percentage
of Revolving Loans requested by Borrowers hereunder, provided, however, that
after giving effect thereto, the Revolving Loan Outstandings shall not exceed
the Revolving Loan Limit. Borrowers shall deliver to Agent a Notice of Borrowing
with respect to each proposed Revolving Loan Borrowing, such Notice of Borrowing
to be delivered before 1:00 p.m. (Eastern time) two (2) Business Days prior to
the date of such proposed borrowing. Each Borrower and each Revolving Lender
hereby authorizes Agent to make Revolving Loans on behalf of Revolving Lenders,
at any time in its sole discretion, to pay principal owing in respect of the
Loans and interest, fees, expenses and other charges payable by any Credit Party
from time to time arising under this Agreement or any other Financing Document.
The Borrowing Base shall be determined by Agent based on the most recent
Borrowing Base Certificate delivered to Agent in accordance with this Agreement
and such other information as may be available to Agent. Without limiting any
other rights and remedies of Agent hereunder or under the other Financing
Documents, the Revolving Loans shall be subject to Agent’s continuing right to
withhold from the Borrowing Base reserves, and to increase and decrease such
reserves from time to time, if and to the extent that in Agent’s good faith
credit judgment and discretion, such reserves are necessary.

(ii) Mandatory Revolving Loan Repayments and Prepayments.

(A) The Revolving Loan Commitment shall terminate on the Termination Date. On
such Termination Date, there shall become due, and Borrowers shall pay, the
entire outstanding principal amount of each Revolving Loan, together with
accrued and unpaid Obligations pertaining thereto.

 

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(B) If at any time the Revolving Loan Outstandings exceed the Revolving Loan
Limit, then, on the next succeeding Business Day, Borrowers shall repay the
Revolving Loans in an aggregate amount equal to such excess.

(C) Principal payable on account of Revolving Loans shall be payable by
Borrowers to Agent (I) immediately upon the receipt by any Borrower or Agent of
any payments on or proceeds from any of the Accounts, to the extent of such
payments or proceeds, as further described in Section 2.11 below, and (II) in
full on the Termination Date.

(iii) Optional Prepayments. After Borrowers have paid to Agent’s satisfaction
all of the Obligations arising from the Term Loan in immediately available
funds, Borrowers may from time to time prepay the Revolving Loans in whole or in
part; provided, however, that any such partial prepayment shall be in an amount
equal to $100,000 or a higher integral multiple of $25,000 and shall be subject
to the Prepayment Fee set forth in Section 2.2(g).

(iv) LIBOR Rate.

(A) Except as provided in subsection (C) below, Revolving Loans shall accrue
interest at the LIBOR Rate plus the Applicable Margin.

(B) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such
Lender of maintaining or obtaining any eurodollar deposits or increased costs,
in each case, due to changes in applicable Law occurring subsequent to the
commencement of the then applicable Interest Period, including changes in tax
laws (except changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), which additional or increased costs
would increase the cost of funding loans bearing interest based upon the LIBOR
Rate; provided, however, that notwithstanding anything in this Agreement to the
contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (ii) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “change in applicable Law”, regardless of the date
enacted, adopted or issued. In any such event, the affected Lender shall give
Borrowers and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt of
the notice from the affected Lender, Borrowers may, by notice to such affected
Lender (I) require such Lender to furnish to Borrowers a statement setting forth
the basis for adjusting such LIBOR Rate and the method for determining the
amount of such adjustment, or (II) repay the Loans bearing interest based upon
the LIBOR Rate with respect to which such adjustment is made.

 

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(C) In the event that any change in market conditions or any law, regulation,
treaty, or directive, or any change therein or in the interpretation of
application thereof, shall at any time after the date hereof, in the reasonable
opinion of any Lender, make it unlawful or impractical for such Lender to fund
or maintain Loans bearing interest based upon the LIBOR Rate or to continue such
funding or maintaining, or to determine or charge interest rates at the LIBOR
Rate, such Lender shall give notice of such changed circumstances to Agent and
Borrowers and Agent promptly shall transmit the notice to each other Lender and
(I) in the case of any outstanding Loans of such Lender bearing interest based
upon the LIBOR Rate, the date specified in such Lender’s notice shall be deemed
to be the last day of the Interest Period of such Loans, and interest upon such
Lender’s Loans thereafter shall accrue interest at Base Rate plus the Applicable
Margin, and (II) such Loans shall continue to accrue interest at Base Rate plus
the Applicable Margin until such Lender determines that it would no longer be
unlawful or impractical to maintain such Loans at the LIBOR Rate.

(D) Anything to the contrary contained herein notwithstanding, neither Agent nor
any Lender is required actually to acquire eurodollar deposits to fund or
otherwise match fund any Obligation as to which interest accrues based on the
LIBOR Rate.

(c) Additional Tranches. After the Closing Date, so long as no Default or Event
of Default exists and subject to the terms of this Agreement, with the prior
written consent of Agent and all Lenders in their sole discretion, the Revolving
Loan Commitment may be increased upon the written request of Borrower
Representative (which such request shall state the aggregate amount of the
Additional Tranche requested and shall be made at least thirty (30) days prior
to the proposed effective date of such Additional Tranche) to Agent to activate
an Additional Tranche; provided, however, that Agent and Lenders shall have no
obligation to consent to any requested activation of an Additional Tranche and
the written consent of Agent and all Lenders shall be required in order to
activate an Additional Tranche. Upon activating an Additional Tranche, each
Lender’s Commitment shall increase by a proportionate amount so as to maintain
the same Pro Rata Percentage of the Revolving Loan Commitment as such Lender
held immediately prior to such activation. In the event Agent and all Lenders do
not consent to the activation of a requested Additional Tranche within
forty-five (45) days after receiving a written request from Borrower
Representative, then the Revolving Loan Commitment shall not be increased and,
within the next ninety (90) days, Borrowers may terminate this Agreement upon
written notice to Agent and, if the Borrowing Base on the date of such request
would have supported such increased Revolving Loan Commitment, upon repayment in
full of all Obligations, no fee shall be due pursuant to Section 2.2(g) in
connection with such termination.

Section 2.2 Interest, Interest Calculations and Certain Fees.

(a) Interest. From and following the Closing Date, except as expressly set forth
in this Agreement, Loans and the other Obligations shall bear interest at the
sum of the LIBOR Rate plus the Applicable Margin. Interest on the Loans shall be
paid in arrears on the first (1st) day of each month and on the maturity of such
Loans, whether by acceleration or otherwise. Interest on all other Obligations
shall be payable upon demand. For purposes of calculating interest, all funds
transferred to the Payment Account for application to any Revolving Loans or the
Term Loan shall be subject to a six (6) Business Day clearance period and all
interest accruing on such funds during such clearance period shall accrue for
the benefit of Agent, and not for the benefit of the Lenders.

(b) Unused Line Fee. From and following the Closing Date, Borrowers shall pay
Agent, for the benefit of all Lenders committed to make Revolving Loans, in
accordance with their respective Pro Rata Shares, a fee in an amount equal to
(i) (A) the Revolving Loan Commitment minus (B) the average daily balance of the
sum of the Revolving Loan Outstandings during the preceding month, multiplied by
(ii) one-half of one percent (0.5%) per annum. Such fee is to be paid monthly in
arrears on the first day of each month.

 

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(c) Fee Letter. In addition to the other fees set forth herein, the Borrowers
agree to pay Agent the fees set forth in the Fee Letter.

(d) Collateral Fee. From and following the Closing Date, Borrowers shall pay
Agent, for its own account and not for the benefit of any other Lenders, a fee
in an amount equal to the product obtained by multiplying (i) the greater of
(A) the average end-of-day principal balance of Revolving Loans outstanding
during the immediately preceding month and (B) the Minimum Balance, by
(ii) one-half of one percent (0.5%) per annum. For purposes of calculating the
average end-of-day principal balance of Revolving Loans, all funds paid into the
Payment Account (or which were required to be paid into the Payment Account
hereunder) or otherwise received by Agent for the account of Borrowers shall be
subject to a six (6) Business Day clearance period. The collateral management
fee shall be deemed fully earned when due and payable and, once paid, shall be
non-refundable.

(e) Origination Fees. Contemporaneous with Borrowers’ execution of this
Agreement, Borrowers shall pay Agent, for the benefit of all Lenders committed
to make Revolving Loans on the Closing Date, in accordance with their respective
Pro Rata Shares, a Revolving Loan origination fee in an amount equal to (i) the
Revolving Loan Commitment, multiplied by (ii) one percent (1%). On the first day
of each calendar month (unless otherwise accelerated pursuant to the terms of
this Agreement), Borrowers shall pay Agent, for its own account and not for the
benefit of any other Lenders, a Term Loan origination fee in an aggregate amount
equal to (i) the Term Loan Commitment multiplied by (ii) one percent (1%) in
twelve (12) equal monthly installments of $3,333.33.

(f) Exit Fee. Borrowers shall pay to Agent, as compensation for the costs of
making funds available to Borrowers under this Agreement an exit fee (the “Exit
Fee”) calculated in accordance with this subsection and upon the date or dates
required under this subsection. The Exit Fee shall be an amount equal to (i) the
Term Loan Commitment multiplied by (ii) one percent (1%). Upon any repayment of
any portion of the Term Loan (whether voluntary, involuntary or mandatory) other
than scheduled amortization payments (if any) and the final payment of principal
in respect of the Term Loan, a portion of the Exit Fee shall be due in the
following amount: that percentage which is obtained by dividing the amount
prepaid by the then outstanding principal balance of the Term Loan. Any
remaining unpaid amount of the Exit Fee shall be due and payable on the
Termination Date.

(g) Deferred Revolving Loan Origination Fee. If Lenders’ funding obligations in
respect of the Revolving Loan Commitment under this Agreement terminate for any
reason (whether by voluntary termination by Borrowers, by reason of the
occurrence of an Event of Default or otherwise) prior to the Commitment Expiry
Date, Borrowers shall pay to Agent, for the benefit of all Lenders committed to
make Revolving Loans on the Closing Date, a fee as compensation for the costs of
such Lenders being prepared to make funds available to Borrowers under this
Agreement, equal to an amount determined by multiplying the Revolving Loan
Commitment by the following applicable percentage amount: two percent (2%) for
the first year following the Closing Date, one percent (1%) for the second year
following the Closing Date, and one-half of one percent (0.5%) thereafter.

(h) Audit Fees. Borrowers shall pay to Agent, for its own account and not for
the benefit of any other Lenders, all reasonable fees and expenses in connection
with audits and inspections of Borrowers’ books and records, audits, valuations
or appraisals of the Collateral, audits of Borrowers’ compliance with applicable
Laws and such other matters as Agent shall deem appropriate, which shall be due
and payable on the first Business Day of the month following the date of
issuance by Agent of a written request for payment thereof to Borrowers.

(i) Wire Fees. Borrowers shall pay to Agent, for its own account and not for the
account of any other Lenders, on written demand, fees for incoming and outgoing
wires made for the account of Borrowers, such fees to be based on Agent’s then
current wire fee schedule (available upon written request of the Borrowers).

 

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(j) Late Charges. If payments of principal (other than a final installment of
principal upon the Termination Date), interest due on the Obligations, or any
other amounts due hereunder or under the other Financing Documents are not
timely made and remain overdue for a period of five (5) days, Borrowers, without
notice or demand by Agent, promptly shall pay to Agent, for its own account and
not for the benefit of any other Lenders, as additional compensation to Agent in
administering the Obligations, an amount equal to five percent (5.0%) of each
delinquent payment.

(k) Computation of Interest and Related Fees. All interest and fees under each
Financing Document shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. The date of funding of a Loan shall be included
in the calculation of interest. The date of payment of a Loan shall be excluded
from the calculation of interest. If a Loan is repaid on the same day that it is
made, one (1) day’s interest shall be charged.

(l) Automated Clearing House Payments. If Agent so elects, monthly payments of
principal, interest, fees, expenses or any other amounts due and owing from
Borrower to Agent hereunder shall be paid to Agent by Automated Clearing House
debit of immediately available funds from the financial institution account
designated by Borrower Representative in the Automated Clearing House debit
authorization executed by Borrowers or Borrower Representative in connection
with this Agreement, and shall be effective upon receipt. Borrowers shall
execute any and all forms and documentation necessary from time to time to
effectuate such automatic debiting. In no event shall any such payments be
refunded to Borrowers.

Section 2.3 Notes. The portion of the Loans made by each Lender shall be
evidenced, if so requested by such Lender, by one or more promissory notes
executed by Borrowers on a joint and several basis (each, a “Note”) in an
original principal amount equal to such Lender’s Revolving Loan Commitment
Amount or Term Loan Commitment Amount. Upon activation of an Additional Tranche
in accordance with Section 2.1(c) hereof, Borrowers shall deliver to each Lender
to whom Borrowers previously delivered a Note, a restated Note evidencing such
Lender’s Revolving Loan Commitment Amount.

Section 2.4 [Reserved]

Section 2.5 [Reserved]

Section 2.6 General Provisions Regarding Payment; Loan Account.

(a) All payments to be made by each Borrower under any Financing Document,
including payments of principal and interest made hereunder and pursuant to any
other Financing Document, and all fees, expenses, indemnities and
reimbursements, shall be made without set-off, recoupment or counterclaim. If
any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension (it being understood and agreed that,
solely for purposes of calculating financial covenants and computations
contained herein and determining compliance therewith, if payment is made, in
full, on any such extended due date, such payment shall be deemed to have been
paid on the original due date without giving effect to any extension thereto).
Any payments received in the Payment Account before 12:00 Noon (Eastern time) on
any date shall be deemed received by Agent on such date, and any payments
received in the Payment Account at or after 12:00 Noon (Eastern time) on any
date shall be deemed received by Agent on the next succeeding Business Day. In
the absence of receipt by Agent of a written designation by Borrower
Representative, at least two (2) Business Days prior to such prepayment, that
such prepayment is to be applied to a Term Loan, Borrowers and each Lender
hereby authorize and direct Agent, subject to the provisions of Section 10.7
hereof, to apply such prepayment against then outstanding Revolving Loans, and
second, if no Revolving Loans are then outstanding, pro rata against all
outstanding Term Loans in accordance with the provisions of Section 2.1(a)(iii);
provided, however, that if Agent at any time determines that payments received
by Agent were in respect of a mandatory prepayment event, Agent shall apply such
payments in accordance with the provisions of Section 2.1(a)(ii) and shall be
fully authorized by Borrowers and each Lender to make corresponding Loan Account
reversals in respect thereof.

 

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(b) Agent shall maintain a loan account (the “Loan Account”) on its books to
record Loans and other extensions of credit made by the Lenders hereunder or
under any other Financing Document, and all payments thereon made by each
Borrower. All entries in the Loan Account shall be made in accordance with
Agent’s customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded in Agent’s books and records at any
time shall be conclusive and binding evidence of the amounts due and owing to
Agent by each Borrower absent manifest error; provided, however, that any
failure to so record or any error in so recording shall not limit or otherwise
affect any Borrower’s duty to pay all amounts owing hereunder or under any other
Financing Document. Agent shall endeavor to provide Borrowers with a monthly
statement regarding the Loan Account (but neither Agent nor any Lender shall
have any liability if Agent shall fail to provide any such statement). Unless
any Borrower notifies Agent of any objection to any such statement (specifically
describing the basis for such objection) within ninety (90) days after the date
of receipt thereof, it shall be deemed final, binding and conclusive upon
Borrowers in all respects as to all matters reflected therein.

Section 2.7 Maximum Interest. In no event shall the interest charged with
respect to the Loans or any other Obligations of any Borrower under any
Financing Document exceed the maximum amount permitted under the laws of the
State of Maryland or of any other applicable jurisdiction. Notwithstanding
anything to the contrary herein or elsewhere, if at any time the rate of
interest payable hereunder or under any Note or other Financing Document (the
“Stated Rate”) would exceed the highest rate of interest permitted under any
applicable law to be charged (the “Maximum Lawful Rate”), then for so long as
the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the Stated Rate is less than the Maximum Lawful Rate, each Borrower
shall, to the extent permitted by law, continue to pay interest at the Maximum
Lawful Rate until such time as the total interest received is equal to the total
interest which would have been received had the Stated Rate been (but for the
operation of this provision) the interest rate payable. Thereafter, the interest
rate payable shall be the Stated Rate unless and until the Stated Rate again
would exceed the Maximum Lawful Rate, in which event this provision shall again
apply. In no event shall the total interest received by any Lender exceed the
amount which it could lawfully have received had the interest been calculated
for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the
prior sentence, any Lender has received interest hereunder in excess of the
Maximum Lawful Rate, such excess amount shall be applied to the reduction of the
principal balance of the Loans or to other amounts (other than interest) payable
hereunder, and if no such principal or other amounts are then outstanding, such
excess or part thereof remaining shall be paid to Borrowers. In computing
interest payable with reference to the Maximum Lawful Rate applicable to any
Lender, such interest shall be calculated at a daily rate equal to the Maximum
Lawful Rate divided by the number of days in the year in which such calculation
is made.

 

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Section 2.8 Taxes; Capital Adequacy.

(a) All payments of principal and interest on the Loans and all other amounts
payable hereunder shall be made free and clear of and without deduction for any
present or future income, excise, stamp, documentary, payroll, employment,
property or franchise taxes and other taxes, fees, duties, levies, assessments,
withholdings or other charges of any nature whatsoever (including interest and
penalties thereon) imposed by any taxing authority, excluding taxes imposed on
or measured by Agent’s or any Lender’s net income by the jurisdictions under
which Agent or such Lender is organized or conducts business (other than solely
as the result of entering into any of the Financing Documents or taking any
action thereunder) (all non-excluded items being called “Taxes”). If any
withholding or deduction from any payment to be made by any Borrower hereunder
is required in respect of any Taxes pursuant to any applicable Law, then
Borrowers will: (i) pay directly to the relevant authority the full amount
required to be so withheld or deducted; (ii) promptly forward to Agent an
official receipt or other documentation satisfactory to Agent evidencing such
payment to such authority; and (iii) pay to Agent for the account of Agent and
Lenders such additional amount or amounts as is necessary to ensure that the net
amount actually received by Agent and each Lender will equal the full amount
Agent and such Lender would have received had no such withholding or deduction
been required. If any Taxes are directly asserted against Agent or any Lender
with respect to any payment received by Agent or such Lender hereunder, Agent or
such Lender may pay such Taxes and Borrowers will promptly pay such additional
amounts (including any penalty, interest or expense) as is necessary in order
that the net amount received by such Person after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount such
Person would have received had such Taxes not been asserted so long as such
amounts have accrued on or after the day which is two hundred seventy (270) days
prior to the date on which Agent or such Lender first made written demand
therefor.

(b) If any Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Agent, for the account of Agent and the
respective Lenders, the required receipts or other required documentary
evidence, Borrowers shall indemnify Agent and Lenders for any incremental Taxes,
interest or penalties that may become payable by Agent or any Lender as a result
of any such failure.

(c) Each Lender that (i) is organized under the laws of a jurisdiction other
than the United States, and (ii)(A) is a party hereto on the Closing Date or
(B) purports to become an assignee of an interest as a Lender under this
Agreement after the Closing Date (unless such Lender was already a Lender
hereunder immediately prior to such assignment) (each such Lender a “Foreign
Lender”) shall execute and deliver to each of Borrowers and Agent one or more
(as Borrowers or Agent may reasonably request) United States Internal Revenue
Service Forms W-8ECI, W-8BEN, W-8IMY (as applicable) and other applicable forms,
certificates or documents prescribed by the United States Internal Revenue
Service or reasonably requested by Agent certifying as to such Lender’s
entitlement to a complete exemption from withholding or deduction of Taxes.
Borrowers shall not be required to pay additional amounts to any Lender pursuant
to this Section 2.8 with respect to United States withholding and income Taxes
to the extent that the obligation to pay such additional amounts would not have
arisen but for the failure of such Lender to comply with this paragraph other
than as a result of a change in law.

 

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(d) If any Lender shall determine in its commercially reasonable judgment that
the adoption or taking effect of, or any change in, any applicable Law regarding
capital adequacy, in each instance, after the Closing Date, or any change after
the Closing Date in the interpretation, administration or application thereof by
any Governmental Authority, central bank or comparable agency charged with the
interpretation, administration or application thereof, or the compliance by any
Lender or any Person controlling such Lender with any request, guideline or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency adopted or
otherwise taking effect after the Closing Date, has or would have the effect of
reducing the rate of return on such Lender’s or such controlling Person’s
capital as a consequence of such Lender’s obligations hereunder to a level below
that which such Lender or such controlling Person could have achieved but for
such adoption, taking effect, change, interpretation, administration,
application or compliance (taking into consideration such Lender’s or such
controlling Person’s policies with respect to capital adequacy) then from time
to time, upon written demand by such Lender (which demand shall be accompanied
by a statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to
Agent), Borrowers shall promptly pay to such Lender such additional amount as
will compensate such Lender or such controlling Person for such reduction, so
long as such amounts have accrued on or after the day which is two hundred
seventy (270) days prior to the date on which such Lender first made demand
therefor; provided, however, that notwithstanding anything in this Agreement to
the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act
and all requests, rules, guidelines or directives thereunder or issued in
connection therewith and (ii) all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee on
Banking Supervision (or any successor or similar authority) or the United States
or foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “change in applicable Law”, regardless of the date
enacted, adopted or issued.

(e) If any Lender requires compensation under Section 2.8(d), or requires any
Borrower to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.8(a), then, upon
the written request of Borrower Representative, such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder (subject to the
terms of this Agreement) to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would
eliminate or materially reduce amounts payable pursuant to any such subsection,
as the case may be, in the future, and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender (as determined in its sole discretion). Borrowers hereby agree to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

Section 2.9 Appointment of Borrower Representative. Each Borrower hereby
designates Borrower Representative as its representative and agent on its behalf
for the purposes of issuing Notices of Borrowing and Borrowing Base
Certificates, and giving instructions with respect to the disbursement of the
proceeds of the Loans, giving and receiving all other notices and consents
hereunder or under any of the other Financing Documents and taking all other
actions (including in respect of compliance with covenants) on behalf of any
Borrower or Borrowers under the Financing Documents. Borrower Representative
hereby accepts such appointment. Notwithstanding anything to the contrary
contained in this Agreement, no Borrower other than Borrower Representative
shall be entitled to take any of the foregoing actions. The proceeds of each
Loan made hereunder shall be advanced to or at the direction of Borrower
Representative and if not used by Borrower Representative in its business (for
the purposes provided in this Agreement) shall be deemed to be immediately
advanced by Borrower Representative to the appropriate other Borrower hereunder
as an intercompany loan (collectively, “Intercompany Loans”). All collections of
each Borrower in respect of Accounts and other proceeds of Collateral of such
Borrower received by Agent and applied to the Obligations shall also be deemed
to be repayments of the Intercompany Loans owing by such Borrower to Borrower
Representative. Borrowers shall maintain accurate books and records with respect
to all Intercompany Loans and all repayments thereof. Agent and each Lender may
regard any notice or other communication pursuant to any Financing Document from
Borrower Representative as a notice or communication from all Borrowers, and may
give any notice or communication required or permitted to be given to any
Borrower or all Borrowers hereunder to Borrower Representative on behalf of such
Borrower or all Borrowers. Each Borrower agrees that each notice, election,
representation and warranty, covenant, agreement and undertaking made on its
behalf by Borrower Representative shall be deemed for all purposes to have been
made by such Borrower and shall be binding upon and enforceable against such
Borrower to the same extent as if the same had been made directly by such
Borrower.

 

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Section 2.10 Joint and Several Liability; Rights of Contribution; Subordination
and Subrogation.

(a) Borrowers are defined collectively to include all Persons named as one of
the Borrowers herein; provided, however, that any references herein to “any
Borrower”, “each Borrower” or similar references, shall be construed as a
reference to each individual Person named as one of the Borrowers herein. Each
Person so named shall be jointly and severally liable for all of the obligations
of Borrowers under this Agreement. Each Borrower, individually, expressly
understands, agrees and acknowledges, that the credit facilities would not be
made available on the terms herein in the absence of the collective credit of
all of the Persons named as the Borrowers herein, the joint and several
liability of all such Persons, and the cross-collateralization of the collateral
of all such Persons. Accordingly, each Borrower individually acknowledges that
the benefit to each of the Persons named as one of the Borrowers as a whole
constitutes reasonably equivalent value, regardless of the amount of the credit
facilities actually borrowed by, advanced to, or the amount of collateral
provided by, any individual Borrower. In addition, each entity named as one of
the Borrowers herein hereby acknowledges and agrees that all of the
representations, warranties, covenants, obligations, conditions, agreements and
other terms contained in this Agreement shall be applicable to and shall be
binding upon and measured and enforceable individually against each Person named
as one of the Borrowers herein as well as all such Persons when taken together.
By way of illustration, but without limiting the generality of the foregoing,
the terms of Section 10.1 of this Agreement are to be applied to each individual
Person named as one of the Borrowers herein (as well as to all such Persons
taken as a whole), such that the occurrence of any of the events described in
Section 10.1 of this Agreement as to any Person named as one of the Borrowers
herein shall constitute an Event of Default even if such event has not occurred
as to any other Persons named as the Borrowers or as to all such Persons taken
as a whole.

(b) Notwithstanding any provisions of this Agreement to the contrary, it is
intended that the joint and several nature of the liability of each Borrower for
the Obligations and the Liens granted by Borrowers to secure the Obligations,
not constitute a Fraudulent Conveyance (as defined below). Consequently, Agent,
Lenders and each Borrower agree that if the liability of a Borrower for the
Obligations, or any Liens granted by such Borrower securing the Obligations
would, but for the application of this sentence, constitute a Fraudulent
Conveyance, the liability of such Borrower and the Liens securing such liability
shall be valid and enforceable only to the maximum extent that would not cause
such liability or such Lien to constitute a Fraudulent Conveyance, and the
liability of such Borrower and this Agreement shall automatically be deemed to
have been amended accordingly. For purposes hereof, the term “Fraudulent
Conveyance” means a fraudulent conveyance under Section 548 of Chapter 11 of
Title II of the Bankruptcy Code or a fraudulent conveyance or fraudulent
transfer under the applicable provisions of any fraudulent conveyance or
fraudulent transfer law or similar law of any state, nation or other
governmental unit, as in effect from time to time.

