Exhibit 10.31


 


Execution Version


 


Published CUSIP Number:  74349EAD6


Revolving Credit CUSIP Number: 
74349EAF1


Term Loan CUSIP Number:74349EAE4


 


FIRST LIEN CREDIT AGREEMENT


 


Dated as of August 8, 2007


 


among


 


PROSPECT MEDICAL HOLDINGS, INC.


AND


PROSPECT MEDICAL GROUP, INC.,


as the Borrowers,


 


BANK OF AMERICA, N.A.,

as Administrative Agent, Swing Line Lender and

L/C Issuer,


 


CRATOS CAPITAL MANAGEMENT, LLC


as Syndication Agent


 


and


 


The Other Lenders Party Hereto


 


BANC OF AMERICA SECURITIES LLC,


 


as Sole Lead Arranger and Sole Book Manager


 

















 


TABLE OF
CONTENTS


 




	
  Section

  	
   

  	
  Page

  






 


ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS


 


	
  1.01

  	
  Defined Terms

  	
  1

  
	
  1.02

  	
  Other Interpretive Provisions

  	
  30

  
	
  1.03

  	
  Accounting Terms

  	
  31

  
	
  1.04

  	
  Rounding

  	
  31

  
	
  1.05

  	
  Times of Day

  	
  31

  
	
  1.06

  	
  Letter of Credit Amounts

  	
  32

  
	
  1.07

  	
  Currency Equivalents
  Generally

  	
  32

  



 


ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS


 


	
  2.01

  	
  The Loans

  	
  32

  
	
  2.02

  	
  Borrowings, Conversions and
  Continuations of Loans

  	
  33

  
	
  2.03

  	
  Letters of Credit

  	
  34

  
	
  2.04

  	
  Swing Line Loans

  	
  43

  
	
  2.05

  	
  Prepayments

  	
  46

  
	
  2.06

  	
  Termination or Reduction of
  Commitments

  	
  49

  
	
  2.07

  	
  Repayment of Loans

  	
  50

  
	
  2.08

  	
  Interest

  	
  51

  
	
  2.09

  	
  Fees

  	
  51

  
	
  2.10

  	
  Computation of Interest and
  Fees; Retroactive Adjustments of Applicable Rate

  	
  52

  
	
  2.11

  	
  Evidence of Debt

  	
  53

  
	
  2.12

  	
  Payments Generally; Administrative
  Agent’s Clawback

  	
  53

  
	
  2.13

  	
  Sharing of Payments by
  Lenders

  	
  55

  
	
  2.14

  	
  Obligations Joint and Several

  	
  56

  
	
  2.15

  	
  PMG as Borrower Agent

  	
  58

  



 


 


ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY


 


	
  3.01