 

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(c) Agent is hereby authorized, without notice or demand (except as otherwise
specifically required under this Agreement) and without affecting the liability
of any Borrower hereunder, at any time and from time to time, to (i) renew,
extend or otherwise increase the time for payment of the Obligations; (ii) with
the written agreement of any Borrower, change the terms relating to the
Obligations or otherwise modify, amend or change the terms of any Note or other
agreement, document or instrument now or hereafter executed by any Borrower and
delivered to Agent for any Lender; (iii) accept partial payments of the
Obligations; (iv) take and hold any Collateral for the payment of the
Obligations or for the payment of any guaranties of the Obligations and
exchange, enforce, waive and release any such Collateral; (v) apply any such
Collateral and direct the order or manner of sale thereof as Agent, in its sole
discretion, may determine; and (vi) settle, release, compromise, collect or
otherwise liquidate the Obligations and any Collateral therefor in any manner,
all guarantor and surety defenses being hereby waived by each Borrower. Without
limitations of the foregoing, with respect to the Obligations, each Borrower
hereby makes and adopts each of the agreements and waivers set forth in each
Guarantee, the same being incorporated hereby by reference. Except as
specifically provided in this Agreement or any of the other Financing Documents,
Agent shall have the exclusive right to determine the time and manner of
application of any payments or credits, whether received from any Borrower or
any other source, and such determination shall be binding on all Borrowers. All
such payments and credits may be applied, reversed and reapplied, in whole or in
part, to any of the Obligations that Agent shall determine, in its sole
discretion, without affecting the validity or enforceability of the Obligations
of the other Borrower.

(d) Each Borrower hereby agrees that, except as hereinafter provided, its
obligations hereunder shall be unconditional, irrespective of (i) the absence of
any attempt to collect the Obligations from any obligor or other action to
enforce the same; (ii) the waiver or consent by Agent with respect to any
provision of any instrument evidencing the Obligations, or any part thereof, or
any other agreement heretofore, now or hereafter executed by a Borrower and
delivered to Agent; (iii) failure by Agent to take any steps to perfect and
maintain its security interest in, or to preserve its rights to, any security or
collateral for the Obligations; (iv) the institution of any proceeding under the
Bankruptcy Code, or any similar proceeding, by or against a Borrower or Agent’s
election in any such proceeding of the application of Section 1111(b)(2) of the
Bankruptcy Code; (v) any borrowing or grant of a security interest by a Borrower
as debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Agent’s claim(s) for repayment of any of the Obligations; or (vii) any other
circumstance other than payment in full of the Obligations which might otherwise
constitute a legal or equitable discharge or defense of a guarantor or surety.

(e) The Borrowers hereby agree, as between themselves, that to the extent that
Agent, on behalf of Lenders, shall have received from any Borrower any Recovery
Amount (as defined below), then the paying Borrower shall have a right of
contribution against each other Borrower in an amount equal to such other
Borrower’s contributive share of such Recovery Amount; provided, however, that
in the event any Borrower suffers a Deficiency Amount (as defined below), then
the Borrower suffering the Deficiency Amount shall be entitled to seek and
receive contribution from and against the other Borrowers in an amount equal to
the Deficiency Amount; and provided, further, that in no event shall the
aggregate amounts so reimbursed by reason of the contribution of any Borrower
equal or exceed an amount that would, if paid, constitute or result in
Fraudulent Conveyance. Until all Obligations have been paid and satisfied in
full, no payment made by or for the account of a Borrower including, without
limitation, (i) a payment made by such Borrower on behalf of the liabilities of
any other Borrower, or (ii) a payment made by any other Guarantor under any
Guarantee, shall entitle such Borrower, by subrogation or otherwise, to any
payment from such other Borrower or from or out of such other Borrower’s
property. The right of each Borrower to receive any contribution under this
Section 2.10(e) or by subrogation or otherwise from any other Borrower shall be
subordinate in right of payment to the Obligations and such Borrower shall not
exercise any right or remedy against such other Borrower or any property of such
other Borrower by reason of any performance of such Borrower of its joint and
several obligations hereunder, until the Obligations have been indefeasibly paid
and satisfied in full, and no Borrower shall exercise any right or remedy with
respect to this Section 2.10(e) until the Obligations have been indefeasibly
paid and satisfied in full. As used in this Section 2.10(e), the term “Recovery
Amount” means the amount of proceeds received by or credited to Agent from the
exercise of any remedy of the Lenders under this Agreement or the other
Financing Documents, including, without limitation, the sale of any Collateral.
As used in this Section 2.10(e), the term “Deficiency Amount” means any amount
that is less than the entire amount a Borrower is entitled to receive by way of
contribution or subrogation from, but that has not been paid by, the other
Borrowers in respect of any Recovery Amount attributable to the Borrower
entitled to contribution, until the Deficiency Amount has been reduced to zero
through contributions and reimbursements made under the terms of this
Section 2.10(e) or otherwise.

 

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Section 2.11 Collections and Lockbox Account.

(a) No later than ten (10) Business Days after the Closing Date, Borrowers shall
establish and maintain a lockbox (the “Lockbox”) with a United States depository
institution designated from time to time by Agent (the “Lockbox Bank”), subject
to the provisions of this Agreement, and shall execute with the Lockbox Bank a
Deposit Account Control Agreement and such other agreements related to such
Lockbox as Agent may require. Borrowers shall ensure that all collections of
Accounts (other than Accounts for which the Account Debtor is a Governmental
Account Debtor) are paid directly from Account Debtors (i) into the Lockbox for
deposit into the Lockbox Account and/or (ii) directly into the Lockbox Account;
provided, however, unless Agent shall otherwise direct by written notice to
Borrowers, Borrowers shall be permitted to cause Account Debtors who are
individuals to pay Accounts directly to Borrowers, which Borrowers shall then
administer and apply in the manner required below. All funds deposited into a
Lockbox Account shall be transferred into the Payment Account by the close of
each Business Day.

(b) If any of the Account Debtors are Governmental Account Debtors, no later
than ten (10) Business Days after the Closing Date, Borrowers shall establish
and maintain additional lockboxes (also herein referred to collectively in the
singular as the “Lockbox”) and related Lockbox Accounts with the Lockbox Bank,
subject to the provisions of this Agreement, and shall execute with the Lockbox
Bank a Deposit Account Restriction Agreement and such other agreements related
to such Lockbox as Agent may require. A separate Lockbox shall be established
for each Borrower that is a licensed provider under the Medicaid or Medicare
programs, if applicable. Borrowers shall ensure that all collections of Accounts
due from Governmental Account Debtors are paid directly from such Account
Debtors into the applicable Lockbox and/or Lockbox Account established pursuant
to this subsection for deposit into the Lockbox Account established pursuant to
this subsection. All funds deposited into a Lockbox Account that is subject (or
required to be subject) to a Deposit Account Restriction Agreement shall be
transferred into either (at Agent’s option) (i) the Payment Account by the close
of each Business Day, or (ii) the Lockbox Account established pursuant to
Section 2.11(a), which such transfer shall be made via an automatic immediate
intrabank transfer, and then transferred to the Payment Account by the close of
each Business Day.

(c) Notwithstanding anything in any lockbox agreement or Deposit Account Control
Agreement to the contrary, Borrowers agree that they shall be liable for any
fees and charges in effect from time to time and charged by the Lockbox Bank in
connection with the Lockbox, the Lockbox Account, and that Agent shall have no
liability therefor. Borrowers hereby indemnify and agree to hold Agent harmless
from any and all liabilities, claims, losses and demands whatsoever, including
reasonable attorneys’ fees and expenses, arising from or relating to actions of
Agent or the Lockbox Bank pursuant to this Section or any lockbox agreement or
Deposit Account Control Agreement or similar agreement, except to the extent of
such losses arising solely from Agent’s gross negligence or willful misconduct.

 

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(d) Agent shall apply, on a daily basis, all funds transferred into the Payment
Account pursuant to this Section to reduce the outstanding Revolving Loans in
such order of application as Agent shall elect. Agent shall have no obligation
to apply any funds transferred into the Payment Account pursuant to this
Section to reduce the outstanding Term Loan, but Agent shall have the option to
apply such funds to any Term Loan to the extent of any payments (whether of
principal, interest or otherwise) due and payable in respect thereof. If as the
result of collections of Accounts pursuant to the terms and conditions of this
Section, a credit balance exists with respect to the Loan Account, such credit
balance shall not accrue interest in favor of Borrowers, but Agent shall
transfer such funds into an account designated by Borrower Representative for so
long as no Event of Default exists.

(e) To the extent that any collections of Accounts or proceeds of other
Collateral are not sent directly to the Lockbox or Lockbox Account but are
received by any Borrower, such collections shall be held in trust for the
benefit of Agent pursuant to an express trust created hereby and immediately
remitted, in the form received, to applicable Lockbox or Lockbox Account. No
such funds received by any Borrower shall be commingled with other funds of the
Borrowers. If any funds received by any Borrower are commingled with other funds
of the Borrowers, or are required to be deposited to a Lockbox or Lockbox
Account and are not so deposited within two (2) Business Days, then Borrower
shall pay to Agent, for its own account and not for the account of any other
Lenders, a compliance fee equal to $500 for each day that any such conditions
exist.

(f) Borrowers acknowledge and agree that compliance with the terms of this
Section is essential, and that Agent and Lenders will suffer immediate and
irreparable injury and have no adequate remedy at law, if any Borrower, through
acts or omissions, causes or permits Account Debtors to send payments other than
to the Lockbox or Lockbox Accounts or if any Borrower fails to promptly deposit
collections of Accounts or proceeds of other Collateral in the Lockbox Account
as herein required. Accordingly, in addition to all other rights and remedies of
Agent and Lenders hereunder, Agent shall have the right to seek specific
performance of the Borrowers’ obligations under this Section, and any other
equitable relief as Agent may deem necessary or appropriate, and Borrowers waive
any requirement for the posting of a bond in connection with such equitable
relief.

(g) Borrowers shall not, and Borrowers shall not suffer or permit any Credit
Party to (i) withdraw any amounts from any Lockbox Account, (ii) change the
procedures or sweep instructions under the agreements governing any Lockbox
Accounts, or (iii) send to or deposit in any Lockbox Account any funds other
than payments made with respect to and proceeds of Accounts or other Collateral.
Borrowers shall, and shall cause each Credit Party to, cooperate with Agent in
the identification and reconciliation on a daily basis of all amounts received
in or required to be deposited into the Lockbox Accounts. If more than five
percent (5%) of the collections of Accounts received by Borrowers during any
given fifteen (15) day period is not identified or reconciled to the reasonable
satisfaction of Agent within ten (10) Business Days of receipt, Agent shall not
be obligated to make further advances under this Agreement until such amount is
identified or is reconciled to the reasonable satisfaction of Agent, as the case
may be. In addition, if any such amount cannot be identified or reconciled to
the reasonable satisfaction of Agent, Agent 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 Agent’s own staff shall be in accordance with Agent’s then
prevailing customary charges (plus expenses)), to make such examination and
report as may be necessary to identify and reconcile such amount.

(h) If any Borrower breaches its obligation to direct payments of the proceeds
of the Collateral to the Lockbox Account, Agent, as the irrevocably made,
constituted and appointed true and lawful attorney for Borrowers, may, by the
signature or other act of any of Agent’s officers (without requiring any of them
to do so), direct any Account Debtor to pay proceeds of the Collateral to
Borrowers by directing payment to the Lockbox Account.

 

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(i) On the Closing Date, Borrowers shall (i) execute standing wire transfer
instructions, or (ii) manually sweep such deposit accounts as necessary to cause
all collections of Accounts to be swept to the Payment Account by the close of
each Business Day, and such wire transfer instructions shall remain in place
until the Lockboxes and Lockbox Accounts required pursuant to subsections
(a) and (b) above have been established and Borrowers are in compliance with
subsections (a) through (h) above.

Section 2.12 Termination; Restriction on Termination.

(a) Termination by Lenders. In addition to the rights set forth in Section 10.2,
Agent may, and at the direction of Required Lenders shall, terminate this
Agreement without notice upon or after the occurrence and during the continuance
of an Event of Default.

(b) Termination by Borrowers. Upon at least thirty (30) days’ prior written
notice to Agent and Lenders, Borrowers may, at its option, terminate this
Agreement; provided, however, that no such termination shall be effective until
Borrowers have paid to Agent’s satisfaction all of the Obligations in
immediately available funds, complied with Section 2.2(g) and the terms of any
Fee Letter, and (iii) paid in full all of the Affiliated Obligations in
immediately available funds and terminated the Affiliated Financing Documents,
if any. Any notice of termination given by Borrowers shall be irrevocable unless
all Lenders otherwise agree in writing and no Lender shall have any obligation
to make any Loans on or after the termination date stated in such notice.
Borrowers may elect to terminate this Agreement in its entirety only. No section
of this Agreement or type of Loan available hereunder may be terminated singly.

(c) Effectiveness of Termination. All of the Obligations shall be immediately
due and payable upon the Termination Date. All undertakings, agreements,
covenants, warranties and representations of Borrowers contained in the
Financing Documents shall survive any such termination and Agent shall retain
its Liens in the Collateral and Agent and each Lender shall retain all of its
rights and remedies under the Financing Documents notwithstanding such
termination until all Obligations have been discharged or paid, in full, in
immediately available funds, including, without limitation, all Obligations
under Section 2.2(g) and the terms of any Fee Letter resulting from such
termination. Notwithstanding the foregoing or the payment in full of the
Obligations and any Affiliated Obligations, Agent shall not be required to
terminate its Liens in the Collateral unless, with respect to any loss or damage
Agent may incur as a result of dishonored checks or other items of payment
received by Agent from Borrower or any Account Debtor and applied to the
Obligations, Agent shall, at its option, (i) have received a written agreement
satisfactory to Agent, 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 Agent and each Lender from any such loss or damage or
(ii) have retained cash Collateral or other Collateral for such period of time
as Agent, in its discretion, may deem necessary to protect Agent and each Lender
from any such loss or damage.

ARTICLE 3—REPRESENTATIONS AND WARRANTIES

To induce Agent and Lenders to enter into this Agreement and to make the Loans
and other credit accommodations contemplated hereby, each Borrower hereby
represents and warrants to Agent and each Lender that:

Section 3.1 Existence and Power. Each Credit Party is an entity as specified on
Schedule 3.1, is duly organized, validly existing and in good standing under the
laws of the jurisdiction specified on Schedule 3.1 and no other jurisdiction,
has the same legal name as it appears in such Credit Party’s Organizational
Documents and an organizational identification number (if any), in each case as
specified on Schedule 3.1, and has all powers and all Permits necessary or
desirable in the operation of its business as presently conducted or as proposed
to be conducted, except where the failure to have such Permits could not
reasonably be expected to have a Material Adverse Effect. Each Credit Party is
qualified to do business as a foreign entity in each jurisdiction in which it is
required to be so qualified, which jurisdictions as of the Closing Date are
specified on Schedule 3.1, except where the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.1, no Credit Party (a) has had, over the five (5) year period
preceding the Closing Date, any name other than its current name, or (b) was
incorporated or organized under the laws of any jurisdiction other than its
current jurisdiction of incorporation or organization.

 

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Section 3.2 Organization and Governmental Authorization; No Contravention. The
execution, delivery and performance by each Credit Party of the Operative
Documents to which it is a party are within its powers, have been duly
authorized by all necessary action pursuant to its Organizational Documents,
require no further action by or in respect of, or filing with, any Governmental
Authority and do not violate, conflict with or cause a breach or a default under
(a) any Law applicable to any Credit Party or any of the Organizational
Documents of any Credit Party, or (b) any agreement or instrument binding upon
it, except for such violations, conflicts, breaches or defaults as could not,
with respect to this clause (b), reasonably be expected to have a Material
Adverse Effect.

Section 3.3 Binding Effect. Each of the Operative Documents to which any Credit
Party is a party constitutes a valid and binding agreement or instrument of such
Credit Party, enforceable against such Credit Party in accordance with its
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws relating to the enforcement of
creditors’ rights generally and by general equitable principles.

Section 3.4 Capitalization. The authorized equity securities of each of the
Credit Parties and an organizational chart showing the Credit Parties and their
Affiliates, each as of the Closing Date, are as set forth on Schedule 3.4. All
issued and outstanding equity securities of each of the Credit Parties are duly
authorized and validly issued, fully paid, nonassessable, free and clear of all
Liens other than those in favor of Agent for the benefit of Agent and Lenders,
and such equity securities were issued in compliance with all applicable Laws.
The identity of the holders of the equity securities of each of the Credit
Parties and the percentage of their fully-diluted ownership of the equity
securities of each of the Credit Parties as of the Closing Date is set forth on
Schedule 3.4. No shares of the capital stock or other equity securities of any
Credit Party, other than those described above, are issued and outstanding as of
the Closing Date. Except as set forth on Schedule 3.4, as of the Closing Date
there are no preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from any Credit Party of any equity securities of any such entity.

Section 3.5 Financial Information. All information delivered to Agent and
pertaining to the financial condition of any Credit Party fairly presents the
financial position of such Credit Party as of such date in conformity with GAAP
(and as to unaudited financial statements, subject to normal year-end
adjustments and the absence of footnote disclosures). All information delivered
to Agent and pertaining to the financial, physical or other condition or aspect
of the Project is true, accurate and correct in all material respects as of such
date and as of the date hereof. Since June 30, 2012, there has been no material
adverse change in the business, operations, properties, prospects or condition
(financial or otherwise) of any Credit Party.

Section 3.6 Litigation. Except as set forth on Schedule 3.6 as of the Closing
Date, and except as hereafter disclosed to Agent in writing, there is no
Litigation pending against, or to such Borrower’s knowledge threatened against
or affecting, any Credit Party or, to such Borrower’s knowledge, any party to
any Operative Document other than a Credit Party. There is no Litigation pending
in which an adverse decision could reasonably be expected to have a Material
Adverse Effect or which in any manner draws into question the validity of any of
the Operative Documents.

 

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Section 3.7 Ownership of Property. Each Borrower and each of its Subsidiaries is
the lawful owner of, has good and marketable title to and is in lawful
possession of, or has valid leasehold interests in, all properties and other
assets (real or personal, tangible, intangible or mixed) purported or reported
to be owned or leased (as the case may be) by such Person.

Section 3.8 No Default. No Event of Default, or to such Borrower’s knowledge,
Default, has occurred and is continuing. No Credit Party is in breach or default
under or with respect to any contract, agreement, lease or other instrument to
which it is a party or by which its property is bound or affected, which breach
or default could reasonably be expected to have a Material Adverse Effect.

Section 3.9 Labor Matters. As of the Closing Date, there are no strikes or other
labor disputes pending or, to any Borrower’s knowledge, threatened against any
Credit Party. Hours worked and payments made to the employees of the Credit
Parties have not been in violation of the Fair Labor Standards Act or any other
applicable Law dealing with such matters. All payments due from the Credit
Parties, or for which any claim may be made against any of them, on account of
wages and employee and retiree health and welfare insurance and other benefits
have been paid or accrued as a liability on their books, as the case may be. The
consummation of the transactions contemplated by the Financing Documents will
not give rise to a right of termination or right of renegotiation on the part of
any union under any collective bargaining agreement to which it is a party or by
which it is bound.

Section 3.10 Regulated Entities. No Credit Party is an “investment company” or a
company “controlled” by an “investment company” or a “subsidiary” of an
“investment company,” all within the meaning of the Investment Company Act of
1940.

Section 3.11 Margin Regulations. None of the proceeds from the Loans have been
or will be used, directly or indirectly, for the purpose of purchasing or
carrying any “margin stock” (as defined in Regulation U of the Federal Reserve
Board), for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any “margin stock” or for any other
purpose which might cause any of the Loans to be considered a “purpose credit”
within the meaning of Regulation T, U or X of the Federal Reserve Board.

Section 3.12 Compliance With Laws; Anti-Terrorism Laws.

(a) Each Credit Party is in compliance with the requirements of all applicable
Laws, except for such Laws the noncompliance with which could not reasonably be
expected to have a Material Adverse Effect.

(b) None of the Credit Parties and, to the knowledge of the Credit Parties, none
of their Affiliates (i) is in violation of any Anti-Terrorism Law, (ii) engages
in or conspires to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled
by a Blocked Person, (iv) is acting or will act for or on behalf of a Blocked
Person, (v) is associated with, or will become associated with, a Blocked Person
or (vi) is providing, or will provide, material, financial or technical support
or other services to or in support of acts of terrorism of a Blocked Person. No
Credit Party nor, to the knowledge of any Credit Party, any of its Affiliates or
agents acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement, (A) conducts any business or engages in making
or receiving any contribution of funds, goods or services to or for the benefit
of any Blocked Person, or (B) deals in, or otherwise engages in any transaction
relating to, any property or interest in property blocked pursuant to Executive
Order No. 13224, any similar executive order or other Anti-Terrorism Law.

 

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Section 3.13 Taxes. All federal, state and local tax returns, reports and
statements required to be filed by or on behalf of each Credit Party have been
filed with the appropriate Governmental Authorities in all jurisdictions in
which such returns, reports and statements are required to be filed and, except
to the extent subject to a Permitted Contest, all Taxes (including real property
Taxes) and other charges shown to be due and payable in respect thereof have
been timely paid prior to the date on which any fine, penalty, interest, late
charge or loss may be added thereto for nonpayment thereof. Except to the extent
subject to a Permitted Contest, all state and local sales and use Taxes required
to be paid by each Credit Party have been paid. All federal and state returns
have been filed by each Credit Party for all periods for which returns were due
with respect to employee income tax withholding, social security and
unemployment taxes, and, except to the extent subject to a Permitted Contest,
the amounts shown thereon to be due and payable have been paid in full or
adequate provisions therefor have been made.

Section 3.14 Compliance with ERISA.

(a) Each ERISA Plan (and the related trusts and funding agreements) complies in
form and in operation with, has been administered in compliance with, and the
terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the
Code in all material respects. Each ERISA Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified, and the United States Internal
Revenue Service has issued a favorable determination letter with respect to each
such ERISA Plan which may be relied on currently. No Credit Party has incurred
liability for any material excise tax under any of Sections 4971 through 5000 of
the Code.

(b) Except as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, each Borrower and each Subsidiary
is in compliance with the applicable provisions of ERISA and the provision of
the Code relating to ERISA Plans and the regulations and published
interpretations therein. During the thirty-six (36) month period prior to the
Closing Date or the making of any Loan, (i) no steps have been taken to
terminate any Pension Plan, and (ii) no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under
Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by any Credit Party of any material liability, fine or penalty. No Credit Party
has incurred liability to the PBGC (other than for current premiums) with
respect to any employee Pension Plan. All contributions (if any) have been made
on a timely basis to any Multiemployer Plan that are required to be made by any
Credit Party or any other member of the Controlled Group under the terms of the
plan or of any collective bargaining agreement or by applicable Law; no Credit
Party nor any member of the Controlled Group has withdrawn or partially
withdrawn from any Multiemployer Plan, incurred any withdrawal liability with
respect to any such plan or received notice of any claim or demand for
withdrawal liability or partial withdrawal liability from any such plan, and no
condition has occurred which, if continued, could result in a withdrawal or
partial withdrawal from any such plan, and no Credit Party nor any member of the
Controlled Group has received any notice that any Multiemployer Plan is in
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, that any such
plan is or has been funded at a rate less than that required under Section 412
of the Code, that any such plan is or may be terminated, or that any such plan
is or may become insolvent.

Section 3.15 Consummation of Operative Documents; Brokers. Except for fees
payable to Agent and/or Lenders, no broker, finder or other intermediary has
brought about the obtaining, making or closing of the transactions contemplated
by the Operative Documents, and no Credit Party has or will have any obligation
to any Person in respect of any finder’s or brokerage fees, commissions or other
expenses in connection herewith or therewith.

 

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Section 3.16 Related Transactions. All transactions contemplated by the
Operative Documents to be consummated on or prior to the date hereof have been
so consummated (including, without limitation, the disbursement and transfer of
all funds in connection therewith) in all material respects pursuant to the
provisions of the applicable Operative Documents, true and complete copies of
which have been delivered to Agent, and in compliance with all applicable Law,
except for such Laws the noncompliance with which would not reasonably be
expected to have a Material Adverse Effect.

Section 3.17 Material Contracts. Except for the Operative Documents and the
other agreements set forth on Schedule 3.17 (collectively with the Operative
Documents, the “Material Contracts”), as of the Closing Date there are no
(a) employment agreements covering the management of any Credit Party,
(b) collective bargaining agreements or other similar labor agreements covering
any employees of any Credit Party, (c) agreements for managerial, consulting or
similar services to which any Credit Party is a party or by which it is bound,
(d) agreements regarding any Credit Party, its assets or operations or any
investment therein to which any of its equity holders is a party or by which it
is bound, (e) real estate leases, Intellectual Property licenses or other lease
or license agreements to which any Credit Party is a party, either as lessor or
lessee, or as licensor or licensee (other than licenses arising from the
purchase of “off the shelf” products), (f) customer, distribution, marketing or
supply agreements to which any Credit Party is a party, in each case with
respect to the preceding clauses (a) through (e) requiring payment of more than
$100,000 in any year, (g) partnership agreements to which any Credit Party is a
general partner or joint venture agreements to which any Credit Party is a
party, (h) third party billing arrangements to which any Credit Party is a
party, or (i) any other agreements or instruments to which any Credit Party is a
party, and the breach, nonperformance or cancellation of which, or the failure
of which to renew, could reasonably be expected to have a Material Adverse
Effect. Schedule 3.17 sets forth, with respect to each real estate lease
agreement to which any Borrower is a party (as a lessee) as of the Closing Date,
the address of the subject property and the annual rental (or, where applicable,
a general description of the method of computing the annual rental). The
consummation of the transactions contemplated by the Financing Documents will
not give rise to a right of termination in favor of any party to any Material
Contract (other than any Credit Party), except for such Material Contracts the
noncompliance with which would not reasonably be expected to have a Material
Adverse Effect.

Section 3.18 Compliance with Environmental Requirements; No Hazardous Materials.
Except in each case as set forth on Schedule 3.18:

(a) no notice, notification, demand, request for information, citation, summons,
complaint or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending, or to such Borrower’s
knowledge, threatened by any Governmental Authority or other Person with respect
to any (i) alleged violation by any Credit Party of any Environmental Law,
(ii) alleged failure by any Credit Party to have any Permits required in
connection with the conduct of its business or to comply with the terms and
conditions thereof, (iii) any generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Materials, or (iv) release of
Hazardous Materials; and

(b) no property now owned or leased by any Credit Party and, to the knowledge of
each Borrower, no such property previously owned or leased by any Credit Party,
to which any Credit Party has, directly or indirectly, transported or arranged
for the transportation of any Hazardous Materials, is listed or, to such
Borrower’s knowledge, proposed for listing, on the National Priorities List
promulgated pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar
state list or is the subject of federal, state or local enforcement actions or,
to the knowledge of such Borrower, other investigations which may lead to claims
against any Credit Party for clean-up costs, remedial work, damage to natural
resources or personal injury claims, including, without limitation, claims under
CERCLA.

 

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For purposes of this Section 3.18, each Credit Party shall be deemed to include
any business or business entity (including a corporation) that is, in whole or
in part, a predecessor of such Credit Party.

Section 3.19 Intellectual Property. Each Credit Party owns, is licensed to use
or otherwise has the right to use, all Intellectual Property that is material to
the condition (financial or other), business or operations of such Credit Party.
All Intellectual Property existing as of the Closing Date which is issued,
registered or pending with any United States or foreign Governmental Authority
(including, without limitation, any and all applications for the registration of
any Intellectual Property with any such United States or foreign Governmental
Authority) and all licenses under which any Borrower is the licensee of any such
registered Intellectual Property (or any such application for the registration
of Intellectual Property) owned by another Person are set forth on
Schedule 3.19. Such Schedule 3.19 indicates in each case whether such registered
Intellectual Property (or application therefore) is owned or licensed by such
Credit Party, and in the case of any such licensed registered Intellectual
Property (or application therefore), lists the name and address of the licensor
and the name and date of the agreement pursuant to which such item of
Intellectual Property is licensed and whether or not such license is an
exclusive license and indicates whether there are any purported restrictions in
such license on the ability to such Credit Party to grant a security interest in
and/or to transfer any of its rights as a licensee under such license. Except as
indicated on Schedule 3.19, the applicable Credit Party is the sole and
exclusive owner of the entire and unencumbered right, title and interest in and
to each such registered Intellectual Property (or application therefore)
purported to be owned by such Credit Party, free and clear of any Liens and/or
licenses in favor of third parties or agreements or covenants not such sue third
parties for infringement. All registered Intellectual Property of each Credit
Party is duly and properly registered, filed or issued in the appropriate office
and jurisdictions for such registrations, filings or issuances, except where the
failure to do so would not reasonably be expected to have a Material Adverse
Effect. No Credit Party is party to, nor bound by, any material license or other
agreement with respect to which any Credit Party is the licensee that prohibits
or otherwise restricts such Credit Party from granting a security interest in
such Borrower’s interest in such license or agreement or other property. To such
Borrower’s knowledge, each Credit Party conducts its business without
infringement or claim of infringement of any Intellectual Property rights of
others and there is no infringement or claim of infringement by others of any
Intellectual Property rights of any Credit Party, which infringement or claim of
infringement could reasonably be expected to have a Material Adverse Effect.

Section 3.20 Solvency. After giving effect to the Loan advance and the
liabilities and obligations of each Borrower under the Operative Documents, each
Borrower and each additional Credit Party is Solvent.

Section 3.21 Full Disclosure. None of the written information (financial or
otherwise) furnished by or on behalf of any Credit Party to Agent or any Lender
in connection with the consummation of the transactions contemplated by the
Operative Documents, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which such statements
were made. All financial projections delivered to Agent and the Lenders by
Borrowers (or their agents) have been prepared on the basis of the assumptions
stated therein. Such projections represent each Borrower’s best estimate of such
Borrower’s future financial performance and such assumptions are believed by
such Borrower to be fair and reasonable in light of current business conditions;
provided, however, that Borrowers can give no assurance that such projections
will be attained.

Section 3.22 Interest Rate. The rate of interest paid under the Notes and the
method and manner of the calculation thereof do not violate any usury or other
law or applicable Laws, any of the Organizational Documents, or any of the
Operative Documents.

 

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Section 3.23 Subsidiaries. Borrowers do not own any stock, partnership
interests, limited liability company interests or other equity securities except
for Permitted Investments.

Section 3.24 Representations and Warranties Incorporated from Operative
Documents. As of the Closing Date, each of the representations and warranties
made in the Operative Documents by each of the parties thereto is true and
correct in all material respects, and such representations and warranties are
hereby incorporated herein by reference with the same effect as though set forth
in their entirety herein, as qualified therein, except to the extent that such
representation or warranty relates to a specific date, in which case such
representation and warranty shall be true as of such earlier date.

Section 3.25 Issuance of Securities. The Warrant is duly authorized and, when
issued in accordance with the terms hereof, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens. The Warrant Shares
are duly authorized and, when issued in accordance with the terms of the
Warrant, will be validly issued, fully paid and nonassessable, free and clear of
all Liens. No Person has any right of first refusal, preemptive right, right of
participation or any similar right with respect to the Warrant Shares issuable
under the Warrant. University General Hospital has reserved from its duly
authorized capital stock the maximum number of Warrant Shares in accordance with
the terms of the Warrant as of the date hereof.

Section 3.26 Private Placement. No registration under the Securities Act or any
state securities laws is required for the offer and sale of the Warrant or the
Warrant Shares as contemplated hereby. The issuance and sale of the Warrant and
the Warrant Shares does not and will not contravene the rules and regulations of
any trading market or securities exchange on which the Common Stock is listed,
traded or quoted.

Section 3.27 No Integrated Offering; No General Solicitation. Neither University
General Hospital, nor any of its Affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause the offering of the Warrant and/or any Warrant Shares to be
integrated with any prior offerings by University General Hospital for purposes
of (i) the Securities Act, which would require the registration of any such
securities under the Securities Act, or (ii) any applicable shareholder approval
provisions of any trading market or securities exchange on which the Common
Stock is listed, traded or quoted. Neither University General Hospital nor any
Person acting on its behalf has offered or sold the Warrant or any Warrant
Shares by any form of general solicitation or general advertising.

ARTICLE 4—AFFIRMATIVE COVENANTS

Each Borrower agrees that, so long as any Credit Exposure exists:

Section 4.1 Financial Statements and Other Reports. Each Borrower will deliver
to Agent: (a) as soon as available, but no later than thirty (30) days after the
last day of each month, a company prepared consolidated balance sheet, cash flow
and income statement covering Borrowers’ and its Consolidated Subsidiaries’
consolidated operations during the period, prepared under GAAP, consistently
applied, certified by a Responsible Officer and in a form acceptable to Agent;
(b) together with the financial reporting package described in (a) above,
evidence of payment and satisfaction of all payroll, withholding and similar
taxes due and owing by all Borrowers with respect to the payroll period(s)
occurring during such month; (c) as soon as available, but no later than ninety
(90) days after the last day of Borrower’s fiscal year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Agent in its reasonable discretion;
(d) within five (5) days of delivery or filing thereof, copies of all
statements, reports and notices made available to Borrower’s

 

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security holders or to any holders of Subordinated Debt and copies of all
reports and other filings made by Borrower with any stock exchange on which any
securities of any Borrower are traded and/or the SEC; (e) a prompt report of any
legal actions pending or threatened against any Borrower or any of its
Subsidiaries that could result in damages or costs to any Borrower or any of its
Subsidiaries of $250,000 or more; (f) prompt written notice of an event that
materially and adversely affects the value of any Intellectual Property;
(g) budgets, sales projections, operating plans and other financial information
and information, reports or statements regarding the Borrowers, their business
and the Collateral as Agent may from time to time reasonably request; and (h) an
updated Schedule 5.8 at least once per each twelve (12) month period. Each
Borrower will, within thirty (30) days after the last day of each month, deliver
to Agent with the monthly financial statements in clause (a) above, a duly
completed Compliance Certificate signed by a Responsible Officer setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement. Promptly upon their becoming available, Borrowers shall deliver to
Agent copies of all Material Contracts. Each Borrower will, within ten (10) days
after the last day of each month, deliver to Agent a duly completed Borrowing
Base Certificate signed by a Responsible Officer, with aged listings of accounts
receivable and accounts payable (by invoice date). Borrowers shall, every ninety
(90) days on a schedule to be designated by Agent, and at such other times as
Agent shall request, deliver to Agent a schedule of Eligible Accounts denoting,
for the thirty (30) largest Account Debtors during such quarter, such Account
Debtor’s credit rating(s), if any, as rated by A.M. Best Company, Standard &
Poor’s Corporation, Moody’s Investors Service, Inc., FITCH, Inc. or other
applicable rating agent.

Section 4.2 Payment and Performance of Obligations. Each Borrower (a) will pay
and discharge, and cause each Subsidiary to pay and discharge, on a timely basis
as and when due, all of their respective obligations and liabilities, except for
such obligations and/or liabilities (i) that may be the subject of a Permitted
Contest, and (ii) the nonpayment or nondischarge of which could not reasonably
be expected to have a Material Adverse Effect or result in a Lien against any
Collateral, except for Permitted Liens, (b) without limiting anything contained
in the foregoing clause (a), pay all amounts due and owing in respect of Taxes
(including without limitation, payroll and withholdings tax liabilities) on a
timely basis as and when due, and in any case prior to the date on which any
fine, penalty, interest, late charge or loss may be added thereto for nonpayment
thereof, (c) will maintain, and cause each Subsidiary to maintain, in accordance
with GAAP, appropriate reserves for the accrual of all of their respective
obligations and liabilities, and (d) will not breach or permit any Subsidiary to
breach, or permit to exist any default under, the terms of any lease,
commitment, contract, instrument or obligation to which it is a party, or by
which its properties or assets are bound, except for such breaches or defaults
which could not reasonably be expected to have a Material Adverse Effect.

Section 4.3 Maintenance of Existence. Each Borrower will preserve, renew and
keep in full force and effect and in good standing, and will cause each
Subsidiary to preserve, renew and keep in full force and effect and in good
standing, their respective existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business.

Section 4.4 Maintenance of Property; Insurance.

(a) Each Borrower will keep, and will cause each Subsidiary to keep, all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted. If all or any part of the Collateral
useful or necessary in its business, or upon which any Borrowing Base is
calculated, becomes damaged or destroyed, each Borrower will, and will cause
each Subsidiary to, promptly and completely repair and/or restore the affected
Collateral in a good and workmanlike manner, regardless of whether Agent agrees
to disburse insurance proceeds or other sums to pay costs of the work of repair
or reconstruction.

 

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(b) Upon completion of any Permitted Contest, Borrowers shall, and will cause
each Subsidiary to, promptly pay the amount due, if any, and deliver to Agent
proof of the completion of the contest and payment of the amount due, if any,
following which Agent shall return the security, if any, deposited with Agent
pursuant to the definition of Permitted Contest.

(c) Each Borrower will maintain (i) casualty insurance on all real and personal
property on an all risks basis (including the perils of flood, windstorm and
quake), covering the repair and replacement cost of all such property and
coverage, business interruption and rent loss coverages with extended period of
indemnity (for the period required by Agent from time to time) and indemnity for
extra expense, in each case without application of coinsurance and with agreed
amount endorsements, (ii) general and professional liability insurance
(including products/completed operations liability coverage), and (iii) such
other insurance coverage in such amounts and with respect to such risks as Agent
may request from time to time, pursuant to the Insurance Requirements attached
hereto as Schedule 4.4; provided, however, that, in no event shall such
insurance be in amounts or with coverage less than, or with carriers with
qualifications inferior to, any of the insurance or carriers in existence as of
the Closing Date (or required to be in existence after the Closing Date under a
Financing Document). All such insurance shall be provided by insurers having an
A.M. Best policyholders rating reasonably acceptable to Agent.

(d) On or prior to the Closing Date, and at all times thereafter, each Borrower
will cause Agent to be named as an additional insured, assignee and lender loss
payee (which shall include, as applicable, identification as mortgagee), as
applicable, on each insurance policy required to be maintained pursuant to this
Section 4.4 pursuant to endorsements in form and substance acceptable to Agent.
Borrowers shall deliver to Agent and the Lenders (i) on the Closing Date, a
certificate from Borrowers’ insurance broker dated such date showing the amount
of coverage as of such date, and that such policies will include effective
waivers (whether under the terms of any such policy or otherwise) by the insurer
of all claims for insurance premiums against all loss payees and additional
insureds and all rights of subrogation against all loss payees and additional
insureds, and that if all or any part of such policy is canceled, terminated or
expires, the insurer will forthwith give notice thereof to each additional
insured, assignee and loss payee and that no cancellation, reduction in amount
or material change in coverage thereof shall be effective until at least thirty
(30) days after receipt by each additional insured, assignee and loss payee of
written notice thereof, (ii) on an annual basis, and upon the request of any
Lender through Agent from time to time full information as to the insurance
carried, (iii) within five (5) days of receipt of notice from any insurer, a
copy of any notice of cancellation, nonrenewal or material change in coverage
from that existing on the date of this Agreement, (iv) forthwith, notice of any
cancellation or nonrenewal of coverage by any Borrower, and (v) at least 60 days
prior to expiration of any policy of insurance, evidence of renewal of such
insurance upon the terms and conditions herein required.

(e) In the event any Borrower fails to provide Agent with evidence of the
insurance coverage required by this Agreement, Agent may purchase insurance at
Borrowers’ expense to protect Agent’s interests in the Collateral. This
insurance may, but need not, protect such Borrower’s interests. The coverage
purchased by Agent may not pay any claim made by such Borrower or any claim that
is made against such Borrower in connection with the Collateral. Such Borrower
may later cancel any insurance purchased by Agent, but only after providing
Agent with evidence that such Borrower has obtained insurance as required by
this Agreement. If Agent purchases insurance for the Collateral, Borrowers will
be responsible for the costs of that insurance to the fullest extent provided by
law, including interest and other charges imposed by Agent in connection with
the placement of the insurance, until the effective date of the cancellation or
expiration of the insurance. The costs of the insurance may be added to the
Obligations. The costs of the insurance may be more than the cost of insurance
such Borrower is able to obtain on its own.

 

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Section 4.5 Compliance with Laws and Material Contracts. Each Borrower will
comply, and cause each Subsidiary to comply, with the requirements of all
applicable Laws and Material Contracts, except to the extent that failure to so
comply could not reasonably be expected to (a) have a Material Adverse Effect,
or (b) result in any Lien upon either (i) a material portion of the assets of
any such Person in favor of any Governmental Authority, or (ii) any Collateral
which is part of the Borrowing Base.

Section 4.6 Inspection of Property, Books and Records. Each Borrower will keep,
and will cause each Subsidiary to keep, proper books of record substantially in
accordance with GAAP in which full, true and correct entries shall be made of
all dealings and transactions in relation to its business and activities; and
will permit, and will cause each Subsidiary to permit, at the sole cost of the
applicable Borrower or any applicable Subsidiary, representatives of Agent and
of any Lender to visit and inspect any of their respective properties, to
examine and make abstracts or copies from any of their respective books and
records, to conduct a collateral audit and analysis of their respective
operations and the Collateral, to verify the amount and age of the Accounts, the
identity and credit of the respective Account Debtors, to review the billing
practices of Borrowers and to discuss their respective affairs, finances and
accounts with their respective officers, employees and independent public
accountants as often as may reasonably be desired. In the absence of a Default
or an Event of Default, Agent or any Lender exercising any rights pursuant to
this Section 4.6 shall give the applicable Borrower or any applicable Subsidiary
commercially reasonable prior notice of such exercise. No notice shall be
required during the existence and continuance of any Default or any time during
which Agent reasonably believes a Default exists.

Section 4.7 Use of Proceeds. Borrowers shall use the proceeds of the Term Loan
solely for payment of amounts due in respect of an acquisition of equity
interests or assets contemplated by the Operative Documents, transaction fees
incurred in connection with the Operative Documents and the refinancing on the
Closing Date of Debt. Borrowers shall use the proceeds of Revolving Loans solely
for (a) transaction fees incurred in connection with the Financing Documents and
the refinancing on the Closing Date of Debt, and (b) for working capital needs
of Borrowers and their Subsidiaries. No portion of the proceeds of the Loans
will be used for family, personal, agricultural or household use.

Section 4.8 Estoppel Certificates. After written request by Agent, Borrowers,
within fifteen (15) days and at their expense, will furnish Agent with a
statement, duly acknowledged and certified, setting forth (a) the amount of the
original principal amount of the Notes, and the unpaid principal amount of the
Notes, (b) the rate of interest of the Notes, (c) the date payments of interest
and/or principal were last paid, (d) any offsets or defenses to the payment of
the Obligations, and if any are alleged, the nature thereof, (e) that the Notes
and this Agreement have not been modified or if modified, giving particulars of
such modification, and (f) that there has occurred and is then continuing no
Default or if such Default exists, the nature thereof, the period of time it has
existed, and the action being taken to remedy such Default. After written
request by Agent, Borrowers, within fifteen (15) days and at their expense, will
furnish Agent with a certificate, signed by a Responsible Officer of Borrowers,
updating all of the representations and warranties contained in this Agreement
and the other Financing Documents and certifying that all of the representations
and warranties contained in this Agreement and the other Financing Documents, as
updated pursuant to such certificate, are true, accurate and complete as of the
date of such certificate.

 

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Section 4.9 Notices of Litigation and Defaults. Borrowers will give prompt
written notice to Agent (a) of any litigation or governmental proceedings
pending or threatened (in writing) against Borrowers or other Credit Party which
would reasonably be expected to have a Material Adverse Effect with respect to
Borrowers or any other Credit Party or which in any manner calls into question
the validity or enforceability of any Financing Document, (b) upon any Borrower
becoming aware of the existence of any Default or Event of Default, (c) if any
Credit Party is in breach or default under or with respect to any Material
Contract, or if any Credit Party is in breach or default under or with respect
to any other contract, agreement, lease or other instrument to which it is a
party or by which its property is bound or affected, which breach or default
could reasonably be expected to have a Material Adverse Effect, (d) of any
strikes or other labor disputes pending or, to any Borrower’s knowledge,
threatened against any Credit Party, (e) if there is any infringement or claim
of infringement by any other Person with respect to any Intellectual Property
rights of any Credit Party that could reasonably be expected to have a Material
Adverse Effect, or if there is any claim by any other Person that any Credit
Party in the conduct of its business is infringing on the Intellectual Property
Rights of others, and (f) of all returns, recoveries, disputes and claims that
involve more than $250,000. Borrowers represent and warrant that Schedule 4.9
sets forth a complete list of all matters existing as of the Closing Date for
which notice could be required under this Section and all litigation or
governmental proceedings pending or, to such Borrower’s knowledge, threatened
(in writing) against Borrowers or other Credit Party as of the Closing Date.

Section 4.10 Hazardous Materials; Remediation.

(a) If any release or disposal of Hazardous Materials shall occur or shall have
occurred on any real property or any other assets of any Borrower or any other
Credit Party, such Borrower will cause, or direct the applicable Credit Party to
cause, the prompt containment and removal of such Hazardous Materials and the
remediation of such real property or other assets as is necessary to comply with
all Environmental Laws and to preserve the value of such real property or other
assets. Without limiting the generality of the foregoing, each Borrower shall,
and shall cause each other Credit Party to, comply with each Environmental Law
requiring the performance at any real property by any Borrower or any other
Credit Party of activities in response to the release or threatened release of a
Hazardous Material.

(b) Borrowers will provide Agent within thirty (30) days after written demand
therefor with a bond, letter of credit or similar financial assurance evidencing
to the reasonable satisfaction of Agent that sufficient funds are available to
pay the cost of removing, treating and disposing of any Hazardous Materials or
Hazardous Materials Contamination and discharging any assessment which may be
established on any property as a result thereof, such demand to be made, if at
all, upon Agent’s reasonable business determination that the failure to remove,
treat or dispose of any Hazardous Materials or Hazardous Materials
Contamination, or the failure to discharge any such assessment could reasonably
be expected to have a Material Adverse Effect.

Section 4.11 Further Assurances.

(a) Each Borrower will, and will cause each Subsidiary to, at its own cost and
expense, promptly and duly take, execute, acknowledge and deliver all such
further acts, documents and assurances as may from time to time be necessary or
as Agent or the Required Lenders may from time to time reasonably request in
order to carry out the intent and purposes of the Financing Documents and the
transactions contemplated thereby, including all such actions to (i) establish,
create, preserve, protect and perfect a first priority Lien (subject only to
Permitted Liens) in favor of Agent for itself and for the benefit of the Lenders
on the Collateral (including Collateral acquired after the date hereof), and
(ii) unless Agent shall agree otherwise in writing, cause all Subsidiaries of
Borrowers to be jointly and severally obligated with the other Borrowers under
all covenants and obligations under this Agreement, including the obligation to
repay the Obligations. Without limiting the generality of the foregoing,
(x) Borrowers shall, at the time of the delivery of any Compliance Certificate
disclosing the acquisition by an Credit Party of any registered Intellectual
Property or application for the registration of Intellectual Property, deliver
to Agent a duly completed and executed supplement to the applicable Credit
Party’s Patent Security Agreement or Trademark Security Agreement in the form of
the respective Exhibit thereto, and (y) at the request of Agent, following the
disclosure by Borrowers on any Compliance Certificate of the acquisition by any
Credit Party of any rights under a license as a licensee with respect to any
registered Intellectual Property or application for the registration of any
Intellectual Property owned by another Person, Borrowers shall execute any
documents requested by Agent to establish, create, preserve, protect and perfect
a first priority lien in favor of Agent, to the extent legally possible, in such
Borrower’s rights under such license and shall use their commercially reasonable
best efforts to obtain the written consent of the licensor which such license to
the granting in favor of Agent of a Lien on such Borrower’s rights as licensee
under such license.

 

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(b) Upon receipt of an affidavit of an officer of Agent or a Lender as to the
loss, theft, destruction or mutilation of any Note or any other Financing
Document which is not of public record, and, in the case of any such mutilation,
upon surrender and cancellation of such Note or other applicable Financing
Document, Borrowers will issue, in lieu thereof, a replacement Note or other
applicable Financing Document, dated the date of such lost, stolen, destroyed or
mutilated Note or other Financing Document in the same principal amount thereof
and otherwise of like tenor.

(c) Upon the formation or acquisition of a new Subsidiary, Borrowers shall
(i) pledge, have pledged or cause or have caused to be pledged to the Agent
pursuant to a pledge agreement in form and substance satisfactory to the Agent,
all of the outstanding shares of equity interests or other equity interests of
such new Subsidiary owned directly or indirectly by any Borrower, along with
undated stock or equivalent powers for such certificates, executed in blank;
(ii) unless Agent shall agree otherwise in writing, cause the new Subsidiary to
take such other actions (including entering into or joining any Security
Documents) as are necessary or advisable in the reasonable opinion of the Agent
in order to grant the Agent, acting on behalf of the Lenders, a first priority
Lien on all real and personal property of such Subsidiary in existence as of
such date and in all after acquired property, which first priority Liens are
required to be granted pursuant to this Agreement; (iii) unless Agent shall
agree otherwise in writing, cause such new Subsidiary to either (at the election
of Agent) become a Borrower hereunder with joint and several liability for all
obligations of Borrowers hereunder and under the other Financing Documents
pursuant to a joinder agreement or other similar agreement in form and substance
satisfactory to Agent or to become a Guarantor of the obligations of Borrowers
hereunder and under the other Financing Documents pursuant to a guaranty and
suretyship agreement in form and substance satisfactory to Agent; and (iv) cause
the new Subsidiary to deliver certified copies of such Subsidiary’s certificate
or articles of incorporation, together with good standing certificates, by-laws
(or other operating agreement or governing documents), resolutions of the Board
of Directors or other governing body, approving and authorize the execution and
delivery of the Security Documents, incumbency certificates and to execute
and/or deliver such other documents and legal opinions or to take such other
actions as may be requested by the Agent, in each case, in form and substance
satisfactory to the Agent.

(d) Upon the request of Agent, Borrowers shall obtain a landlord’s agreement or
mortgagee agreement, as applicable, from the lessor of each leased property or
mortgagee of owned property with respect to any business location where any
portion of the Collateral included in or proposed to be included in the
Borrowing Base, or the records relating to such Collateral and/or software and
equipment relating to such records or Collateral, is stored or located, which
agreement or letter shall be reasonably satisfactory in form and substance to
Agent. Borrowers shall timely and fully pay and perform its obligations under
all leases and other agreements with respect to each leased location where any
Collateral, or any records related thereto, is or may be located.

Section 4.12 [Reserved]

 

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Section 4.13 Power of Attorney. Each of the officers of Agent is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrowers (without requiring any of them to act as such) with full power of
substitution to do the following: (a) endorse the name of Borrowers upon any and
all checks, drafts, money orders, and other instruments for the payment of money
that are payable to Borrowers and constitute collections on Borrowers’ Accounts;
(b) so long as Agent has provided not less than three (3) Business Days’ prior
written notice to Borrower to perform the same and Borrower has failed to take
such action, execute in the name of Borrowers any schedules, assignments,
instruments, documents, and statements that Borrowers are obligated to give
Agent under this Agreement; (c) after the occurrence and during the continuance
of an Event of Default, take any action Borrowers are required to take under
this Agreement; (d) so long as Agent has provided not less than three
(3) Business Days’ prior written notice to Borrower to perform the same and
Borrower has failed to take such action, do such other and further acts and
deeds in the name of Borrowers that Agent may deem necessary or desirable to
enforce any Account or other Collateral or perfect Agent’s security interest or
Lien in any Collateral; and (e) after the occurrence and during the continuance
of an Event of Default, do such other and further acts and deeds in the name of
Borrowers that Agent may deem necessary or desirable to enforce its rights with
regard to any Account or other Collateral. This power of attorney shall be
irrevocable and coupled with an interest.

Section 4.14 Borrowing Base Collateral Administration.

(a) All data and other information relating to Accounts or other intangible
Collateral shall at all times be kept by Borrowers, at their respective
principal offices and shall not be moved from such locations without
(i) providing prior written notice to Agent, and (ii) obtaining the prior
written consent of Agent, which consent shall not be unreasonably withheld.

(b) Borrowers shall provide prompt written notice to each Person who either is
currently an Account Debtor or becomes an Account Debtor at any time following
the date of this Agreement that directs each Account Debtor to make payments
into the Lockbox, and hereby authorizes Agent, upon Borrowers’ failure to send
such notices within thirty (30) days after the date of this Agreement (or thirty
(30) days after the Person becomes an Account Debtor), to send any and all
similar notices to such Person. Agent reserves the right to notify Account
Debtors that Agent has been granted a Lien upon all Accounts.

Section 4.15 Reservation and Listing of Securities.

(a) University General Hospital shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Warrant in such
amount as may then be required to fulfill its obligations in full thereunder.

(b) If, on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than 130% of the number of
unexercised Warrant Shares under the Warrant (the “Unexercised Warrant Shares”)
on such date, then the Board of Directors of University General Hospital shall
use commercially reasonable efforts to amend the certificate or articles of
incorporation of University General Hospital to increase the number of
authorized but unissued shares of Common Stock by at least the number of
Unexercised Warrant Shares as of such date, as soon as possible and in any event
not later than the 75th day after such date.

(c) As soon as practicable after the Closing Date, University General Hospital
shall (i) in the time and manner required by the rules and regulations of any
trading market or securities exchange on which the Common Stock is listed,
traded or quoted, prepare and file with such trading market or securities
exchange an additional shares listing application covering all of the Warrant
Shares, (ii) take all steps necessary to cause the Warrant Shares to be approved
for listing or quotation on such trading market or securities exchange as soon
as practicable thereafter, (iii) provide to MCF evidence of any approval of such
listing application, when available, and (iv) maintain on any date the listing
or quotation of the Common Stock on any such trading market or securities
exchange.

 

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Section 4.16 Piggyback Registration Rights. If, at any time after the Closing
Date, University General Hospital shall determine to prepare and file with the
SEC a registration statement relating to an offering for its account or the
account of others under the Securities Act covering the Common Stock, other than
on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with the stock option or other employee benefit plans, University
General Hospital shall deliver to MCF a written notice of such determination and
if, within 15 Business Days after the date of delivery of such notice, MCF (or
any permitted successor or assign) shall so request in writing, University
General Hospital shall include in such registration statement all or any part of
the Warrant Shares that MCF requests to be registered; provided, however, that
University General Hospital shall not be required to register any Warrant Shares
pursuant to this Section 4.16 that are eligible for resale without restriction
pursuant to Rule 144 under the Securities Act. In the case of inclusion in a
firm-commitment underwritten offering, MCF must sell its Warrant Shares on the
same terms set by the underwriters for shares of Common Stock to be sold for the
account of University General Hospital. Further, in the event that the offering
by University General Hospital is a firm-commitment underwritten offering,
University General Hospital may exclude some or all of the Warrant Shares if so
requested in writing by the lead underwriter of such offering.

ARTICLE 5—NEGATIVE COVENANTS

Each Borrower agrees that, so long as any Credit Exposure exists:

Section 5.1 Debt; Contingent Obligations. No Borrower will, or will permit any
Subsidiary to, directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt, except for Permitted Debt. No Borrower will, or will permit any Subsidiary
to, directly or indirectly, create, assume, incur or suffer to exist any
Contingent Obligations, except for Permitted Contingent Obligations.

Section 5.2 Liens. No Borrower will, or will permit any Subsidiary to, directly
or indirectly, create, assume or suffer to exist any Lien on any asset now owned
or hereafter acquired by it, except for Permitted Liens.

Section 5.3 Restricted Distributions. No Borrower will, or will permit any
Subsidiary to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Distribution, except for Permitted Distributions.

Section 5.4 Restrictive Agreements. No Borrower will, or will permit any
Subsidiary to, directly or indirectly (a) enter into or assume any agreement
(other than the Financing Documents and any agreements for purchase money debt
permitted under clause (c) of the definition of Permitted Debt) prohibiting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired, or (b) create or otherwise cause or suffer to exist
or become effective any consensual encumbrance or restriction of any kind
(except as provided by the Financing Documents) on the ability of any Subsidiary
to: (i) pay or make Restricted Distributions to any Borrower or any Subsidiary;
(ii) pay any Debt owed to any Borrower or any Subsidiary; (iii) make loans or
advances to any Borrower or any Subsidiary; or (iv) transfer any of its property
or assets to any Borrower or any Subsidiary.

 

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Section 5.5 Payments and Modifications of Subordinated Debt. Borrower will not,
and will not permit any Subsidiary to, directly or indirectly (a) declare, pay,
make or set aside any amount for payment in respect of Subordinated Debt, except
for regularly scheduled payments of principal and interest pursuant to the terms
of such Subordinated Debt in effect on the Closing Date, (b) amend or otherwise
modify the terms of any Subordinated Debt, except for amendments or
modifications made in compliance with the Subordination Agreement, (c) declare,
pay, make or set aside any amount for payment in respect of any Debt hereinafter
incurred that, by its terms, or by separate agreement, is subordinated to the
Obligations, except for payments made in compliance with and expressly permitted
under the subordination provisions applicable thereto, or (d) amend or otherwise
modify the terms of any such Debt if the effect of such amendment or
modification is to (i) increase the interest rate or fees on, or change the
manner or timing of payment of, such Debt, (ii) accelerate or shorten the dates
upon which payments of principal or interest are due on, or the principal amount
of, such Debt, (iii) change in a manner adverse to any Credit Party or Agent any
event of default or add or make more restrictive any covenant with respect to
such Debt, (iv) change the prepayment provisions of such Debt or any of the
defined terms related thereto, (v) change the subordination provisions thereof
(or the subordination terms of any guaranty thereof), or (vi) change or amend
any other term if such change or amendment would materially increase the
obligations of the obligor or confer additional material rights on the holder of
such Debt in a manner adverse to Borrower, any Subsidiaries, Agents or Lenders.
Borrower shall, prior to entering into any such amendment or modification,
deliver to Agent reasonably in advance of the execution thereof, any final or
execution form copy thereof.

Section 5.6 Consolidations, Mergers and Sales of Assets; Change in Control. No
Borrower will, or will permit any Subsidiary to, directly or indirectly
(a) consolidate or merge or amalgamate with or into any other Person, or
(b) consummate any Asset Dispositions other than Permitted Asset Dispositions.
No Borrower will suffer or permit to occur any Change in Control with respect to
itself, any Subsidiary or any Guarantor with respect to such Persons.

Section 5.7 Purchase of Assets, Investments. No Borrower will, or will permit
any Subsidiary to, directly or indirectly (a) acquire or enter into any
agreement to acquire any assets other than in the Ordinary Course of Business or
as permitted under clause (h) of the definition of Permitted Investments;
(b) engage or enter into any agreement to engage in any joint venture or
partnership with any other Person; or (c) acquire or own or enter into any
agreement to acquire or own any Investment in any Person other than Permitted
Investments.

Section 5.8 Transactions with Affiliates. Except as otherwise disclosed on
Schedule 5.8 (as updated pursuant to Section 4.1) and except for transactions
which contain terms that are no less favorable to the applicable Borrower or any
Subsidiary, as the case may be, than those which might be obtained from a third
party not an Affiliate of any Credit Party, no Borrower will, or will permit any
Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of any Borrower.

Section 5.9 Modification of Organizational Documents. No Borrower will, or will
permit any Subsidiary to, directly or indirectly, amend or otherwise modify any
Organizational Documents of such Person, except for Permitted Modifications.

Section 5.10 Modification of Certain Agreements. No Borrower will, or will
permit any Subsidiary to, directly or indirectly, amend or otherwise modify any
Material Contract, which amendment or modification in any case: (a) is contrary
to the terms of this Agreement or any other Financing Document; (b) could
reasonably be expected to be adverse to the rights, interests or privileges of
the Agent or the Lenders or their ability to enforce the same; (c) results in
the imposition or expansion in any material respect of any obligation of or
restriction or burden on any Borrower or any Subsidiary; or (d) reduces in any
material respect any rights or benefits of any Borrower or any Subsidiaries (it
being understood and agreed that any such determination shall be in the
discretion of the Agent). Each Borrower shall, prior to entering into any
amendment or other modification of any of the foregoing documents, deliver to
Agent reasonably in advance of the execution thereof, any final or execution
form copy of amendments or other modifications to such documents, and such
Borrower agrees not to take, nor permit any of its Subsidiaries to take, any
such action with respect to any such documents without obtaining such approval
from Agent.

 

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Section 5.11 Conduct of Business. No Borrower will, or will permit any
Subsidiary to, directly or indirectly, engage in any line of business other than
those businesses engaged in on the Closing Date and described on Schedule 5.11
and businesses reasonably related thereto. No Borrower will, or will permit any
Subsidiary to, other than in the Ordinary Course of Business, change its normal
billing payment and reimbursement policies and procedures with respect to its
Accounts (including, without limitation, the amount and timing of finance
charges, fees and write-offs).

Section 5.12 Lease Payments. No Borrower will, or will permit any Subsidiary to,
directly or indirectly, incur or assume (whether pursuant to a Guarantee or
otherwise) any liability for rental payments except (i) in the Ordinary Course
of Business or (ii) as approved by Agent in connection with a Permitted
Acquisition.

Section 5.13 Limitation on Sale and Leaseback Transactions. No Borrower will, or
will permit any Subsidiary to, directly or indirectly, enter into any
arrangement with any Person whereby, in a substantially contemporaneous
transaction, any Borrower or any Subsidiaries sells or transfers all or
substantially all of its right, title and interest in an asset and, in
connection therewith, acquires or leases back the right to use such asset.

Section 5.14 Deposit Accounts and Securities Accounts; Payroll and Benefits
Accounts. No Borrower will, or will permit any Subsidiary (other than UGHS ER
Services, Inc. or UGHS Alvin Hospital, Inc.) directly or indirectly, establish
any new Deposit Account or Securities Account without prior written notice to
Agent, and unless Agent, such Borrower or such Subsidiary and the bank,
financial institution or securities intermediary at which the account is to be
opened enter into a Deposit Account Control Agreement or Securities Account
Control Agreement prior to or concurrently with the establishment of such
Deposit Account or Securities Account. Borrowers represent and warrant that
Schedule 5.14 lists all of the Deposit Accounts and Securities Accounts of each
Borrower as of the Closing Date. The provisions of this Section requiring
Deposit Account Control Agreements shall not apply to Deposit Accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrowers’ employees and identified to Agent
by Borrowers as such; provided, however, that at all times that any Obligations
or Affiliated Obligations remain outstanding, Borrower shall maintain one or
more separate Deposit Accounts to hold any and all amounts to be used for
payroll, payroll taxes and other employee wage and benefit payments, and shall
not commingle any monies allocated for such purposes with funds in any other
Deposit Account.

Section 5.15 Compliance with Anti-Terrorism Laws. Agent hereby notifies
Borrowers that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s
policies and practices, Agent is required to obtain, verify and record certain
information and documentation that identifies Borrowers and its principals,
which information includes the name and address of each Borrower and its
principals and such other information that will allow Agent to identify such
party in accordance with Anti-Terrorism Laws. No Borrower will, or will permit
any Subsidiary to, directly or indirectly, knowingly enter into any Material
Contracts with any Blocked Person or any Person listed on the OFAC Lists. Each
Borrower shall immediately notify Agent if such Borrower has knowledge that any
Borrower, any additional Credit Party or any of their respective Affiliates or
agents acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement is or becomes a Blocked Person or (a) is
convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is
arraigned and held over on charges involving money laundering or predicate
crimes to money laundering. No Borrower will, or will permit any Subsidiary to,
directly or indirectly, (i) conduct any business or engage in any transaction or
dealing with any Blocked Person, including, without limitation, the making or
receiving of any contribution of funds, goods or services to or for the benefit
of any Blocked Person, (ii) deal in, or otherwise engage in any transaction
relating to, any property or interests in property blocked pursuant to Executive
Order No. 13224, any similar executive order or other Anti-Terrorism Law, or
(iii) engage in or conspire to engage in any transaction that evades or avoids,
or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

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Section 5.16 Integration. University General Hospital shall not sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Warrant and/or the Warrant Shares in a manner that
would require the registration under the Securities Act of the sale of the
Warrant or any Warrant Shares or that would be integrated with the offer or sale
of the Warrant or any Warrant Shares for purposes of the rules and regulations
of any trading market or securities exchange on which the Common Stock is then
listed, traded or quoted such that it would require shareholder approval prior
to the closing of such other transaction unless shareholder approval is obtained
before the closing of such subsequent transaction.

ARTICLE 6—FINANCIAL COVENANTS

Section 6.1 Additional Defined Terms. The following additional definitions are
hereby appended to Section 1.1 of this Agreement:

“Approved Goods and Services” means goods sold and/or services rendered by
Borrowers in the Ordinary Course of Business, in compliance with all Laws, and
consistent with the type of goods sold and/or services rendered by Borrowers
throughout all or substantially all of its business operations as of the Closing
Date.

“Defined Period” means, for purposes of calculating the Fixed Charge Coverage
Ratio for any given calendar month, the twelve (12) month period immediately
preceding any such calendar month.

“EBITDA” has the meaning provided in the Compliance Certificate.

“Fixed Charge Coverage Ratio” means the ratio of Operating Cash Flow to Fixed
Charges for each Defined Period.

“Gross Invoiced Revenues” means gross revenues of Borrowers generated and
invoiced in the Ordinary Course of Business from the sale or provision of
Approved Goods and Services and which are fully and unconditionally earned under
the terms of such sale or provision.

“Senior Debt” means an amount equal to the total aggregate Debt for borrowed
money, including, without limitation, the Obligations hereunder and Debt under
capitalized leases, but excluding the outstanding balance of the Subordinated
Debt.

“Senior Leverage Ratio” means the ratio of (a) Senior Debt to (b) EBITDA.

“Total Debt” means an amount equal to the sum of (a) Senior Debt plus (b) the
total outstanding balance of Subordinated Debt.

 

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Section 6.2 Fixed Charge Coverage Ratio. Borrowers will not permit the Fixed
Charge Coverage Ratio for any Defined Period, as tested monthly, to be less than
1.20 to 1.00.

Section 6.3 Evidence of Compliance. Borrowers shall furnish to Agent, together
with the financial reporting required of Borrowers in Section 4.1 hereof, a
Compliance Certificate as evidence of Borrowers’ compliance with the covenants
in this Article and evidence that no Event of Default specified in this
Article has occurred. The Compliance Certificate shall include, without
limitation, (a) a statement and report, on a form approved by Agent, detailing
Borrowers’ calculations, and (b) if requested by Agent, back-up documentation
(including, without limitation, invoices, receipts and other evidence of costs
incurred during such quarter as Agent shall reasonably require) evidencing the
propriety of the calculations.

ARTICLE 7—CONDITIONS

Section 7.1 Conditions to Closing. The obligation of each Lender to make the
initial Loans on the Closing Date shall be subject to the receipt by Agent of
each agreement, document and instrument set forth on the closing checklist
prepared by Agent or its counsel, each in form and substance satisfactory to
Agent, and such other closing deliverables reasonably requested by Agent and
Lenders, and to the satisfaction of the following conditions precedent, each to
the satisfaction of Agent and Lenders and their respective counsel in their sole
discretion:

(a) evidence of the consummation of the transactions (other than the funding of
the Loan and the closing of any acquisition for which the proceeds of the Loan
are purchase money) contemplated by the Operative Documents including, without
limitation, the funding of any and all investments contemplated by the Operative
Documents;

(b) the payment of all fees, expenses and other amounts due and payable under
each Financing Document;

(c) since June 30, 2012, the absence of any material adverse change in any
aspect of the business, operations, properties, prospects or condition
(financial or otherwise) of any Credit Party or any seller of any assets or
business to be purchased by any Borrower contemporaneous with the Closing Date,
or any event or condition which could reasonably be expected to result in such a
material adverse change;

(d) the receipt of the initial Borrowing Base Certificate, prepared as of the
Closing Date; and

(e) on or prior to the Closing Date, University General Hospital shall execute
and deliver to MCF the Warrant.

Each Lender, by delivering its signature page to this Agreement, shall be deemed
to have acknowledged receipt of, and consented to and approved, each Financing
Document, each additional Operative Document and each other document, agreement
and/or instrument required to be approved by Agent, Required Lenders or Lenders,
as applicable, on the Closing Date.

 

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Section 7.2 Conditions to Each Loan. The obligation of the Lenders to make a
Loan or an advance in respect of any Loan, is subject to the satisfaction of the
following additional conditions:

(a) in the case of a Revolving Loan Borrowing, receipt by Agent of a Notice of
Borrowing (or telephonic notice if permitted by this Agreement) and updated
Borrowing Base Certificate, and in the case of a Term Loan advance, receipt by
Agent of a Notice of Borrowing;

(b) the fact that, immediately after such borrowing and after application of the
proceeds thereof or after such issuance, the Revolving Loan Outstandings will
not exceed the Revolving Loan Limit;

(c) the fact that, immediately before and after such advance or issuance, no
Default or Event of Default shall have occurred and be continuing;

(d) the fact that the representations and warranties of each Credit Party
contained in the Financing Documents shall be true, correct and complete on and
as of the date of such borrowing or issuance, except to the extent that any such
representation or warranty relates to a specific date in which case such
representation or warranty shall be true and correct as of such earlier date;

(e) the fact that no adverse change in the condition (financial or otherwise),
properties, business, prospects, or operations of Borrowers or any other Credit
Party shall have occurred and be continuing with respect to Borrowers or any
Credit Party since the date of this Agreement; and

(f) the continued compliance by Borrowers with all of the terms, covenants and
conditions of Article 8 and, unless Agent shall elect otherwise from time to
time, the absence of any fact, event or circumstance for which Borrower is
required to give Agent notice under Article 8.

Each giving of a Notice of Borrowing hereunder and each acceptance by any
Borrower of the proceeds of any Loan made hereunder shall be deemed to be (y) a
representation and warranty by each Borrower on the date of such notice or
acceptance as to the facts specified in this Section, and (z) a restatement by
each Borrower that each and every one of the representations made by it in any
of the Financing Documents is true and correct as of such date (except to the
extent that such representations and warranties expressly relate solely to an
earlier date).

Section 7.3 Searches. Before the Closing Date, and thereafter (as and when
determined by Agent in its discretion), Agent shall have the right to perform,
all at Borrowers’ expense, the searches described in clauses (a), (b), and
(c) below against Borrowers and any other Credit Party, the results of which are
to be consistent with Borrowers’ representations and warranties under this
Agreement and the satisfactory results of which shall be a condition precedent
to all advances of Loan proceeds: (a) UCC searches with the Secretary of State
of the jurisdiction in which the applicable Person is organized; (b) judgment,
pending litigation, federal tax lien, personal property tax lien, and corporate
and partnership tax lien searches, in each jurisdiction searched under clause
(a) above; and (c) searches of applicable corporate, limited liability company,
partnership and related records to confirm the continued existence, organization
and good standing of the applicable Person and the exact legal name under which
such Person is organized.

Section 7.4 Post Closing Requirements. Borrowers shall complete each of the post
closing obligations and/or provide to Agent each of the documents, instruments,
agreements and information listed on Schedule 7.4 attached hereto on or before
the date set forth for each such item thereon, each of which shall be completed
or provided in form and substance satisfactory to Agent.

 

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ARTICLE 8 – REGULATORY MATTERS

Section 8.1 Additional Defined Terms. The following additional definitions are
hereby appended to Section 1.1 of this Agreement:

“Accrediting Organization” means any Person from which any Borrower has received
an accreditation as of the Closing Date or thereafter.

“CON” means any certificate of need or similar license which determines that
there is a need for a healthcare facility at a particular location or within a
certain geographic region.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
as amended by the Health Information Technology for Economic and Clinical Health
Act, and as further amended, modified or supplemented from time to time, and any
successor statute thereto, and any and all rules or regulations promulgated from
time to time thereunder.

“HIPAA Compliant” shall mean that the applicable Person is in compliance with
each of the applicable requirements of HIPAA and all other applicable laws
governing the privacy or security of patient medical information, and is not and
could not reasonably be expected to become the subject of any civil or criminal
penalty, process, claim, action or proceeding, or any administrative or other
regulatory review, survey, process or proceeding (other than routine surveys or
reviews conducted by any Governmental Authority or other accreditation entity)
that could result in any of the foregoing or that could reasonably be expected
to adversely affect such Person’s business, operations, assets, properties or
condition (financial or otherwise), in connection with any actual or potential
violation by such Person of the provisions of HIPAA or any other applicable law
governing the privacy or security of patient medical information.

“Resident Agreements” means the singular or collective reference to all patient
and resident care agreements, admission agreements and service agreements which
include an occupancy agreement and all amendments, modifications or supplements
thereto.

Section 8.2 Representations and Warranties. To induce Agent and Lenders to enter
into this Agreement and to make credit accommodations contemplated hereby,
Borrowers hereby represent and warrant that, all of the information regarding
the Borrowers and Projects set forth in Schedule 8.2(a) is true, complete and
correct, and that except as disclosed in Schedule 8.2(b), the following
statements are true, complete and correct as of the date hereof, and Borrowers
hereby covenant and agree to notify Agent within three (3) Business Days (but in
any event prior to Borrowers submitting any requests for advances of reserves or
escrows or fundings of credit facility proceeds under this Agreement) following
the occurrence of any facts, events or circumstances known to a Borrower,
whether threatened, existing or pending, that would make any of the following
representations and warranties untrue, incomplete or incorrect (together with
such supporting data and information as shall be necessary to fully explain to
Agent the scope and nature of the fact, event or circumstance), and shall
provide to Agent within two (2) Business Days of Agent’s request, such
additional information as Agent shall request regarding such disclosure:

(a) Healthcare Permits. Borrowers have (i) each Healthcare 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, management and operation
of the Projects or the assets of any Borrower, and (ii) no knowledge that any
Governmental Authority is considering limiting, suspending or revoking any such
Healthcare Permit. All such Healthcare Permits are valid and in full force and
effect and Borrowers are in material compliance with the terms and conditions of
all such Healthcare Permits, except where failure to be in such compliance or
for a Healthcare Permit to be valid and in full force and effect would not have
a Material Adverse Effect.

 

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(b) Specific Licensing. Each Project is duly licensed as a hospital under the
applicable laws of the state where the Project is located. The licensed bed or
unit capacity of each Project is shown on Schedule 8.1. Borrowers have not
granted to any third party the right to reduce the number of licensed beds,
persons served or units in the Projects or the right to apply for approval to
move any and all of the licensed beds, persons served or units in the Projects
to any other location and there are no proceedings or contemplated to reduce the
number of licensed beds, persons served or units in the Projects

(c) Accreditation. Borrowers have received and maintain accreditation in good
standing and without impairment by all applicable Accrediting Organizations, to
the extent required by law (including any equivalent regulation). No Borrower or
manager has received any notice or communication from any Accrediting
Organization that a Project is (i) subject to or is required to file a plan of
correction with respect to any accreditation survey, or (ii) in danger of losing
its accreditation due to a failure to comply with a plan of correction.

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

(i) 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, restriction, limitation, or non-renewal of
any Third Party Payor participation agreement or provider number or other
Healthcare 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 Healthcare Permit
related to any Project, nor have the Borrowers made any decision not to renew
any participation agreement or provider agreement or other Healthcare Permit,
nor is there any action pending or threatened to impose material intermediate or
alternative sanctions with respect to any Project.

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

(iii) Borrowers have the requisite participation agreement or provider number or
other Healthcare Permit to bill the Federal Healthcare Programs in the state or
states in which such Borrowers operate (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, without limitation, Medicare) which have
historically accounted for any portion of the revenues of such Project.

(iv) All Third Party Payor cost reports and financial reports submitted by the
Borrowers are and will be materially accurate and complete and have not been and
will not be misleading in any material respects. No cost reports for the
Projects remain “open” or unsettled and there are no current, pending or
outstanding Third Party Payor Program reimbursement audits or appeals pending
with respect to the Projects or the Borrowers.

 

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(e) No Violation of Healthcare Laws.

(i) None of the Projects or the Borrowers are in violation of any Healthcare
Laws, except where any such violation would not have a Material Adverse Effect.

(ii) Borrowers are HIPAA Compliant.

(f) Proceedings. No Borrower nor any Project is subject to any proceeding, suit,
qui tam litigation 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), or any Third Party Payor,: (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 which has not been
provided for on their respective financial statements, or which would have a
Material Adverse Effect on any Borrower or the operation of any individual
Project; (ii) which could result in the revocation, transfer, surrender,
suspension or other impairment of the operating certificate, provider agreement
or Healthcare Permits of any Project; (iii) which pertains to or requests any
voluntary disclosure pertaining to a potential overpayment matter involving the
submission of claims to any Third Party Payor by a Borrower; or (iv) which
pertains to any Third Party Payor cost reports or claims filed by any Borrower
(including, without limitation, any reimbursement audits), or any disallowance
by any commission, board or agency in connection with any audit of such cost
reports;

(g) Ancillary Laws. Borrowers have received no notice, and are not aware, of any
violation of applicable antitrust laws, employment or landlord-tenant laws of
any federal, state or local government or quasi-governmental body, agency, board
or other authority with respect to the Projects or the Borrowers.

(h) Hill-Burton. No Borrower is or will be a participant in any federal program
whereby any federal, state or local government or quasi-governmental body,
agency, board or other authority may have the right to recover funds by reason
of the advance of federal funds, including, without limitation, those authorized
under the Hill-Burton Act (42 U.S.C. 291, et seq.).

(i) Fraud and Abuse.

(i) No Borrower has, or to its knowledge has been threatened to have, and 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 Federal Healthcare Program;
(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 Federal Healthcare Program; (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 Federal Healthcare Program
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
(I) 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 (II) 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 (I) not provided
as claimed, or (II) 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 (I) a Project in order that the Project may
qualify for Federal Healthcare Program certification, or (II) information
required to be provided under 42 U.S.C. § 1320a-3. No Borrower has paid or will
pay any percentage-based compensation to any third party manager for services
relating to items or services that may be reimbursed by a Federal Healthcare
Program pursuant to any management services agreement. All contractual
arrangements to which Borrower is a party are in compliance with all Healthcare
Laws.

 

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(ii) No Borrower has been, or to its knowledge has been threatened to be, and 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 Healthcare
Program 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 9.4), 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; (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
the Federal Healthcare Programs or other Third Party Payor Programs or its
billing practices with respect thereto; (G) is a party to a corporate integrity
agreement, a Certificate of Compliance Agreement with the Office of Inspector
General of the Department of Health and Human Services, or similar
government-mandated compliance program or agreement; (H) has any continuing
material reporting obligations pursuant to a settlement agreement or other
remedial measure entered into with any Government Authority; or (I) has been
served with or received any search warrants, subpoenas, or civil investigative
demands from any Government Authority related to its business operations.

Section 8.3 Certificates of Need.

(a) If required under applicable Healthcare Laws, Borrower has and shall
maintain in full force and effect a valid CON for no less than the number of
beds and units in the applicable Project as of the date of this Agreement.
Borrower shall maintain any applicable CON free from restrictions or known
conflicts which would materially impair the use or operation of the applicable
Project for its current use, and shall not permit any CON to become provisional,
probationary or restricted in any way. Each Borrower that is the owner of the
fee simple real estate for the Project shall be the owner of the CON, if any,
relating to each Project.

 

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(b) No Borrower shall do (or suffer to be done by any Borrower or any Affiliate
of any Borrower) any of the following without Agent’s prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed:

(i) Replace or transfer all or any part of any Project’s units or beds to
another site or location;

(ii) Transfer or demise any CON or other Healthcare Permit or rights thereunder
to any Person (other than Agent) or to any location other than the Project to
which such CON or Healthcare Permit pertains; or

(iii) Pledge or hypothecate any CON or other Healthcare Permit as collateral
security for any indebtedness other than indebtedness to Agent.

Section 8.4 Healthcare Operations.

(a) Borrower will:

(i) timely file or cause to be timely filed (after giving effect to any
extension duly obtained), all notifications, reports, submissions, Permit
renewals and reports (other than cost reports as provided in Section 8.4(a)(ii)
below) of every kind whatsoever required by Healthcare Laws (which reports will
be materially accurate and complete in all respects and not misleading in any
respect and shall not remain open or unsettled); and

(ii) timely file or caused to be timely filed (after giving effect to any
extension duly obtained), all cost reports required by any Third Party Payor,
which reports shall be materially accurate and complete in all respects and not
misleading in any material respect and which shall not remain open or unsettled,
except in accordance with applicable settlement appeals procedures that are
timely and diligently pursued and except for any processing delays of any
Governmental Authority.

(b) Borrower will 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 Project for its current use, all Healthcare Permits
necessary under Healthcare Laws to carry on the business of Borrowers as it is
conducted on the Closing Date.

(c) Borrower will not suffer or permit to occur any of the following:

(i) any transfer of a Healthcare Permit or rights thereunder to any Person
(other than Borrowers or Agent) or to any location other than a Project approved
by Agent in advance in writing;

(ii) any pledge or hypothecation of any Healthcare Permit as collateral security
for any indebtedness other than indebtedness to Agent;

(iii) any rescission, withdrawal, revocation, amendment or modification of or
other alteration to the nature, tenor or scope of any Healthcare Permit without
Agent’s prior written consent, including, without limitation, (A) any change to
the authorized units/beds and persons served capacity of any Project and/or the
number of units/beds and persons served approved by the applicable Governmental
Authority, and (B) any transfer all or any part of any Project’s authorized
units or beds to another site or location;

 

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(iv) without Agent’s prior written consent, the provision by any Borrower of
additional regulated services at any Project, including, without limitation,
medical services; or

(v) any fact, event or circumstance for which notice to Agent is required under
Section 8.2.

(d) Borrower will maintain a corporate health care regulatory compliance program
(“CCP”) which includes at least the following components and allows Agent and/or
any outside consultants from time to time to review such CCP: (i) standards of
conduct and procedures that describe compliance policies regarding laws with an
emphasis on prevention of fraud and abuse; (ii) specific officer within
high-level personnel identified as having overall responsibility for compliance
with such standards and procedures; (iii) training and education programs which
effectively communicate the compliance standards and procedures to employees and
agents, including, without limitation, fraud and abuse laws and illegal billing
practices; (iv) auditing and monitoring systems and reasonable steps for
achieving compliance with such standards and procedures including, without
limitation, publicizing a report system to allow employees and other agents to
anonymously report criminal or suspect conduct and potential compliance
problems; (v) disciplinary guidelines and consistent enforcement of compliance
policies including, without limitation, discipline of individuals responsible
for the failure to detect violations of the CCP; and (vi) mechanisms to
immediately respond to detected violations of the CCP.

(e) Borrowers will at all times be HIPAA Compliant.

(f) If any Project is currently accredited by an Accrediting Organization,
Borrower will (i) maintain such accreditation in good standing and without
limitation or impairment, (ii) promptly submit to the Accrediting Organization a
plan of correction for any deficiencies listed on any accreditation survey
report, and (iii) cure all such deficiencies within such time frame as is
necessary to preserve and maintain in good standing and without limitation or
impairment such accreditation.

Section 8.5 Third Party Payor Programs. Neither the Projects, nor any Borrower,
shall, other than in the Ordinary Course of Business, change the terms of any
Third Party Payor Programs or its normal billing payment and reimbursement
policies and procedures with respect thereto (including, without limitation, the
amount and timing of finance charges, fees and write-offs). Borrowers will
(a) 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 Project for its current use, all Healthcare Permits necessary under
Healthcare Laws to continue to receive reimbursement under all Third Party Payor
Programs in which any Borrower or any Project participates as of the date of
this Agreement, and (b) provide to Agent upon request, an accurate, complete and
current list of all participation agreements with Third Party Payors with
respect to the business of Borrowers. Borrowers shall at all times comply with
all requirements, contracts, conditions and stipulations applicable to Borrowers
in order to maintain in good standing and without default or limitation all such
participation agreements.

Section 8.6 Cures. If there shall occur any fact, event or circumstance for
which Borrowers are required to give Agent notice under Section 8.2 above after
the Closing Date, Borrowers shall take such action as is necessary to validly
challenge or otherwise appropriately respond to such fact, event or circumstance
within any timeframe required by applicable Healthcare Laws, and shall
thereafter diligently pursue the same to a favorable conclusion, all to the
effect that the fact, event or circumstance giving rise to Borrowers’ notice
obligation under Section 8.2 shall be dismissed, rescinded, eliminated and
otherwise cease to exist on that date which is the earlier to occur of (a) sixty
(60) days after the date any Borrower or any of its Affiliates became aware of
such fact, event or circumstance, or (b) the expiration of any cure period given
under applicable Healthcare Laws; provided, however, that Borrowers will not
permit to exist or occur any fact, event or circumstance which could cause any
representation or warranty in the following subsections of Section 8.2 to be
untrue, incomplete or incorrect or which could trigger an disclosure obligation
under such subsections of Section 8.2: (a), (b), (f)(i) and (k).

 

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ARTICLE 9—SECURITY AGREEMENT

Section 9.1 Generally. As security for the payment and performance of the
Obligations, and for the payment and performance of all obligations under the
Affiliated Financing Documents (if any) and without limiting any other grant of
a Lien and security interest in any Security Document, Borrowers hereby assign
and grant to Agent, for the benefit of itself and Lenders, a continuing first
priority Lien on and security interest in, upon, and to the personal property
set forth on Schedule 9.1 attached hereto and made a part hereof.

Section 9.2 Representations and Warranties and Covenants Relating to Collateral.

(a) Schedule 9.2 sets forth (i) each chief executive office and principal place
of business of each Borrower and each of their respective Subsidiaries, and
(ii) all of the addresses (including all warehouses) at which any of the
Collateral is located and/or books and records of Borrowers regarding any of the
Collateral are kept, which such Schedule 9.2 indicates in each case which
Borrower(s) have Collateral and/or books and records located at such address,
and, in the case of any such address not owned by one or more of the
Borrowers(s), indicates the nature of such location (e.g., leased business
location operated by Borrower(s), third party warehouse, consignment location,
processor location, etc.) and the name and address of the third party owning
and/or operating such location.

(b) Without limiting the generality of Section 3.2, except as indicated on
Schedule 3.19 with respect to any rights of any Borrower as a licensee under any
license of Intellectual Property owned by another Person, and except for the
filing of financing statements under the UCC, no authorization, approval or
other action by, and no notice to or filing with, any Governmental Authority or
consent of any other Person is required for (i) the grant by each Borrower to
Agent of the security interests and Liens in the Collateral provided for under
this Agreement and the other Security Documents (if any), or (ii) the exercise
by Agent of its rights and remedies with respect to the Collateral provided for
under this Agreement and the other Security Documents or under any applicable
Law, including the UCC and neither any such grant of Liens in favor of Agent or
exercise of rights by Agent shall violate or cause a default under any agreement
between any Borrower and any other Person relating to any such collateral,
including any license to which a Borrower is a party, whether as licensor or
licensee, with respect to any Intellectual Property, whether owned by such
Borrower or any other Person.

(c) As of the Closing Date, no Borrower has any ownership interest in any
Chattel Paper (as defined in Article 9 of the UCC), letter of credit rights,
commercial tort claims, Instruments, documents or investment property (other
than equity interests in any Subsidiaries of such Borrower disclosed on
Schedule 3.4) and Borrowers shall give notice to Agent promptly (but in any
event not later than the delivery by Borrowers of the next Compliance
Certificate required pursuant to Section 4.1 above) upon the acquisition by any
Borrower of any such Chattel Paper, letter of credit rights, commercial tort
claims, Instruments, documents, investment property. No Person other than Agent
or (if applicable) any Lender has “control” (as defined in Article 9 of the UCC)
over any Deposit Account, investment property (including Securities Accounts and
commodities account), letter of credit rights or electronic chattel paper in
which any Borrower has any interest (except for such control arising by
operation of law in favor of any bank or securities intermediary or commodities
intermediary with whom any Deposit Account, Securities Account or commodities
account of Borrowers is maintained).

 

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(d) Borrowers shall not, and shall not permit any Credit Party to, take any of
the following actions or make any of the following changes unless Borrowers have
given at least thirty (30) days prior written notice to Agent of Borrowers’
intention to take any such action (which such written notice shall include an
updated version of any Schedule impacted by such change) and have executed any
and all documents, instruments and agreements and taken any other actions which
Agent may request after receiving such written notice in order to protect and
preserve the Liens, rights and remedies of Agent with respect to the Collateral:
(i) change the legal name or organizational identification number of any
Borrower as it appears in official filings in the jurisdiction of its
organization, (ii) change the jurisdiction of incorporation or formation of any
Borrower or Credit Party or allow any Borrower or Credit Party to designate any
jurisdiction as an additional jurisdiction of incorporation for such Borrower or
Credit Party, or change the type of entity that it is, or (iii) change its chief
executive office, principal place of business, or the location of its records
concerning the Collateral or move any Collateral to or place any Collateral on
any location that is not then listed on the Schedules and/or establish any
business location at any location that is not then listed on the Schedules.

(e) Borrowers shall not adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any Account Debtor, or allow any credit
or discount thereon (other than adjustments, settlements, compromises, credits
and discounts in the Ordinary Course of Business, made while no Default exists
and in amounts which are not material with respect to the Account and which,
after giving effect thereto, do not cause the Borrowing Base to be less than the
Revolving Loan Outstandings) without the prior written consent of Agent. Without
limiting the generality of this Agreement or any other provisions of any of the
Financing Documents relating to the rights of Agent after the occurrence and
during the continuance of an Event of Default, Agent shall have the right at any
time after the occurrence and during the continuance of an Event of Default to:
(i) exercise the rights of Borrowers with respect to the obligation of any
Account Debtor to make payment or otherwise render performance to Borrowers and
with respect to any property that secures the obligations of any Account Debtor
or any other Person obligated on the Collateral, and (ii) adjust, settle or
compromise the amount or payment of such Accounts.

(f) Without limiting the generality of Sections 9.2(c) and 9.2(e):

(i) Borrowers shall deliver to Agent all tangible Chattel Paper and all
Instruments and documents owned by any Borrower and constituting part of the
Collateral duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Agent.
Borrowers shall provide Agent with “control” (as defined in Article 9 of the
UCC) of all electronic Chattel Paper owned by any Borrower and constituting part
of the Collateral by having Agent identified as the assignee on the records
pertaining to the single authoritative copy thereof and otherwise complying with
the applicable elements of control set forth in the UCC. Borrowers also shall
deliver to Agent all security agreements securing any such Chattel Paper and
securing any such Instruments. Borrowers will mark conspicuously all such
Chattel Paper and all such Instruments and documents with a legend, in form and
substance satisfactory to Agent, indicating that such Chattel Paper and such
instruments and documents are subject to the security interests and Liens in
favor of Agent created pursuant to this Agreement and the Security Documents.
Borrowers shall comply with all the provisions of Section 5.14 with respect to
the Deposit Accounts and Securities Accounts of Borrowers.

(ii) Borrowers shall deliver to Agent all letters of credit on which any
Borrower is the beneficiary and which give rise to letter of credit rights owned
by such Borrower which constitute part of the Collateral in each case duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to Agent. Borrowers shall take any and
all actions as may be necessary or desirable, or that Agent may request, from
time to time, to cause Agent to obtain exclusive “control” (as defined in
Article 9 of the UCC) of any such letter of credit rights in a manner acceptable
to Agent.

 

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(iii) Borrowers shall promptly advise Agent upon any Borrower becoming aware
that it has any interests in any commercial tort claim that constitutes part of
the Collateral, which such notice shall include descriptions of the events and
circumstances giving rise to such commercial tort claim and the dates such
events and circumstances occurred, the potential defendants with respect such
commercial tort claim and any court proceedings that have been instituted with
respect to such commercial tort claims, and Borrowers shall, with respect to any
such commercial tort claim, execute and deliver to Agent such documents as Agent
shall request to perfect, preserve or protect the Liens, rights and remedies of
Agent with respect to any such commercial tort claim.

(iv) Except for Accounts and Inventory in an aggregate amount of $25,000, no
Accounts or Inventory or other Collateral shall at any time be in the possession
or control of any warehouse, consignee, bailee or any of Borrowers’ agents or
processors without prior written notice to Agent and the receipt by Agent, if
Agent has so requested, of warehouse receipts, consignment agreements or bailee
lien waivers (as applicable) satisfactory to Agent prior to the commencement of
such possession or control. Borrower has notified Agent that Inventory is
currently located at the locations set forth on Schedule 9.2. Borrowers shall,
upon the request of Agent, notify any such warehouse, consignee, bailee, agent
or processor of the security interests and Liens in favor of Agent created
pursuant to this Agreement and the Security Documents, instruct such Person to
hold all such Collateral for Agent’s account subject to Agent’s instructions and
shall obtain an acknowledgement from such Person that such Person holds the
Collateral for Agent’s benefit.

(v) Borrowers shall cause all equipment and other tangible Personal Property
other than Inventory to be maintained and preserved in the same condition,
repair and in working order as when new, ordinary wear and tear excepted, and
shall promptly make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable to such
end. Upon request of Agent, Borrowers shall promptly deliver to Agent any and
all certificates of title, applications for title or similar evidence of
ownership of all such tangible Personal Property and shall cause Agent to be
named as lienholder on any such certificate of title or other evidence of
ownership. Borrowers shall not permit any such tangible Personal Property to
become fixtures to real estate unless such real estate is subject to a Lien in
favor of Agent.

(vi) Each Borrower hereby authorizes Agent to file without the signature of such
Borrower one or more UCC financing statements relating to liens on personal
property relating to all or any part of the Collateral, which financing
statements may list Agent as the “secured party” and such Borrower as the
“debtor” and which describe and indicate the collateral covered thereby as all
or any part of the Collateral under the Financing Documents (including an
indication of the collateral covered by any such financing statement as “all
assets” of such Borrower now owned or hereafter acquired) in such jurisdictions
as Agent from time to time determines are appropriate, and to file without the
signature of such Borrower any continuations of or corrective amendments to any
such financing statements, in any such case in order for Agent to perfect,
preserve or protect the Liens, rights and remedies of Agent with respect to the
Collateral. Each Borrower also ratifies its authorization for Agent to have
filed in any jurisdiction any initial financing statements or amendments thereto
if filed prior to the date hereof.

 

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(vii) As of the Closing Date, no Borrower holds, and after the Closing Date
Borrowers shall promptly notify Agent in writing upon creation or acquisition by
any Borrower of, any Collateral which constitutes a claim against any
Governmental Authority, including, without limitation, the federal government of
the United States or any instrumentality or agency thereof, the assignment of
which claim is restricted by any applicable Law, including, without limitation,
the federal Assignment of Claims Act and any other comparable Law. Upon the
request of Agent, Borrowers shall take such steps as may be necessary or
desirable, or that Agent may request, to comply with any such applicable Law.

(viii) Borrowers shall furnish to Agent from time to time any statements and
schedules further identifying or describing the Collateral and any other
information, reports or evidence concerning the Collateral as Agent may
reasonably request from time to time.

ARTICLE 10—EVENTS OF DEFAULT

Section 10.1 Events of Default. For purposes of the Financing Documents, the
occurrence of any of the following conditions and/or events, whether voluntary
or involuntary, by operation of law or otherwise, shall constitute an “Event of
Default”:

(a) (i) any Borrower shall fail to pay when due any principal, interest, premium
or fee under any Financing Document or any other amount payable under any
Financing Document, (ii) there shall occur any default in the performance of or
compliance with any of the following sections of this Agreement: Section 2.11,
Section 4.2(b), Section 4.4(c), Section 4.6 and Article 5, or (iii) there shall
occur any default in the performance of or compliance with Section 4.1 and/or
Article 6 of this Agreement and Borrower Representative has received written
notice from Agent or Required Lenders of such default;

(b) any Credit Party defaults in the performance of or compliance with any term
contained in this Agreement or in any other Financing Document (other than
occurrences described in other provisions of this Section 10.1 for which a
different grace or cure period is specified or for which no grace or cure period
is specified and thereby constitute immediate Events of Default) and such
default is not remedied by the Credit Party or waived by Agent within fifteen
(15) days after the earlier of (i) receipt by Borrower Representative of notice
from Agent or Required Lenders of such default, or (ii) actual knowledge of any
Borrower or any other Credit Party of such default;

(c) any representation, warranty, certification or statement made by any Credit
Party or any other Person in any Financing Document or in any certificate,
financial statement or other document delivered pursuant to any Financing
Document is incorrect in any respect (or in any material respect if such
representation, warranty, certification or statement is not by its terms already
qualified as to materiality) when made (or deemed made);

(d) (i) failure of any Credit Party to pay when due or within any applicable
grace period any principal, interest or other amount on Debt (other than the
Loans), or the occurrence of any breach, default, condition or event with
respect to any Debt (other than the Loans), if the effect of such failure or
occurrence is to cause or to permit the holder or holders of any such Debt, to
cause, Debt or other liabilities having an individual principal amount in excess
of $25,000 or having an aggregate principal amount in excess of $25,000 to
become or be declared due prior to its stated maturity, or (ii) the occurrence
of any breach or default under any terms or provisions of any Subordinated Debt
Document or under any agreement subordinating the Subordinated Debt to all or
any portion of the Obligations or the occurrence of any event requiring the
prepayment of any Subordinated Debt;

 

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(e) any Credit Party or any Subsidiary of a Borrower shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;

(f) an involuntary case or other proceeding shall be commenced against any
Credit Party or any Subsidiary of a Borrower seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of forty-five (45) days; or
an order for relief shall be entered against any Credit Party or any Subsidiary
of a Borrower under applicable federal bankruptcy, insolvency or other similar
law in respect of (i) bankruptcy, liquidation, winding-up, dissolution or
suspension of general operations, (ii) composition, rescheduling,
reorganization, arrangement or readjustment of, or other relief from, or stay of
proceedings to enforce, some or all of the debts or obligations, or
(iii) possession, foreclosure, seizure or retention, sale or other disposition
of, or other proceedings to enforce security over, all or any substantial part
of the assets of such Credit Party or Subsidiary;

(g) (i) institution of any steps by any Person to terminate a Pension Plan if as
a result of such termination any Credit Party or any member of the Controlled
Group could be required to make a contribution to such Pension Plan, or could
incur a liability or obligation to such Pension Plan, in excess of $25,000,
(ii) a contribution failure occurs with respect to any Pension Plan sufficient
to give rise to a Lien under Section 302(f) of ERISA, or (iii) there shall occur
any withdrawal or partial withdrawal from a Multiemployer Plan and the
withdrawal liability (without unaccrued interest) to Multiemployer Plans as a
result of such withdrawal (including any outstanding withdrawal liability that
any Credit Party or any member of the Controlled Group have incurred on the date
of such withdrawal) exceeds $25,000;

(h) one or more judgments or orders for the payment of money (not paid or fully
covered by insurance maintained in accordance with the requirements of this
Agreement and as to which the relevant insurance company has acknowledged
coverage) aggregating in excess of $25,000 shall be rendered against any or all
Credit Parties and either (i) enforcement proceedings shall have been commenced
by any creditor upon any such judgments or orders, or (ii) there shall be any
period of twenty (20) consecutive days during which a stay of enforcement of any
such judgments or orders, by reason of a pending appeal, bond or otherwise,
shall not be in effect;

(i) any Lien created by any of the Security Documents shall at any time fail to
constitute a valid and perfected Lien on all of the Collateral purported to be
encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or
any Credit Party shall so assert;

(j) the institution by any Governmental Authority of criminal proceedings
against any Credit Party;

(k) a default or event of default occurs under any Guarantee of any portion of
the Obligations;

 

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(l) any Borrower makes any payment on account of any Debt that has been
subordinated to any of the Obligations, other than payments specifically
permitted by the terms of such subordination;

(m) if any Borrower is or becomes an entity whose equity is registered with the
SEC, and/or is publicly traded on and/or registered with a public securities
exchange, such Borrower’s equity fails to remain registered with the SEC in good
standing, and/or such equity fails to remain publicly traded on and registered
with a public securities exchange;

(n) the occurrence of any fact, event or circumstance that could reasonably be
expected to result in a Material Adverse Effect, if such default shall have
continued unremedied for a period of ten (10) days after written notice from
Agent;

(o) Agent determines, based on information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrowers shall fail to
comply with one or more financial covenants in Article 6 during the next
succeeding financial reporting period;

(p) there shall occur any default or event of default under the Affiliated
Financing Documents;

(q) the introduction of, or any change in, any law or regulation governing or
affecting the healthcare industry, including, without limitation, any Healthcare
Laws, which could reasonably be expected to have a material adverse effect on
Borrowers’ or any Operator’s business, condition (financial or otherwise),
prospects or properties;

(r) there shall occur a material adverse change in the financial condition or
business prospects of any Borrower or any Project, or if Agent in good faith
deems the Lenders insecure as a result of acts or events bearing upon the
financial condition of any Borrower or Project or the repayment of the Notes,
which default shall have continued unremedied for a period of ten (10) days
after written notice from Agent; or

(s) the wire transfer instructions executed on the Closing Date pursuant to
Section 2.11(i) shall be terminated, cancelled, amended or modified in violation
of Section 2.11(i) or without Agent’s prior written consent.

Notwithstanding the foregoing, if a Credit Party fails to comply with any same
provision of this Agreement two (2) times in any twelve (12) month period and
Agent has given to Borrower Representative in connection with each such failure
any notice to which Borrowers would be entitled under this Section before such
failure could become an Event of Default, then all subsequent failures by a
Credit Party to comply with such provision of this Agreement shall effect an
immediate Event of Default (without the expiration of any applicable cure
period) with respect to all subsequent failures by a Credit Party to comply with
such provision of this Agreement, and Agent thereupon may exercise any remedy
set forth in this Article 10 without affording Borrowers any opportunity to cure
such Event of Default.

All cure periods provided for in this Section 10.1 shall run concurrently with
any cure period provided for in any applicable Financing Documents under which
the default occurred.

 

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Section 10.2 Acceleration and Suspension or Termination of Revolving Loan
Commitment and Term Loan Commitment. Upon the occurrence and during the
continuance of an Event of Default, Agent may, and shall if requested by
Required Lenders, (a) by notice to Borrower Representative suspend or terminate
the Revolving Loan Commitment and Term Loan Commitment and the obligations of
Agent and the Lenders with respect thereto, in whole or in part (and, if in
part, each Lender’s Revolving Loan Commitment and Term Loan Commitment shall be
reduced in accordance with its Pro Rata Share), and/or (b) by notice to Borrower
Representative declare all or any portion of the Obligations to be, and the
Obligations shall thereupon become, immediately due and payable, with accrued
interest thereon, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Borrower and Borrowers will pay the
same; provided, however, that in the case of any of the Events of Default
specified in Section 10.1(e) or 10.1(f) above, without any notice to any
Borrower or any other act by Agent or the Lenders, the Revolving Loan Commitment
and Term Loan Commitment and the obligations of Agent and the Lenders with
respect thereto shall thereupon immediately and automatically terminate and all
of the Obligations shall become immediately and automatically due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower and Borrowers will pay the same.

Section 10.3 UCC Remedies.

(a) Upon the occurrence of and during the continuance of an Event of Default
under this Agreement or the other Financing Documents, Agent, in addition to all
other rights, options, and remedies granted to Agent under this Agreement or at
law or in equity, may exercise, either directly or through one or more assignees
or designees, all rights and remedies granted to it under all Financing
Documents and under the UCC in effect in the applicable jurisdiction(s) and
under any other applicable law; including, without limitation:

(i) the right to take possession of, send notices regarding, and collect
directly the Collateral, with or without judicial process;

(ii) the right to (by its own means or with judicial assistance) enter any of
Borrowers’ premises and take possession of the Collateral, or render it
unusable, or to render it usable or saleable, or dispose of the Collateral on
such premises in compliance with subsection (iii) below and to take possession
of Borrowers’ original books and records, to obtain access to Borrowers’ data
processing equipment, computer hardware and software relating to the Collateral
and to use all of the foregoing and the information contained therein in any
manner Agent deems appropriate, without any liability for rent, storage,
utilities, or other sums, and Borrowers shall not resist or interfere with such
action (if Borrowers’ books and records are prepared or maintained by an
accounting service, contractor or other third party agent, Borrowers hereby
irrevocably authorize such service, contractor or other agent, upon notice by
Agent to such Person that an Event of Default has occurred and is continuing, to
deliver to Agent or its designees such books and records, and to follow Agent’s
instructions with respect to further services to be rendered);

(iii) the right to require Borrowers at Borrowers’ expense to assemble all or
any part of the Collateral and make it available to Agent at any place
designated by Lender;

(iv) the right to notify postal authorities to change the address for delivery
of Borrowers’ mail to an address designated by Agent and to receive, open and
dispose of all mail addressed to any Borrower; and/or

(v) the right to enforce Borrowers’ rights against Account Debtors and other
obligors, including, without limitation, (i) the right to collect Accounts
directly in Agent’s own name (as agent for Lenders) and to charge the collection
costs and expenses, including attorneys’ fees, to Borrowers, and (ii) the right,
in the name of Agent or any designee of Agent or Borrowers, to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise, including, without limitation, verification
of Borrowers’ compliance with applicable Laws. Borrowers shall cooperate fully
with Agent in an effort to facilitate and promptly conclude such verification
process. Such verification may include contacts between Agent and applicable
federal, state and local regulatory authorities having jurisdiction over the
Borrowers’ affairs, all of which contacts Borrowers hereby irrevocably
authorize.

 

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(b) Each Borrower agrees that a notice received by it at least ten (10) days
before the time of any intended public sale, or 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 perishable Collateral which threatens to speedily decline in value or
which is sold on a recognized market may be sold immediately by Agent without
prior notice to Borrowers. At any sale or disposition of Collateral, Agent may
(to the extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrowers, which right is
hereby waived and released. Each Borrower covenants and agrees not to interfere
with or impose any obstacle to Agent’s exercise of its rights and remedies with
respect to the Collateral. Agent shall have no obligation to clean-up or
otherwise prepare the Collateral for sale. Agent may comply with any applicable
state or federal law requirements in connection with a disposition of the
Collateral and compliance will not be considered to adversely affect the
commercial reasonableness of any sale of the Collateral. Agent may sell the
Collateral without giving any warranties as to the Collateral. Agent may
specifically disclaim any warranties of title or the like. This procedure will
not be considered to adversely affect the commercial reasonableness of any sale
of the Collateral. If Agent sells any of the Collateral upon credit, Borrowers
will be credited only with payments actually made by the purchaser, received by
Agent and applied to the indebtedness of the purchaser. In the event the
purchaser fails to pay for the Collateral, Agent may resell the Collateral and
Borrowers shall be credited with the proceeds of the sale. Borrowers shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all Obligations.

(c) Without restricting the generality of the foregoing and for the purposes
aforesaid, each Borrower hereby appoints and constitutes Agent its lawful
attorney-in-fact with full power of substitution in the Collateral, upon the
occurrence and during the continuance of an Event of Default, to (i) use
unadvanced funds remaining under this Agreement or which may be reserved,
escrowed or set aside for any purposes hereunder at any time, or to advance
funds in excess of the face amount of the Notes, (ii) pay, settle or compromise
all existing bills and claims, which may be Liens or security interests, or to
avoid such bills and claims becoming Liens against the Collateral, (iii) execute
all applications and certificates in the name of such Borrower and to prosecute
and defend all actions or proceedings in connection with the Collateral, and
(iv) do any and every act which such Borrower might do in its own behalf; it
being understood and agreed that this power of attorney in this subsection
(c) shall be a power coupled with an interest and cannot be revoked.

(d) Agent and each Lender is hereby granted a non-exclusive, royalty-free
license or other right to use, without charge, Borrowers’ labels, mask works,
rights of use of any name, any other Intellectual Property and advertising
matter, and any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Agent’s exercise of its rights under this Article, Borrowers’
rights under all licenses (whether as licensor or licensee) and all franchise
agreements inure to Agent’s and each Lender’s benefit.

Section 10.4 Default Rate of Interest. At the election of Agent or Required
Lenders, after the occurrence of an Event of Default and for so long as it
continues, the Loans and other Obligations shall bear interest at rates that are
five percent (5.0%) per annum in excess of the rates otherwise payable under
this Agreement, provided, however, that in the case of any Event of Default
specified in Section 10.1(e) or 10.1(f) above, such default rates shall apply
immediately and automatically without the need for any election or action of any
kind on the part of Agent or any Lender.

 

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Section 10.5 Setoff Rights. During the continuance of any Event of Default, each
Lender is hereby authorized by each Borrower at any time or from time to time,
with reasonably prompt subsequent notice to such Borrower (any prior or
contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (a) balances held by such Lender or any of
such Lender’s Affiliates at any of its offices for the account of such Borrower
or any of its Subsidiaries (regardless of whether such balances are then due to
such Borrower or its Subsidiaries), and (b) other property at any time held or
owing by such Lender to or for the credit or for the account of such Borrower or
any of its Subsidiaries, against and on account of any of the Obligations;
except that no Lender shall exercise any such right without the prior written
consent of Agent. Any Lender exercising a right to set off shall purchase for
cash (and the other Lenders shall sell) interests in each of such other Lender’s
Pro Rata Share of the Obligations as would be necessary to cause all Lenders to
share the amount so set off with each other Lender in accordance with their
respective Pro Rata Share of the Obligations. Each Borrower agrees, to the
fullest extent permitted by law, that any Lender and any of such Lender’s
Affiliates may exercise its right to set off with respect to the Obligations as
provided in this Section 10.6.

Section 10.6 Application of Proceeds.

(a) Notwithstanding anything to the contrary contained in this Agreement, upon
the occurrence and during the continuance of an Event of Default, each Borrower
irrevocably waives the right to direct the application of any and all payments
at any time or times thereafter received by Agent from or on behalf of such
Borrower or any Guarantor of all or any part of the Obligations, and, as between
Borrowers on the one hand and Agent and Lenders on the other, Agent shall have
the continuing and exclusive right to apply and to reapply any and all payments
received against the Obligations in such manner as Agent may deem advisable
notwithstanding any previous application by Agent.

(b) Following the occurrence and continuance of an Event of Default, but absent
the occurrence and continuance of an Acceleration Event, Agent shall apply any
and all payments received by Agent in respect of the Obligations, and any and
all proceeds of Collateral received by Agent, in such order as Agent may from
time to time elect.

(c) Notwithstanding anything to the contrary contained in this Agreement, if an
Acceleration Event shall have occurred, and so long as it continues, Agent shall
apply any and all payments received by Agent in respect of the Obligations, and
any and all proceeds of Collateral received by Agent, in the following order:
first, to all fees, costs, indemnities, liabilities, obligations and expenses
incurred by or owing to Agent with respect to this Agreement, the other
Financing Documents or the Collateral; second, to all fees, costs, indemnities,
liabilities, obligations and expenses incurred by or owing to any Lender with
respect to this Agreement, the other Financing Documents or the Collateral;
third, to accrued and unpaid interest on the Obligations (including any interest
which, but for the provisions of the Bankruptcy Code, would have accrued on such
amounts); fourth, to the principal amount of the Obligations outstanding; and
fifth to any other indebtedness or obligations of Borrowers owing to Agent or
any Lender under the Financing Documents. Any balance remaining shall be
delivered to Borrowers or to whomever may be lawfully entitled to receive such
balance or as a court of competent jurisdiction may direct. In carrying out the
foregoing, (y) amounts received shall be applied in the numerical order provided
until exhausted prior to the application to the next succeeding category, and
(z) each of the Persons entitled to receive a payment in any particular category
shall receive an amount equal to its Pro Rata Share of amounts available to be
applied pursuant thereto for such category.

 

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Section 10.7 Waivers.

(a) Except as otherwise provided for in this Agreement and to the fullest extent
permitted by applicable law, each Borrower waives: (i) presentment, demand and
protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Financing Documents, the Notes or
any other notes, commercial paper, accounts, contracts, documents, Instruments,
Chattel Paper and Guarantees at any time held by Lenders on which any Borrower
may in any way be liable, and hereby ratifies and confirms whatever Lenders may
do in this regard; (ii) all rights to notice and a hearing prior to Agent’s or
any Lender’s taking possession or control of, or to Agent’s or any Lender’s
replevy, attachment or levy upon, any Collateral or any bond or security which
might be required by any court prior to allowing Agent or any Lender to exercise
any of its remedies; and (iii) the benefit of all valuation, appraisal and
exemption Laws. Each Borrower acknowledges that it has been advised by counsel
of its choices and decisions with respect to this Agreement, the other Financing
Documents and the transactions evidenced hereby and thereby.

(b) Each Borrower for itself and all its successors and assigns, (i) agrees that
its liability shall not be in any manner affected by any indulgence, extension
of time, renewal, waiver, or modification granted or consented to by Lender;
(ii) consents to any indulgences and all extensions of time, renewals, waivers,
or modifications that may be granted by Agent or any Lender with respect to the
payment or other provisions of the Financing Documents, and to any substitution,
exchange or release of the Collateral, or any part thereof, with or without
substitution, and agrees to the addition or release of any Borrower, endorsers,
guarantors, or sureties, or whether primarily or secondarily liable, without
notice to any other Borrower and without affecting its liability hereunder;
(iii) agrees that its liability shall be unconditional and without regard to the
liability of any other Borrower, Agent or any Lender for any tax on the
indebtedness; and (iv) to the fullest extent permitted by law, expressly waives
the benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing.

(c) To the extent that Agent or any Lender may have acquiesced in any
noncompliance with any requirements or conditions precedent to the closing of
the Loans or to any subsequent disbursement of Loan proceeds, such acquiescence
shall not be deemed to constitute a waiver by Agent or any Lender of such
requirements with respect to any future disbursements of Loan proceeds and Agent
may at any time after such acquiescence require Borrowers to comply with all
such requirements. Any forbearance by Agent or Lender in exercising any right or
remedy under any of the Financing Documents, or otherwise afforded by applicable
law, including any failure to accelerate the maturity date of the Loans, shall
not be a waiver of or preclude the exercise of any right or remedy nor shall it
serve as a novation of the Notes or as a reinstatement of the Loans or a waiver
of such right of acceleration or the right to insist upon strict compliance of
the terms of the Financing Documents. Agent’s or any Lender’s acceptance of
payment of any sum secured by any of the Financing Documents after the due date
of such payment shall not be a waiver of Agent’s and such Lender’s right to
either require prompt payment when due of all other sums so secured or to
declare a default for failure to make prompt payment. The procurement of
insurance or the payment of taxes or other Liens or charges by Agent as the
result of an Event of Default shall not be a waiver of Agent’s right to
accelerate the maturity of the Loans, nor shall Agent’s receipt of any
condemnation awards, insurance proceeds, or damages under this Agreement operate
to cure or waive any Credit Party’s default in payment of sums secured by any of
the Financing Documents.

(d) Without limiting the generality of anything contained in this Agreement or
the other Financing Documents, each Borrower agrees that if an Event of Default
is continuing (i) Agent and Lenders shall not be subject to any “one action” or
“election of remedies” law or rule, and (ii) all Liens and other rights,
remedies or privileges provided to Agent or Lenders shall remain in full force
and effect until Agent or Lenders have exhausted all remedies against the
Collateral and any other properties owned by Borrowers and the Financing
Documents and other security instruments or agreements securing the Loans have
been foreclosed, sold and/or otherwise realized upon in satisfaction of
Borrowers’ obligations under the Financing Documents.

 

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(e) Nothing contained herein or in any other Financing Document shall be
construed as requiring Agent or any Lender to resort to any part of the
Collateral for the satisfaction of any of Borrowers’ obligations under the
Financing Documents in preference or priority to any other Collateral, and Agent
may seek satisfaction out of all of the Collateral or any part thereof, in its
absolute discretion in respect of Borrowers’ obligations under the Financing
Documents. In addition, Agent shall have the right from time to time to
partially foreclose upon any Collateral in any manner and for any amounts
secured by the Financing Documents then due and payable as determined by Agent
in its sole discretion, including, without limitation, the following
circumstances: (i) in the event any Borrower defaults beyond any applicable
grace period in the payment of one or more scheduled payments of principal
and/or interest, Agent may foreclose upon all or any part of the Collateral to
recover such delinquent payments, or (ii) in the event Agent elects to
accelerate less than the entire outstanding principal balance of the Loans,
Agent may foreclose all or any part of the Collateral to recover so much of the
principal balance of the Loans as Lender may accelerate and such other sums
secured by one or more of the Financing Documents as Agent may elect.
Notwithstanding one or more partial foreclosures, any unforeclosed Collateral
shall remain subject to the Financing Documents to secure payment of sums
secured by the Financing Documents and not previously recovered.

(f) To the fullest extent permitted by law, each Borrower, for itself and its
successors and assigns, waives in the event of foreclosure of any or all of the
Collateral any equitable right otherwise available to any Credit Party which
would require the separate sale of any of the Collateral or require Agent or
Lenders to exhaust their remedies against any part of the Collateral before
proceeding against any other part of the Collateral; and further in the event of
such foreclosure each Borrower does hereby expressly consent to and authorize,
at the option of Agent, the foreclosure and sale either separately or together
of each part of the Collateral.

Section 10.8 Injunctive Relief. The parties acknowledge and agree that, in the
event of a breach or threatened breach of any Credit Party’s obligations under
any Financing Documents, Agent and Lenders 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 any 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. Each Credit
Party waives, to the fullest extent permitted by law, the requirement of the
posting of any bond in connection with such injunctive relief. By joining in the
Financing Documents as a Credit Party, each Credit Party specifically joins in
this Section as if this Section were a part of each Financing Document executed
by such Credit Party.

Section 10.9 Marshalling; Payments Set Aside. Neither Agent nor any Lender shall
be under any obligation to marshal any assets in payment of any or all of the
Obligations. To the extent that Borrower makes any payment or Agent enforces its
Liens or Agent or any Lender exercises its right of set-off, and such payment or
the proceeds of such enforcement or set-off is subsequently invalidated,
declared to be fraudulent or preferential, set aside, or required to be repaid
by anyone, then to the extent of such recovery, the Obligations or part thereof
originally intended to be satisfied, and all Liens, rights and remedies
therefore, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or set-off had not occurred.

 

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ARTICLE 11—AGENT

Section 11.1 Appointment and Authorization. Each Lender hereby irrevocably
appoints and authorizes Agent to enter into each of the Financing Documents to
which it is a party (other than this Agreement) on its behalf and to take such
actions as Agent on its behalf and to exercise such powers under the Financing
Documents as are delegated to Agent by the terms thereof, together with all such
powers as are reasonably incidental thereto. Subject to the terms of
Section 11.16 and to the terms of the other Financing Documents, Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Financing Documents on behalf of Lenders. The provisions
of this Article 11 are solely for the benefit of Agent and Lenders and neither
any Borrower nor any other Credit Party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, Agent shall act solely as agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Borrower or any other Credit
Party. Agent may perform any of its duties hereunder, or under the Financing
Documents, by or through its agents or employees.

Section 11.2 Agent and Affiliates. Agent shall have the same rights and powers
under the Financing Documents as any other Lender and may exercise or refrain
from exercising the same as though it were not Agent, and Agent and its
Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Credit Party as if it were
not Agent hereunder.

Section 11.3 Action by Agent. The duties of Agent shall be mechanical and
administrative in nature. Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Financing Documents is intended to or shall be construed to impose
upon Agent any obligations in respect of this Agreement or any of the Financing
Documents except as expressly set forth herein or therein.

Section 11.4 Consultation with Experts. Agent may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.

Section 11.5 Liability of Agent. Neither Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action taken
or not taken by it in connection with the Financing Documents, except that Agent
shall be liable with respect to its specific duties set forth hereunder but only
to the extent of its own gross negligence or willful misconduct in the discharge
thereof as determined by a final non-appealable judgment of a court of competent
jurisdiction. Neither Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (a) any statement, warranty or representation made in connection with
any Financing Document or any borrowing hereunder; (b) the performance or
observance of any of the covenants or agreements specified in any Financing
Document; (c) the satisfaction of any condition specified in any Financing
Document; (d) the validity, effectiveness, sufficiency or genuineness of any
Financing Document, any Lien purported to be created or perfected thereby or any
other instrument or writing furnished in connection therewith; (e) the existence
or non-existence of any Default or Event of Default; or (f) the financial
condition of any Credit Party. Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile or electronic transmission or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them).

 

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Section 11.6 Indemnification. Each Lender shall, in accordance with its Pro Rata
Share, indemnify Agent (to the extent not reimbursed by Borrowers) upon demand
against any cost, expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from Agent’s gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction) that Agent may suffer or incur in
connection with the Financing Documents or any action taken or omitted by Agent
hereunder or thereunder. If any indemnity furnished to Agent for any purpose
shall, in the opinion of Agent, be insufficient or become impaired, Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against even if so directed by Required Lenders until such
additional indemnity is furnished.

Section 11.7 Right to Request and Act on Instructions. Agent may at any time
request instructions from Lenders with respect to any actions or approvals which
by the terms of this Agreement or of any of the Financing Documents Agent is
permitted or desires to take or to grant, and if such instructions are promptly
requested, Agent shall be absolutely entitled to refrain from taking any action
or to withhold any approval and shall not be under any liability whatsoever to
any Person for refraining from any action or withholding any approval under any
of the Financing Documents until it shall have received such instructions from
Required Lenders or all or such other portion of the Lenders as shall be
prescribed by this Agreement. Without limiting the foregoing, no Lender shall
have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement or any of the other Financing
Documents in accordance with the instructions of Required Lenders (or all or
such other portion of the Lenders as shall be prescribed by this Agreement) and,
notwithstanding the instructions of Required Lenders (or such other applicable
portion of the Lenders), Agent shall have no obligation to take any action if it
believes, in good faith, that such action would violate applicable Law or
exposes Agent to any liability for which it has not received satisfactory
indemnification in accordance with the provisions of Section 11.6.

Section 11.8 Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.

Section 11.9 Collateral Matters. Lenders irrevocably authorize Agent, at its
option and in its discretion, to (a) release any Lien granted to or held by
Agent under any Security Document (i) upon termination of the Loan Commitment
and payment in full of all Obligations; or (ii) constituting property sold or
disposed of as part of or in connection with any disposition permitted under any
Financing Document (it being understood and agreed that Agent may conclusively
rely without further inquiry on a certificate of a Responsible Officer as to the
sale or other disposition of property being made in full compliance with the
provisions of the Financing Documents); and (b) release or subordinate any Lien
granted to or held by Agent under any Security Document constituting personal
property described herein (it being understood and agreed that Agent may
conclusively rely without further inquiry on a certificate of a Responsible
Officer as to the identification of any personal property described herein).
Upon request by Agent at any time, Lenders will confirm Agent’s authority to
release and/or subordinate particular types or items of Collateral pursuant to
this Section 11.9.

 

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Section 11.10 Agency for Perfection. Agent and each Lender hereby appoint each
other Lender as agent for the purpose of perfecting Agent’s security interest in
assets which, in accordance with the Uniform Commercial Code in any applicable
jurisdiction, can be perfected by possession or control. Should any Lender
(other than Agent) obtain possession or control of any such assets, such Lender
shall notify Agent thereof, and, promptly upon Agent’s request therefor, shall
deliver such assets to Agent or in accordance with Agent’s instructions or
transfer control to Agent in accordance with Agent’s instructions. Each Lender
agrees that it will not have any right individually to enforce or seek to
enforce any Security Document or to realize upon any Collateral for the Loan
unless instructed to do so by Agent (or consented to by Agent), it being
understood and agreed that such rights and remedies may be exercised only by
Agent.

Section 11.11 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default except with respect
to defaults in the payment of principal, interest and fees required to be paid
to Agent for the account of Lenders, unless Agent shall have received written
notice from a Lender or a Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a “notice of
default”. Agent will notify each Lender of its receipt of any such notice. Agent
shall take such action with respect to such Default or Event of Default as may
be requested by Required Lenders (or all or such other portion of the Lenders as
shall be prescribed by this Agreement) in accordance with the terms hereof.
Unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable or in the
best interests of Lenders.

Section 11.12 Assignment by Agent; Resignation of Agent; Successor Agent.

(a) Agent may at any time assign its rights, powers, privileges and duties
hereunder to (i) another Lender, or (ii) any Person to whom Agent, in its
capacity as a Lender, has assigned (or will assign, in conjunction with such
assignment of agency rights hereunder) 50% or more of its Loan, in each case
without the consent of the Lenders or Borrowers. Following any such assignment,
Agent shall give notice to the Lenders and Borrowers. An assignment by Agent
pursuant to this subsection (a) shall not be deemed a resignation by Agent for
purposes of subsection (b) below.

(b) Without limiting the rights of Agent to designate an assignee pursuant to
subsection (a) above, Agent may at any time give notice of its resignation to
the Lenders and Borrowers. Upon receipt of any such notice of resignation,
Required Lenders shall have the right to appoint a successor Agent. If no such
successor shall have been so appointed by Required Lenders and shall have
accepted such appointment within ten (10) Business Days after the retiring Agent
gives notice of its resignation, then the retiring Agent may on behalf of the
Lenders, appoint a successor Agent; provided, however, that if Agent shall
notify Borrowers and the Lenders that no Person has accepted such appointment,
then such resignation shall nonetheless become effective in accordance with such
notice from Agent that no Person has accepted such appointment and, from and
following delivery of such notice, (i) the retiring Agent shall be discharged
from its duties and obligations hereunder and under the other Financing
Documents, and (ii) all payments, communications and determinations provided to
be made by, to or through Agent shall instead be made by or to each Lender
directly, until such time as Required Lenders appoint a successor Agent as
provided for above in this paragraph.

(c) Upon (i) an assignment permitted by subsection (a) above, or (ii) the
acceptance of a successor’s appointment as Agent pursuant to subsection
(b) above, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder and under the other Financing Documents (if not already discharged
therefrom as provided above in this paragraph). The fees payable by Borrowers to
a successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between Borrowers and such successor. After the retiring
Agent’s resignation hereunder and under the other Financing Documents, the
provisions of this Article and Section 11.12 shall continue in effect for the
benefit of such retiring Agent and its sub-agents in respect of any actions
taken or omitted to be taken by any of them while the retiring Agent was acting
or was continuing to act as Agent.

 

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Section 11.13 Payment and Sharing of Payment.

(a) Revolving Loan Advances, Payments and Settlements; Interest and Fee
Payments.

(i) Agent shall have the right, on behalf of Revolving Lenders to disburse funds
to Borrowers for all Revolving Loans requested or deemed requested by Borrowers
pursuant to the terms of this Agreement. Agent shall be conclusively entitled to
assume, for purposes of the preceding sentence, that each Revolving Lender,
other than any Non-Funding Revolving Lenders, will fund its Pro Rata Share of
all Revolving Loans requested by Borrowers. Each Revolving Lender shall
reimburse Agent on demand, in accordance with the provisions of the immediately
following paragraph, for all funds disbursed on its behalf by Agent pursuant to
the first sentence of this clause (i), or if Agent so requests, each Revolving
Lender will remit to Agent its Pro Rata Share of any Revolving Loan before Agent
disburses the same to a Borrower. If Agent elects to require that each Revolving
Lender make funds available to Agent, prior to a disbursement by Agent to a
Borrower, Agent shall advise each Revolving Lender by telephone, facsimile or
e-mail of the amount of such Revolving Lender’s Pro Rata Share of the Revolving
Loan requested by such Borrower no later than noon (Eastern time) on the date of
funding of such Revolving Loan, and each such Revolving Lender shall pay Agent
on such date such Revolving Lender’s Pro Rata Share of such requested Revolving
Loan, in same day funds, by wire transfer to the Payment Account, or such other
account as may be identified by Agent to Revolving Lenders from time to time. If
any Lender fails to pay the amount of its Pro Rata Share of any funds advanced
by Agent pursuant to the first sentence of this clause (i) within one
(1) Business Day after Agent’s demand, Agent shall promptly notify Borrower
Representative, and Borrowers shall immediately repay such amount to Agent. Any
repayment required by Borrowers pursuant to this Section 11.13 shall be
accompanied by accrued interest thereon from and including the date such amount
is made available to a Borrower to but excluding the date of payment at the rate
of interest then applicable to Revolving Loans. Nothing in this Section 11.13 or
elsewhere in this Agreement or the other Financing Documents shall be deemed to
require Agent to advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its commitments hereunder or to prejudice any
rights that Agent or any Borrower may have against any Lender as a result of any
default by such Lender hereunder.

(ii) On a Business Day of each week as selected from time to time by Agent, or
more frequently (including daily), if Agent so elects (each such day being a
“Settlement Date”), Agent will advise each Revolving Lender by telephone,
facsimile or e-mail of the amount of each such Revolving Lender’s percentage
interest of the Revolving Loan balance as of the close of business of the
Business Day immediately preceding the Settlement Date. In the event that
payments are necessary to adjust the amount of such Revolving Lender’s actual
percentage interest of the Revolving Loans to such Lender’s required percentage
interest of the Revolving Loan balance as of any Settlement Date, the Revolving
Lender from which such payment is due shall pay Agent, without setoff or
discount, to the Payment Account before 1:00 p.m. (Eastern time) on the Business
Day following the Settlement Date the full amount necessary to make such
adjustment. Any obligation arising pursuant to the immediately preceding
sentence shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever. In the event settlement shall not have occurred by the
date and time specified in the second preceding sentence, interest shall accrue
on the unsettled amount at the rate of interest then applicable to Revolving
Loans.

 

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(iii) On each Settlement Date, Agent shall advise each Revolving Lender by
telephone, facsimile or e-mail of the amount of such Revolving Lender’s
percentage interest of principal, interest and fees paid for the benefit of
Revolving Lenders with respect to each applicable Revolving Loan, to the extent
of such Revolving Lender’s Revolving Loan Exposure with respect thereto, and
shall make payment to such Revolving Lender before 1:00 p.m. (Eastern time) on
the Business Day following the Settlement Date of such amounts in accordance
with wire instructions delivered by such Revolving Lender to Agent, as the same
may be modified from time to time by written notice to Agent; provided, however,
that, in the case such Revolving Lender is a Defaulted Lender, Agent shall be
entitled to set off the funding short-fall against that Defaulted Lender’s
respective share of all payments received from any Borrower.

(iv) On the Closing Date, Agent, on behalf of Lenders, may elect to advance to
Borrowers the full amount of the initial Loans to be made on the Closing Date
prior to receiving funds from Lenders, in reliance upon each Lender’s commitment
to make its Pro Rata Share of such Loans to Borrowers in a timely manner on such
date. If Agent elects to advance the initial Loans to Borrower in such manner,
Agent shall be entitled to receive all interest that accrues on the Closing Date
on each Lender’s Pro Rata Share of such Loans unless Agent receives such
Lender’s Pro Rata Share of such Loans before 3:00 p.m. (Eastern time) on the
Closing Date.

(v) It is understood that for purposes of advances to Borrowers made pursuant to
this Section 11.13, Agent will be using the funds of Agent, and pending
settlement, (A) all funds transferred from the Payment Account to the
outstanding Revolving Loans shall be applied first to advances made by Agent to
Borrowers pursuant to this Section 11.13, and (B) all interest accruing on such
advances shall be payable to Agent.

(vi) The provisions of this Section 11.13(a) shall be deemed to be binding upon
Agent and Lenders notwithstanding the occurrence of any Default or Event of
Default, or any insolvency or bankruptcy proceeding pertaining to any Borrower
or any other Credit Party.

(b) Term Loan Payments. Payments of principal, interest and fees in respect of
the Term Loans will be settled on the date of receipt if received by Agent on
the last Business Day of a month or on the Business Day immediately following
the date of receipt if received on any day other than the last Business Day of a
month.

(c) Return of Payments.

(i) If Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from a
Borrower and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender on demand without setoff,
counterclaim or deduction of any kind, together with interest accruing on a
daily basis at the Federal Funds Rate.

(ii) If Agent determines at any time that any amount received by Agent under
this Agreement must be returned to any Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Financing Document, Agent will
not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.

 

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(d) Defaulted Lenders. The failure of any Defaulted Lender to make any payment
required by it hereunder shall not relieve any other Lender of its obligations
to make payment, but neither any other Lender nor Agent shall be responsible for
the failure of any Defaulted Lender to make any payment required hereunder.
Notwithstanding anything set forth herein to the contrary, a Defaulted Lender
shall not have any voting or consent rights under or with respect to any
Financing Document or constitute a “Lender” (or be included in the calculation
of “Required Lenders” hereunder) for any voting or consent rights under or with
respect to any Financing Document.

(e) Sharing of Payments. If any Lender shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of setoff or otherwise)
on account of any Loan (other than pursuant to the terms of Section 2.8(d)) in
excess of its Pro Rata Share of payments entitled pursuant to the other
provisions of this Section 11.13, such Lender shall purchase from the other
Lenders such participations in extensions of credit made by such other Lenders
(without recourse, representation or warranty) as shall be necessary to cause
such purchasing Lender to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter required to be returned or otherwise
recovered from such purchasing Lender, such portion of such purchase shall be
rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such return or recovery, without interest. Each Borrower agrees that
any Lender so purchasing a participation from another Lender pursuant to this
clause (e) may, to the fullest extent permitted by law, exercise all its rights
of payment (including pursuant to Section 10.6) with respect to such
participation as fully as if such Lender were the direct creditor of Borrowers
in the amount of such participation). If under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this clause (e) applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this clause (e) to
share in the benefits of any recovery on such secured claim.

Section 11.14 Right to Perform, Preserve and Protect. If any Credit Party fails
to perform any obligation hereunder or under any other Financing Document, Agent
itself may, but shall not be obligated to, cause such obligation to be performed
at Borrowers’ expense. Agent is further authorized by Borrowers and the Lenders
to make expenditures from time to time which Agent, in its reasonable business
judgment, deems necessary or desirable to (a) preserve or protect the business
conducted by Borrowers, the Collateral, or any portion thereof, and/or
(b) enhance the likelihood of, or maximize the amount of, repayment of the Loan
and other Obligations. Each Borrower hereby agrees to reimburse Agent on demand
for any and all costs, liabilities and obligations incurred by Agent pursuant to
this Section 11.14. Each Lender hereby agrees to indemnify Agent upon demand for
any and all costs, liabilities and obligations incurred by Agent pursuant to
this Section 11.14, in accordance with the provisions of Section 11.6.

Section 11.15 Additional Titled Agents. Except for rights and powers, if any,
expressly reserved under this Agreement to any bookrunner, arranger or to any
titled agent named on the cover page of this Agreement, other than Agent
(collectively, the “Additional Titled Agents”), and except for obligations,
liabilities, duties and responsibilities, if any, expressly assumed under this
Agreement by any Additional Titled Agent, no Additional Titled Agent, in such
capacity, has any rights, powers, liabilities, duties or responsibilities
hereunder or under any of the other Financing Documents. Without limiting the
foregoing, no Additional Titled Agent shall have nor be deemed to have a
fiduciary relationship with any Lender. At any time that any Lender serving as
an Additional Titled Agent shall have transferred to any other Person (other
than any Affiliates) all of its interests in the Loan, such Lender shall be
deemed to have concurrently resigned as such Additional Titled Agent.

 

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Section 11.16 Amendments and Waivers.

(a) No provision of this Agreement or any other Financing Document may be
amended, waived or otherwise modified unless such amendment, waiver or other
modification is in writing and is signed or otherwise approved by Borrowers, the
Required Lenders and any other Lender to the extent required under
Section 11.16(b); provided, however, that the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed only by the
parties thereto.

(b) In addition to the required signatures under Section 11.16(a), no provision
of this Agreement or any other Financing Document may be amended, waived or
otherwise modified unless such amendment, waiver or other modification is in
writing and is signed or otherwise approved by the following Persons:

(i) if any amendment, waiver or other modification would increase a Lender’s
funding obligations in respect of any Loan, by such Lender; and/or

(ii) if the rights or duties of Agent are affected thereby, by Agent;

provided, however, that, in each of (i) and (ii) above, no such amendment,
waiver or other modification shall, unless signed or otherwise approved in
writing by all the Lenders directly affected thereby, (A) reduce the principal
of, rate of interest on or any fees with respect to any Loan or forgive any
principal, interest (other than default interest) or fees (other than late
charges) with respect to any Loan; (B) postpone the date fixed for, or waive,
any payment (other than any mandatory prepayment pursuant to Section 2.1(b)(ii))
of principal of any Loan, or of interest on any Loan (other than default
interest) or any fees provided for hereunder (other than late charges) or
postpone the date of termination of any commitment of any Lender hereunder;
(C) change the definition of the term Required Lenders or the percentage of
Lenders which shall be required for Lenders to take any action hereunder;
(D) release all or substantially all of the Collateral, authorize any Borrower
to sell or otherwise dispose of all or substantially all of the Collateral or
release any Guarantor of all or any portion of the Obligations or its Guarantee
obligations with respect thereto, except, in each case with respect to this
clause (D), as otherwise may be provided in this Agreement or the other
Financing Documents (including in connection with any disposition permitted
hereunder); (E) amend, waive or otherwise modify this Section 11.16(b) or the
definitions of the terms used in this Section 11.16(b) insofar as the
definitions affect the substance of this Section 11.16(b); (F) consent to the
assignment, delegation or other transfer by any Credit Party of any of its
rights and obligations under any Financing Document or release any Borrower of
its payment obligations under any Financing Document, except, in each case with
respect to this clause (F), pursuant to a merger or consolidation permitted
pursuant to this Agreement; or (G) amend any of the provisions of Section 10.7
or amend any of the definitions Pro Rata Share, Revolving Loan Commitment, Term
Loan Commitment, Revolving Loan Commitment Amount, Term Loan Commitment Amount,
Revolving Loan Commitment Percentage, Term Loan Commitment Percentage or that
provide for the Lenders to receive their Pro Rata Shares of any fees, payments,
setoffs or proceeds of Collateral hereunder. It is hereby understood and agreed
that all Lenders shall be deemed directly affected by an amendment, waiver or
other modification of the type described in the preceding clauses (C), (D), (E),
(F) and (G) of the preceding sentence.

 

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(c) No provision of this Agreement or any other Financing Document, including
without, limitation, the provisions set forth in Article 5 and Article 6, shall
be deemed to have been amended, waived or otherwise modified as a result of
Agent’s approval of an Acquisition.

Section 11.17 Assignments and Participations.

(a) Assignments.

(i) Any Lender may at any time assign to one or more Eligible Assignees all or
any portion of such Lender’s Loan together with all related obligations of such
Lender hereunder. Except as Agent may otherwise agree, the amount of any such
assignment (determined as of the date of the applicable Assignment Agreement or,
if a “Trade Date” is specified in such Assignment Agreement, as of such Trade
Date) shall be in a minimum aggregate amount equal to $1,000,000 or, if less,
the assignor’s entire interests in the outstanding Loan; provided, however,
that, in connection with simultaneous assignments to two or more related
Approved Funds, such Approved Funds shall be treated as one assignee for
purposes of determining compliance with the minimum assignment size referred to
above. Borrowers and Agent shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned to an
Eligible Assignee until Agent shall have received and accepted an effective
Assignment Agreement executed, delivered and fully completed by the applicable
parties thereto and a processing fee of $3,500 to be paid by the assigning
Lender; provided, however, that only one processing fee shall be payable in
connection with simultaneous assignments to two or more related Approved Funds.

(ii) From and after the date on which the conditions described above have been
met, (A) such Eligible Assignee shall be deemed automatically to have become a
party hereto and, to the extent of the interests assigned to such Eligible
Assignee pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder, and (B) the assigning Lender, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, shall be released from its rights and obligations
hereunder (other than those that survive termination pursuant to Section 12.1).
Upon the request of the Eligible Assignee (and, as applicable, the assigning
Lender) pursuant to an effective Assignment Agreement, each Borrower shall
execute and deliver to Agent for delivery to the Eligible Assignee (and, as
applicable, the assigning Lender) Notes in the aggregate principal amount of the
Eligible Assignee’s Loan (and, as applicable, Notes in the principal amount of
that portion of the principal amount of the Loan retained by the assigning
Lender). Upon receipt by the assigning Lender of such Note, the assigning Lender
shall return to Borrower Representative any prior Note held by it.

(iii) Agent, acting solely for this purpose as an agent of Borrower, shall
maintain at its offices located in Bethesda, Maryland a copy of each Assignment
Agreement delivered to it and a register for the recordation of the names and
addresses of each Lender, and the commitments of, and principal amount of the
Loan owing to, such Lender pursuant to the terms hereof. The entries in such
register shall be conclusive, and Borrower, Agent and Lenders may treat each
Person whose name is recorded therein pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. Such register shall be available for inspection by Borrower and any
Lender, at any reasonable time upon reasonable prior notice to Agent.

(iv) Notwithstanding the foregoing provisions of this Section 11.17(a) or any
other provision of this Agreement, any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided, however, that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

 

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(v) Notwithstanding the foregoing provisions of this Section 11.17(a) or any
other provision of this Agreement, Agent has the right, but not the obligation,
to effectuate assignments of Loan via an electronic settlement system acceptable
to Agent as designated in writing from time to time to the Lenders by Agent (the
“Settlement Service”). At any time when the Agent elects, in its sole
discretion, to implement such Settlement Service, each such assignment shall be
effected by the assigning Lender and proposed assignee pursuant to the
procedures then in effect under the Settlement Service, which procedures shall
be consistent with the other provisions of this Section 11.17(a). Each assigning
Lender and proposed Eligible Assignee shall comply with the requirements of the
Settlement Service in connection with effecting any assignment of Loan pursuant
to the Settlement Service. With the prior written approval of Agent, Agent’s
approval of such Eligible Assignee shall be deemed to have been automatically
granted with respect to any transfer effected through the Settlement Service.
Assignments and assumptions of the Loan shall be effected by the provisions
otherwise set forth herein until Agent notifies Lenders of the Settlement
Service as set forth herein.

(b) Participations. Any Lender may at any time, without the consent of, or
notice to, any Borrower or Agent, sell to one or more Persons participating
interests in its Loan, commitments or other interests hereunder (any such
Person, a “Participant”). In the event of a sale by a Lender of a participating
interest to a Participant, (i) such Lender’s obligations hereunder shall remain
unchanged for all purposes, (ii) Borrowers and Agent shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations hereunder, and (iii) all amounts payable by each Borrower shall be
determined as if such Lender had not sold such participation and shall be paid
directly to such Lender. Each Borrower agrees that if amounts outstanding under
this Agreement are due and payable (as a result of acceleration or otherwise),
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement; provided, however, that such right of set-off shall
be subject to the obligation of each Participant to share with Lenders, and
Lenders agree to share with each Participant, as provided in Section 11.5.

(c) Replacement of Lenders. Within thirty (30) days after: (i) receipt by Agent
of notice and demand from any Lender for payment of additional costs as provided
in Section 2.8(d), which demand shall not have been revoked, (ii) any Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.8(a), (iii) any
Lender is a Defaulted Lender, and the circumstances causing such status shall
not have been cured or waived; or (iv) any failure by any Lender to consent to a
requested amendment, waiver or modification to any Financing Document in which
Required Lenders have already consented to such amendment, waiver or
modification but the consent of each Lender, or each Lender affected thereby, is
required with respect thereto (each relevant Lender in the foregoing clauses (i)
through (iv) being an “Affected Lender”) each of Borrower Representative and
Agent may, at its option, notify such Affected Lender and, in the case of
Borrowers’ election, the Agent, of such Person’s intention to obtain, at
Borrowers’ expense, a replacement Lender (“Replacement Lender”) for such Lender,
which Replacement Lender shall be an Eligible Assignee and, in the event the
Replacement Lender is to replace an Affected Lender described in the preceding
clause (iv), such Replacement Lender consents to the requested amendment, waiver
or modification making the replaced Lender an Affected Lender. In the event
Borrowers or Agent, as applicable, obtains a Replacement Lender within ninety
(90) days following notice of its

 

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intention to do so, the Affected Lender shall sell, at par, and assign all of
its Loan and funding commitments hereunder to such Replacement Lender in
accordance with the procedures set forth in Section 11.17(a); provided, however,
that (A) Borrowers shall have reimbursed such Lender for its increased costs and
additional payments for which it is entitled to reimbursement under
Section 2.8(a) or Section 2.8(d), as applicable, of this Agreement through the
date of such sale and assignment, and (B) Borrowers shall pay to Agent the
$3,500 processing fee in respect of such assignment. In the event that a
replaced Lender does not execute an Assignment Agreement pursuant to
Section 11.17(a) within five (5) Business Days after receipt by such replaced
Lender of notice of replacement pursuant to this Section 11.17(c) and
presentation to such replaced Lender of an Assignment Agreement evidencing an
assignment pursuant to this Section 11.17(c), such replaced Lender shall be
deemed to have consented to the terms of such Assignment Agreement, and any such
Assignment Agreement executed by Agent, the Replacement Lender and, to the
extent required pursuant to Section 11.17(a), Borrowers, shall be effective for
purposes of this Section 11.17(c) and Section 11.17(a). Upon any such assignment
and payment, such replaced Lender shall no longer constitute a “Lender” for
purposes hereof, other than with respect to such rights and obligations that
survive termination as set forth in Section 12.1.

(d) Credit Party Assignments. No Credit Party may assign, delegate or otherwise
transfer any of its rights or other obligations hereunder or under any other
Financing Document without the prior written consent of Agent and each Lender.

Section 11.18 Funding and Settlement Provisions Applicable When Non-Funding
Lenders Exist. So long as Agent has not waived the conditions to the funding of
Revolving Loans set forth in Section 7.2, any Lender may deliver a notice to
Agent stating that such Lender shall cease making Revolving Loans due to the
non-satisfaction of one or more conditions to funding Loans set forth in
Section 7.2, and specifying any such non-satisfied conditions. Any Lender
delivering any such notice shall become a non-funding Lender (a “Non-Funding
Lender”) for purposes of this Agreement commencing on the Business Day following
receipt by Agent of such notice, and shall cease to be a Non-Funding Lender on
the date on which such Lender has either revoked the effectiveness of such
notice or acknowledged in writing to each of Agent the satisfaction of the
condition(s) specified in such notice, or Required Lenders waive the conditions
to the funding of such Loans giving rise to such notice by Non-Funding Lender.
Each Non-Funding Lender shall remain a Lender for purposes of this Agreement to
the extent that such Non-Funding Lender has Revolving Loans Outstanding in
excess of zero or Term Loans outstanding in excess of zero; provided, however,
that during any period of time that any Non-Funding Lender exists, and
notwithstanding any provision to the contrary set forth herein, the following
provisions shall apply:

(a) For purposes of determining the Pro Rata Share of each Revolving Lender
under clause (c) of the definition of such term, each Non-Funding Lender shall
be deemed to have a Revolving Loan Commitment Amount and Term Loan Commitment
Amount as in effect immediately before such Lender became a Non-Funding Lender.

(b) Except as provided in clause (a) above, the Revolving Loan Commitment Amount
and Term Loan Commitment Amount of each Non-Funding Lender shall be deemed to be
zero.

(c) The Revolving Loan Commitment at any date of determination during such
period shall be deemed to be equal to the sum of (i) the aggregate Revolving
Loan Commitment Amounts of all Lenders, other than the Non-Funding Lenders as of
such date plus (ii) the aggregate Revolving Loan Outstandings of all Non-Funding
Lenders as of such date.

(d) The Term Loan Commitment at any date of determination during such period
shall be deemed to be equal to the sum of (i) the aggregate Term Loan Commitment
Amounts of all Lenders, other than the Non-Funding Lenders as of such date plus
(ii) the aggregate principal amount outstanding under the Term Loans of all
Non-Funding Lenders as of such date.

 

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(e) Agent shall have no right to make or disburse Revolving Loans for the
account of any Non-Funding Lender pursuant to Section 2.1(b)(i) to pay interest,
fees, expenses and other charges of any Credit Party.

(f) To the extent that Agent applies proceeds of Collateral or other payments
received by Agent to repayment of Revolving Loans pursuant to Section 10.7, such
payments and proceeds shall be applied first in respect of Revolving Loans made
at the time any Non-Funding Lenders exist, and second in respect of all other
outstanding Revolving Loans.

Section 11.19 Buy-Out Upon Refinancing. MCF shall have the right to purchase
from the other Lenders all of their respective interests in the Loan at par in
connection with any refinancing of the Loan upon one or more new economic terms,
but which refinancing is structured as an amendment and restatement of the Loan
rather than a payoff of the Loan.

Section 11.20 Definitions. As used in this Article 11, the following terms have
the following meanings:

“Approved Fund” means any (a) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the Ordinary Course of Business, or (b) any Person (other than a natural person)
which temporarily warehouses loans for any Lender or any entity described in the
preceding clause (a) and that, with respect to each of the preceding clauses (a)
and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a
Lender, or (iii) a Person (other than a natural person) or an Affiliate of a
Person (other than a natural person) that administers or manages a Lender.

“Assignment Agreement” means an assignment agreement in form and substance
acceptable to Agent.

“Defaulted Lender” means, so long as such failure shall remain in existence and
uncured, any Lender which shall have failed to make any Loan or other credit
accommodation, disbursement, settlement or reimbursement required pursuant to
the terms of any Financing Document.

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural person) approved
by Agent; provided, however, that notwithstanding the foregoing, “Eligible
Assignee” shall not include any Borrower or any of a Borrower’s Affiliates.

“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided, however, that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day, and (b) if no such rate is so
published on such next preceding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Agent on such day on such transactions
as determined by Agent.

 

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ARTICLE 12—MISCELLANEOUS

Section 12.1 Survival. All agreements, representations and warranties made
herein and in every other Financing Document shall survive the execution and
delivery of this Agreement and the other Financing Documents and the other
Operative Documents. The provisions of Section 2.9 and Articles 11 and 12, and
all provisions relating to the Warrants, shall survive the payment of the
Obligations (both with respect to any Lender and all Lenders collectively) and
any termination of this Agreement and any judgment with respect to any
Obligations, including any final foreclosure judgment with respect to any
Security Document, and no unpaid or unperformed, current or future, Obligations
will merge into any such judgment.

Section 12.2 No Waivers. No failure or delay by Agent or any Lender in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and therein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
Any reference in any Financing Document to the “continuing” nature of any Event
of Default shall not be construed as establishing or otherwise indicating that
any Borrower or any other Credit Party has the independent right to cure any
such Event of Default, but is rather presented merely for convenience should
such Event of Default be waived in accordance with the terms of the applicable
Financing Documents.

Section 12.3 Notices.

(a) All notices, requests and other communications to any party hereunder shall
be in writing (including prepaid overnight courier, facsimile transmission or
similar writing) and shall be given to such party at its address, facsimile
number or e-mail address set forth on the signature pages hereof (or, in the
case of any such Lender who becomes a Lender after the date hereof, in an
assignment agreement or in a notice delivered to Borrower Representative and
Agent by the assignee Lender forthwith upon such assignment) or at such other
address, facsimile number or e-mail address as such party may hereafter specify
for the purpose by notice to Agent and Borrower Representative; provided,
however, that notices, requests or other communications shall be permitted by
electronic means only in accordance with the provisions of Section 12.3(b) and
(c). Each such notice, request or other communication shall be effective (i) if
given by facsimile, when such notice is transmitted to the facsimile number
specified by this Section and the sender receives a confirmation of transmission
from the sending facsimile machine, or (ii) if given by mail, prepaid overnight
courier or any other means, when received or when receipt is refused at the
applicable address specified by this Section 12.3(a).

(b) Notices and other communications to the parties hereto may be delivered or
furnished by electronic communication (including e-mail and Internet or intranet
websites) pursuant to procedures approved from time to time by Agent, provided,
however, that the foregoing shall not apply to notices sent directly to any
Lender if such Lender has notified the Agent that it is incapable of receiving
notices by electronic communication. The Agent or Borrower Representative may,
in their discretion, agree to accept notices and other communications to them
hereunder by electronic communications pursuant to procedures approved by it,
provided, however, that approval of such procedures may be limited to particular
notices or communications.

(c) Unless the Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender’s receipt of
an acknowledgment from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgment), and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause
(i) of notification that such notice or communication is available and
identifying the website address therefor, provided, however, that if any such
notice or other communication is not sent or posted during normal business
hours, such notice or communication shall be deemed to have been sent at the
opening of business on the next Business Day.

 

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Section 12.4 Severability. In case any provision of or obligation under this
Agreement or any other Financing Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

Section 12.5 Headings. Headings and captions used in the Financing Documents
(including the Exhibits, Schedules and Annexes hereto and thereto) are included
for convenience of reference only and shall not be given any substantive effect.

Section 12.6 Confidentiality.

(a) Each Credit Party agrees (i) not to transmit or disclose provisions of any
Financing Document to any Person (other than to Borrowers’ advisors and officers
on a need-to-know basis or as otherwise may be required by Law) without Agent’s
prior written consent, (ii) to inform all Persons of the confidential nature of
the Financing Documents and to direct them not to disclose the same to any other
Person and to require each of them to be bound by these provisions.

(b) Agent and each Lender shall hold all non-public information regarding the
Credit Parties and their respective businesses identified as such by Borrowers
and obtained by Agent or any Lender pursuant to the requirements hereof in
accordance with such Person’s customary procedures for handling information of
such nature, except that disclosure of such information may be made (i) to their
respective agents, employees, Subsidiaries, Affiliates, attorneys, auditors,
professional consultants, rating agencies, insurance industry associations and
portfolio management services, (ii) to prospective transferees or purchasers of
any interest in the Loans, the Agent or a Lender, provided, however, that any
such Persons are bound by obligations of confidentiality, (iii) as required by
Law, subpoena, judicial order or similar order and in connection with any
litigation, (iv) as may be required in connection with the examination, audit or
similar investigation of such Person, and (v) to a Person that is a trustee,
investment advisor, collateral manager, servicer, noteholder or secured party in
a Securitization (as hereinafter defined) in connection with the administration,
servicing and reporting on the assets serving as collateral for such
Securitization. For the purposes of this Section, “Securitization” shall mean
(A) the pledge of the Loans as collateral security for loans to a Lender, or
(B) a public or private offering by a Lender or any of its Affiliates or their
respective successors and assigns, of securities which represent an interest in,
or which are collateralized, in whole or in part, by the Loans. Confidential
information shall include only such information identified as such at the time
provided to Agent and shall not include information that either: (y) is in the
public domain, or becomes part of the public domain after disclosure to such
Person through no fault of such Person, or (z) is disclosed to such Person by a
Person other than a Credit Party, provided, however, Agent does not have actual
knowledge that such Person is prohibited from disclosing such information. The
obligations of Agent and Lenders under this Section 12.6 shall supersede and
replace the obligations of Agent and Lenders under any confidentiality agreement
in respect of this financing executed and delivered by Agent or any Lender prior
to the date hereof.

 

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Section 12.7 Waiver of Consequential and Other Damages. To the fullest extent
permitted by applicable law, no Borrower shall assert, and each Borrower hereby
waives, any claim against any Indemnitee (as defined below), on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of this Agreement, any other Financing Document or any agreement or instrument
contemplated hereby or thereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Financing Documents or the transactions contemplated hereby or thereby.

Section 12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION.

(a) THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS
RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT
LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.

(b) EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF MONTGOMERY, STATE OF MARYLAND AND IRREVOCABLY
AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE
LITIGATED IN SUCH COURTS. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH
BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

(c) Each Borrower, Agent and each Lender agree that each Loan (including those
made on the Closing Date) shall be deemed to be made in, and the transactions
contemplated hereunder and in any other Financing Document shall be deemed to
have been performed in, the State of Maryland.

Section 12.9 WAIVER OF JURY TRIAL. EACH BORROWER, AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH BORROWER, AGENT AND
EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO
THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER, AGENT AND
EACH LENDER WARRANTS AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING
THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS.

 

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Section 12.10 Publication; Advertisement.

(a) Publication. No Credit Party will directly or indirectly publish, disclose
or otherwise use in any public disclosure, advertising material, promotional
material, press release or interview, any reference to the name, logo or any
trademark of MCF or any of its Affiliates or any reference to this Agreement or
the financing evidenced hereby, in any case except (i) as required by Law,
subpoena or judicial or similar order, in which case the applicable Credit Party
shall give Agent prior written notice of such publication or other disclosure,
or (ii) with MCF’s prior written consent.

(b) Advertisement. Each Lender and each Credit Party hereby authorizes MCF to
publish the name of such Lender and Credit Party, the existence of the financing
arrangements referenced under this Agreement, the primary purpose and/or
structure of those arrangements, the amount of credit extended under each
facility, the title and role of each party to this Agreement, and the total
amount of the financing evidenced hereby in any “tombstone”, comparable
advertisement or press release which MCF elects to submit for publication. In
addition, each Lender and each Credit Party agrees that MCF may provide lending
industry trade organizations with information necessary and customary for
inclusion in league table measurements after the Closing Date. With respect to
any of the foregoing, MCF shall provide Borrowers with an opportunity to review
and confer with MCF regarding the contents of any such tombstone, advertisement
or information, as applicable, prior to its submission for publication and,
following such review period, MCF may, from time to time, publish such
information in any media form desired by MCF, until such time that Borrowers
shall have requested MCF cease any such further publication.

Section 12.11 Counterparts; Integration. This Agreement and the other Financing
Documents may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. Signatures by facsimile or by electronic mail delivery of
an electronic version of any executed signature page shall bind the parties
hereto. This Agreement and the other Financing Documents constitute the entire
agreement and understanding among the parties hereto and supersede any and all
prior agreements and understandings, oral or written, relating to the subject
matter hereof.

Section 12.12 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

Section 12.13 Lender Approvals. Unless expressly provided herein to the
contrary, any approval, consent, waiver or satisfaction of Agent or Lenders with
respect to any matter that is the subject of this Agreement, the other Financing
Documents may be granted or withheld by Agent and Lenders in their sole and
absolute discretion and credit judgment.

 

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Section 12.14 Expenses; Indemnity

(a) Borrowers hereby agree to promptly pay (i) all costs and expenses of Agent
(including, without limitation, the fees, costs and expenses of counsel to, and
independent appraisers and consultants retained by Agent) in connection with the
examination, review, due diligence investigation, documentation, negotiation,
closing and syndication of the transactions contemplated by the Financing
Documents, in connection with the performance by Agent of its rights and
remedies under the Financing Documents and in connection with the continued
administration of the Financing Documents including (A) any amendments,
modifications, consents and waivers to and/or under any and all Financing
Documents, and (B) any periodic public record searches conducted by or at the
request of Agent (including, without limitation, title investigations, UCC
searches, fixture filing searches, judgment, pending litigation and tax lien
searches and searches of applicable corporate, limited liability, partnership
and related records concerning the continued existence, organization and good
standing of certain Persons); (ii) without limitation of the preceding clause
(i), all costs and expenses of Agent in connection with the creation, perfection
and maintenance of Liens pursuant to the Financing Documents; (iii) without
limitation of the preceding clause (i), all costs and expenses of Agent in
connection with (A) protecting, storing, insuring, handling, maintaining or
selling any Collateral, (B) any litigation, dispute, suit or proceeding relating
to any Financing Document, and (C) any workout, collection, bankruptcy,
insolvency and other enforcement proceedings under any and all of the Financing
Documents; (iv) without limitation of the preceding clause (i), all costs and
expenses of Agent in connection with Agent’s reservation of funds in
anticipation of the funding of the initial Loans to be made hereunder; and
(v) all costs and expenses incurred by Lenders in connection with any
litigation, dispute, suit or proceeding relating to any Financing Document and
in connection with any workout, collection, bankruptcy, insolvency and other
enforcement proceedings under any and all Financing Documents, whether or not
Agent or Lenders are a party thereto. If Agent or any Lender uses in-house
counsel for any of these purposes, Borrowers further agree that the Obligations
include reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by Agent or such Lender
for the work performed.

(b) Each Borrower hereby agrees to indemnify, pay and hold harmless Agent and
Lenders and the officers, directors, employees, trustees, agents, investment
advisors, collateral managers, servicers, and counsel of Agent and Lenders
(collectively called the “Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the fees and disbursements of counsel for such Indemnitee) in
connection with any investigative, response, remedial, administrative or
judicial matter or proceeding, whether or not such Indemnitee shall be
designated a party thereto and including any such proceeding initiated by or on
behalf of a Credit Party, and the reasonable expenses of investigation by
engineers, environmental consultants and similar technical personnel and any
commission, fee or compensation claimed by any broker (other than any broker
retained by Agent or Lenders) asserting any right to payment for the
transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the other Operative Documents (including
(i)(A) as a direct or indirect result of the presence on or under, or escape,
seepage, leakage, spillage, discharge, emission or release from, any property
now or previously owned, leased or operated by Borrower, any Subsidiary or any
other Person of any Hazardous Materials, (B) arising out of or relating to the
offsite disposal of any materials generated or present on any such property, or
(C) arising out of or resulting from the environmental condition of any such
property or the applicability of any governmental requirements relating to
Hazardous Materials, whether or not occasioned wholly or in part by any
condition, accident or event caused by any act or omission of Borrower or any
Subsidiary, and (ii) proposed and actual extensions of credit under this
Agreement) and the use or intended use of the proceeds of the Loans, except that
Borrower shall have no obligation hereunder to an Indemnitee with respect to any
liability resulting from the gross negligence or willful misconduct of such
Indemnitee, as determined by a final non-appealable judgment of a court of
competent jurisdiction. To the extent that the undertaking set forth in the
immediately preceding sentence may be unenforceable, Borrower shall contribute
the maximum portion which it is permitted to pay and satisfy under applicable
Law to the payment and satisfaction of all such indemnified liabilities incurred
by the Indemnitees or any of them.

 

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(c) Notwithstanding any contrary provision in this Agreement, the obligations of
Borrowers under this Section 12.14 shall survive the payment in full of the
Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE
RESPONSIBLE OR LIABLE TO THE BORROWERS OR TO ANY OTHER PARTY TO ANY FINANCING
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.

Section 12.15 Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition or other proceeding be
filed by or against any Credit Party for liquidation or reorganization, should
any Credit Party become insolvent or make an assignment for the benefit of any
creditor or creditors or should an interim receiver, receiver, receiver and
manager or trustee be appointed for all or any significant part of any Credit
Party’s assets, and shall continue to be effective or to be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a fraudulent preference reviewable transaction or otherwise, all as
though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

Section 12.16 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Borrowers and Agent and each Lender and their respective
successors and permitted assigns.

Section 12.17 USA PATRIOT Act Notification. Agent (for itself and not on behalf
of any Lender) and each Lender hereby notifies Borrowers that pursuant to the
requirements of the USA PATRIOT Act, it is required to obtain, verify and record
certain information and documentation that identifies Borrowers, which
information includes the name and address of Borrower and such other information
that will allow Agent or such Lender, as applicable, to identify Borrowers in
accordance with the USA PATRIOT Act.

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

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(Signature Page to Credit and Security Agreement)

IN WITNESS WHEREOF, intending to be legally bound, and intending that this
Agreement constitute an agreement executed under seal, each of the parties have
caused this Agreement to be executed under seal the day and year first above
mentioned.

 

BORROWERS:      UNIVERSITY GENERAL HOSPITAL, LP

Address for Borrowers:

     By:   

 

7501 Fannin Street

     Name:   

 

Houston, Texas 77054

     Title:   

 

Attn:

 

 

       

Facsimile:

 

 

     UGHS HOSPITALS, INC.

E-Mail:

 

 

               By:   

 

       Name:   

 

       Title:   

 

‘

       UNIVERSITY HOSPITAL SYSTEMS, LLP        By:   

 

       Name:   

 

       Title:   

 

       UGHS SUPPORT SERVICES, INC.        By:   

 

       Name:   

 

       Title:   

 

       UGHS AUTIMIS BILLING, INC.        By:   

 

       Name:   

 

       Title:   

 

       UGHS AUTIMIS CODING, INC.        By:   

 

       Name:   

 

       Title:   

 

       SYBARIS GROUP, INC.        By:   

 

       Name:   

 

       Title:   

 

 

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

(Signature Page to Credit and Security Agreement)

 

AGENT:

    MIDCAP FINANCIAL, LLC, as Agent     By:  

 

    Name: Stephen Redlich     Title:   Managing Director    

Address:

 

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attn: Account Manager for University General Hospital transaction

Facsimile: 301-941-1450

Payment Account Designation:

   

Wells Fargo Bank, N.A. (McLean, VA)

 

Account Name: MidCap Funding IV, LLC - Collections

 

Attention: University General Hospital transaction

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(Signature Page to Credit and Security Agreement)

 

LENDER:

    MIDCAP FINANCIAL, LLC, as Lender     By:  

 

    Name: Stephen Redlich     Title:   Managing Director    

 

Address:

 

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attn: Account Manager for University General Hospital transaction

Facsimile: 301-941-1450

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ANNEXES, EXHIBITS AND SCHEDULES

ANNEXES

 

Annex A    Commitment Annex    EXHIBITS       Exhibit A    [Reserved]   
Exhibit B    Form of Compliance Certificate    Exhibit C    Borrowing Base
Certificate    Exhibit D    Form of Notice of Borrowing    Exhibit E    Form of
Payment Notification    Exhibit F    Form of Warrant    SCHEDULES      
Schedule 2.1    Scheduled Principal Payments for Term Loan    Schedule 3.1   
Existence, Organizational ID Numbers, Foreign Qualification, Prior Names   
Schedule 3.4    Capitalization    Schedule 3.6    Litigation    Schedule 3.17   
Material Contracts    Schedule 3.18    Environmental Compliance    Schedule 3.19
   Intellectual Property    Schedule 4.4    Insurance    Schedule 4.9   
Litigation, Governmental Proceedings and Other Notice Events    Schedule 5.1   
Debt; Contingent Obligations    Schedule 5.2    Liens    Schedule 5.7   
Permitted Investments    Schedule 5.8    Affiliate Transactions    Schedule 5.11
   Business Description    Schedule 5.14    Deposit Accounts and Securities
Accounts    Schedule 7.4    Post-Closing Obligations    Schedule 8.2(a)   
Licensing    Schedule 8.2(b)    Exceptions to Healthcare Representations and
Warranties    Schedule 9.1    Collateral    Schedule 9.2    Location of
Collateral   

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Annex A to Credit Agreement (Commitment Annex)

 

Lender

   Revolving Loan
Commitment
Amount      Revolving Loan
Commitment
Percentage     Term Loan
Commitment
Amount      Term Loan
Commitment
Percentage  

MidCap Financial, LLC

   $ 15,000,000         100 %    $ 4,000,000         100 % 

TOTALS

   $ 15,000,000         100 %    $ 4,000,000         100 % 

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Exhibit A to Credit Agreement (Reserved)

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Exhibit B to Credit Agreement (Form of Compliance Certificate)

COMPLIANCE CERTIFICATE

This Compliance Certificate is given by             , a Responsible Officer of
            (the “Borrower Representative”), pursuant to that certain Credit and
Security Agreement dated as of             , 201            among the Borrower
Representative, and any additional Borrower that may hereafter be added thereto
(collectively, “Borrowers”), MidCap Financial, LLC, individually as a Lender and
as Agent, and the financial institutions or other entities from time to time
parties hereto, each as a Lender (as such agreement may have been amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement.

The undersigned Responsible Officer hereby certifies to Agent and Lenders that:

(a) the financial statements delivered with this certificate in accordance with
Section 4.1 of the Credit Agreement fairly present in all material respects the
results of operations and financial condition of Borrowers and their
Consolidated Subsidiaries as of the dates and the accounting period covered by
such financial statements;

(b) I have reviewed the terms of the Credit Agreement and have made, or caused
to be made under my supervision, a review in reasonable detail of the
transactions and conditions of Borrowers and their Consolidated Subsidiaries
during the accounting period covered by such financial statements, and such
review has not disclosed the existence during or at the end of such accounting
period, and I have no knowledge of the existence as of the date hereof, of any
condition or event that constitutes a Default or an Event of Default, except as
set forth in Schedule 1 hereto, which includes a description of the nature and
period of existence of such Default or an Event of Default and what action
Borrowers have taken, are undertaking and propose to take with respect thereto;

(c) except as noted on Schedule 2 attached hereto, Schedule 9.2 to the Credit
Agreement contains a complete and accurate list of all business locations of
Borrowers and Guarantors and all names under which Borrowers currently conduct
business; Schedule 2 specifically notes any changes in the names under which
Borrowers or any Guarantors conduct business;

(d) except as noted on Schedule 3 attached hereto, the undersigned has no
knowledge of (i) any federal or state tax liens having been filed against the
Borrowers, Guarantors or any Collateral, or (ii) any failure of the Borrowers or
any Guarantors to make required payments of withholding or other tax obligations
of the Borrowers or any Guarantors during the accounting period to which the
attached statements pertain or any subsequent period;

(e) Schedule 5.14 to the Credit Agreement contains a complete and accurate
statement of all deposit or investment accounts maintained by Borrowers or any
Guarantors;

(f) except as noted on Schedule 4 attached hereto and Schedule 3.6 to the Credit
Agreement, the undersigned has no knowledge of any current, pending or
threatened: (i) litigation against the Borrowers or any Guarantors,
(ii) inquiries, investigations or proceedings concerning the business affairs,
practices, licensing or reimbursement entitlements of Borrowers or any
Guarantors, or (iii) default by Borrowers or any Guarantors under any Material
Contract to which it is a party;

 

Exhibit B – Page 1

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(g) except as noted on Schedule 5 attached hereto, no Borrower or Guarantor has
acquired, by purchase, by the approval or granting of any application for
registration (whether or not such application was previously disclosed to Agent
by Borrowers) or otherwise, any Intellectual Property that is registered with
any United States or foreign Governmental Authority, or has filed with any such
United States or foreign Governmental Authority, any new application for the
registration of any Intellectual Property, or acquired rights under a license as
a licensee with respect to any such registered Intellectual Property (or any
such application for the registration of Intellectual Property) owned by another
Person, that has not previously been reported to Agent on Schedule 3.17 to the
Credit Agreement or any Schedule 5 to any previous Compliance Certificate
delivered by the Company to Agent;

(h) except as noted on Schedule 6 attached hereto, no Borrower or Guarantor has
acquired, by purchase or otherwise, any Chattel Paper, Letter of Credit Rights,
Instruments, Documents or Investment Property that has not previously been
reported to Agent on any Schedule 6 to any previous Compliance Certificate
delivered by Borrower Representative to Agent;

(i) except as noted on Schedule 7 attached hereto, no Borrower or Guarantor is
aware of any commercial tort claim that has not previously been reported to
Agent on any Schedule 7 to any previous Compliance Certificate delivered by
Borrower Representative to Agent; and

(j) Borrowers and Guarantor are in compliance with the covenants contained in
Article 6 of the Credit Agreement, and in any Guarantee constituting a part of
the Financing Documents, as demonstrated by the calculation of such covenants
below, except as set forth below; in determining such compliance, the following
calculations have been made: [See attached worksheets]. Such calculations and
the certifications contained therein are true, correct and complete.

The foregoing certifications and computations are made as of             ,
201            (end of month) and as of             , 201        .

 

Sincerely,

 

[BORROWER REPRESENTATIVE]

By:

 

 

Name:

 

 

Title:

 

 

 

Exhibit B – Page 2

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EBITDA Worksheet (Attachment to Compliance Certificate)

 

EBITDA for the applicable Defined Period is calculated as follows:    Net income
(or loss) for the Defined Period of Borrowers and their Consolidated
Subsidiaries, but excluding: (a) the income (or loss) of any Person (other than
Subsidiaries of Borrowers) in which Borrowers or any of their Subsidiaries has
an ownership interest unless received by Borrower or their Subsidiary in a cash
distribution; and (b) the income (or loss) of any Person accrued prior to the
date it became a Subsidiary of Borrowers or is merged into or consolidated with
Borrowers    $                       

 

Plus:         Any provision for (or minus any benefit from) income and franchise
taxes deducted in the determination of net income for the Defined Period

   $                       

 

Plus:         Interest expense, net of interest income, deducted in the
determination of net income for the Defined Period

   $                       

 

Plus:         Amortization and depreciation deducted in the determination of net
income for the Defined Period

   $                       

 

Minus:      Any non-cash gains resulting from the extinguishment of liabilities
and the sale and/or disposition of assets in the determination of net income for
the Defined Period

   $                       

 

EBITDA for the Defined Period:    $                       

 

 

Exhibit B – Page 3

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Fixed Charge Coverage Ratio Worksheet (Attachment to Compliance Certificate)

 

Fixed Charges for the applicable Defined Period is calculated as follows:   
Interest expense, net of interest income, interest paid in kind and amortization
of capitalized fees and expenses incurred to consummate the transactions
contemplated by the Financing Documents and included in interest expense,
included in the determination of net income of Borrowers and their Consolidated
Subsidiaries for the Defined Period (“Total Interest Expense”)   
$                       

 

Plus:         Any provision for (or minus any benefit from) income or franchise
taxes included in the determination of net income for the Defined Period *

   $                       

 

Plus:         Payments of principal and interest for the Defined Period with
respect to all Debt (including the portion of scheduled payments under capital
leases allocable to principal but excluding mandatory prepayments required by
Section 2.1 and excluding scheduled repayments of Revolving Loans and other Debt
subject to reborrowing to the extent not accompanied by a concurrent and
permanent reduction of the Revolving Loan Commitment (or equivalent loan
commitment))

   $                       

 

Plus:         Permitted Distributions

   $                       

 

Fixed Charges for the applicable Defined Period:    $                       

 

Operating Cash Flow for the applicable Defined Period is calculated as follows:
   EBITDA for the Defined Period (calculated pursuant to the EBITDA Worksheet)
   $                       

 

Minus:      Unfinanced capital expenditures for the Defined Period

   $                       

 

Minus:      To the extent not already reflected in the calculation of EBITDA,
other capitalized costs, defined as the gross amount paid in cash and
capitalized during the Defined Period, as long term assets, other than amounts
capitalized during the Defined Period as capital expenditures for property,
plant and equipment or similar fixed asset accounts

   $                       

 

Operating Cash Flow for the Defined Period:    $                       

 

Covenant Compliance:   

 

Fixed Charge Coverage Ratio (Ratio of Operating Cash Flow to Fixed Charges) for
the Defined Period

            to 1.0 Minimum Fixed Charge Coverage for the Defined Period   
         to 1.0 In Compliance    Yes / No

 

Exhibit B – Page 1

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Exhibit C to Credit Agreement (Borrowing Base Certificate)

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Exhibit D to Credit Agreement (Form of Notice of Borrowing)

NOTICE OF BORROWING

This Notice of Borrowing is given by             , a Responsible Officer of
            (the “Borrower Representative”), pursuant to that certain Credit and
Security Agreement dated as of             , 201            among the Borrower
Representative,                      and any additional Borrower that may
hereafter be added thereto (collectively, “Borrowers”), MidCap Financial, LLC,
individually as a Lender and as Agent, and the financial institutions or other
entities from time to time parties hereto, each as a Lender (as such agreement
may have been amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”). Capitalized terms used herein without definition
shall have the meanings set forth in the Credit Agreement.

The undersigned Responsible Officer hereby gives notice to Agent of Borrower
Representative’s request to borrow $            of Loans on             ,
201        . Attached is a Borrowing Base Certificate complying in all respects
with the Credit Agreement and confirming that, after giving effect to the
requested advance, the Revolving Loan Outstandings will not exceed the Revolving
Loan Limit.

The undersigned officer hereby certifies that, both before and after giving
effect to the request above (a) each of the conditions precedent set forth in
Section 7.2 have been satisfied, (b) all of the representations and warranties
contained in the Credit Agreement and the other Financing Documents are true,
correct and complete as of the date hereof, except to the extent such
representation or warranty relates to a specific date, in which case such
representation or warranty is true, correct and complete as of such earlier
date, and (c) no Default or Event of Default has occurred and is continuing on
the date hereof.

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
Notice of Borrowing this             day of             , 201        .

 

Sincerely,

 

[BORROWER REPRESENTATIVE]

By:

 

 

Name:

 

 

Title:

 

 

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

Exhibit E to Credit Agreement (Form of Payment Notification)

PAYMENT NOTIFICATION

This Payment Notification is given by             , a Responsible Officer of
            (the “Borrower Representative”), pursuant to that certain Credit and
Security Agreement dated as of             , 201            among the Borrower
Representative,                      and any additional Borrower that may
hereafter be added thereto (collectively, “Borrowers”), MidCap Financial, LLC,
individually as a Lender and as Agent, and the financial institutions or other
entities from time to time parties hereto, each as a Lender (as such agreement
may have been amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”). Capitalized terms used herein without definition
shall have the meanings set forth in the Credit Agreement.

Please be advised that funds in the amount of $            will be wire
transferred to Agent on             , 200        . Such funds shall constitute
[an optional] [a mandatory] prepayment of the Term Loans, with such prepayments
to be applied in the manner specified in Section 2.1(a)(iii). [Such mandatory
prepayment is being made pursuant to Section             of the Credit
Agreement.]

Fax to MCF Operations 301-941-1450 no later than noon Eastern time.

Note: Funds must be received in the Payment Account by no later than noon
Eastern time for same day application

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
Payment Notification this             day of             , 201        .

 

Sincerely,

 

[BORROWER REPRESENTATIVE]

By:

 

 

Name:

 

 

Title:

 

 

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

Exhibit F to Credit Agreement (Form of Warrant)

See attached.

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

Schedule 2.1—Amortization

Commencing on January 1, 2013, and in the case of each such advance under the
Term Loan continuing on the first day of each calendar month thereafter,
Borrowers shall pay to Agent as a principal payment under each Term Loan
outstanding an amount equal to the Amortization Payment (defined below) as an
amortization payment in respect of each advance under the Term Loan. The term
“Amortization Payment” means the principal payment based upon a nine (9) month
straight-line amortization of equal monthly principal payments in the amount of
$444,444.45. Notwithstanding anything to the contrary contained in the
foregoing, the entire remaining outstanding principal balance under the Term
Loan shall mature and be due and payable on September 1, 2013.

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

Schedule 7.4 – Post Closing Requirements

Borrowers shall satisfy and complete each of the following obligations, or
provide Agent each of the items listed below, as applicable, on or before the
date indicated below, all to the satisfaction of Agent in its sole and absolute
discretion:

 

1. No later than October 1, 2012, Borrowers shall pay (and provide documentation
evidencing such payment) such amounts as necessary to remove all Liens in favor
of the United States Internal Revenue Service or any state taxing authority.

 

2. No later than October 1, 2012, Borrowers shall deliver legal opinions
requested by Agent with respect to the Financing Documents and the related
transactions in form and substance satisfactory to Agent.

 

3. No later than October 3, 2012, Borrowers shall have obtained a landlord’s
agreement, in form and substance satisfactory to Lender, from the lessor of 7501
Fannin Street, Houston, Texas 77054.

 

4. No later than October 12, 2012, Borrowers shall have opened or otherwise
designated the Lockboxes and Lockbox Accounts required pursuant to Section 2.11
and shall have delivered notice letters to all Third Party Payors directing such
Third Party Payors to remit payments on Accounts to the appropriate Lockbox, and
no later November 31, 2012, all such Third Party Payors shall be in substantial
compliance with such notice letters.

 

5. No later than October 31, 2012 (or such later date as Agent may specify in
its sole discretion), Borrowers shall (i) amend each contractual arrangement
identified by Agent to which a Borrower is a party to ensure each such
contractual arrangement is in compliance, as determined by Agent in its
reasonable discretion, with all Healthcare Laws, or (ii) deliver an opinion of
counsel to Agent, in form and substance satisfactory to Agent, stating that each
such contractual arrangement is in compliance with all Healthcare Laws.

 

6. No later than October 31, 2012 (or such later date as Agent may specify in
its sole discretion), deliver to Agent such good standing certificates, foreign
qualifications, tax clearance letters, or similar documentation with respect to
the Credit Parties as Agent may request.

 

7. No later than October 31, 2012, Borrowers shall have obtained a landlord’s
agreement from the lessor of each of the following leased properties: (i) 837 FM
1960 West, Suite 105, Houston, Texas; (ii) 847 FM 1960 West, Suite 200, Houston,
Texas; (iii) 22751 Professional Drive, Kingwood, Texas; (iv) 15591 Creek Bend
Drive, Sugar Land, Texas; (v) 901 N. Hwy 146, Baytown, Texas; and (vi) 7324
Southwest Fwy, Suite 700, Houston, TX 77074.

 

8. No later than October 31, 2012, Borrowers shall transition (and provide
documentation evidencing such transition satisfactory to Agent) all of
Borrowers’ payroll services to a third party vendor satisfactory to Agent.

 

9. Borrowers shall use best efforts to (i) deliver to Agent a Subordination
Agreement, satisfactory to Lender, subordinating the Debt owed to 1960 Family
Practice, P.A., or (ii) obtain the release of all Liens in favor of 1960 Family
Practice, P.A. with respect to Accounts.

 

10. No later than December 31, 2012, all Debt owed to Regions Bank on the
Closing Date shall be paid pursuant to its terms (as of the Closing Date).

Borrower’s failure to complete and satisfy any of the above obligations on or
before the date indicated above, or Borrower’s failure to deliver any of the
above listed items on or before the date indicated above, shall constitute an
immediate an automatic Event of Default.

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

Schedule 9.1 – Collateral

The Collateral consists of all of Borrower’s assets, including without
limitation, all of Borrower’s right, title and interest in and to the following,
whether now owned or hereafter created, acquired or arising:

 

  (a) all goods, Accounts (including health-care insurance receivables),
Equipment, Inventory, contract rights or rights to payment of money, leases,
license agreements, franchise agreements, General Intangibles, commercial tort
claims, documents, instruments (including any promissory notes), chattel paper
(whether tangible or electronic), cash, deposit accounts, securities accounts,
fixtures, letter of credit rights (whether or not the letter of credit is
evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located;

 

  (b) all of Borrowers’ books and records relating to any of the foregoing; and

 

  (c) any and all claims, rights and interests in any of the above and all
substitutions for, additions, attachments, accessories, accessions and
improvements to and replacements, products, proceeds and insurance proceeds of
any or all of the foregoing.

 

i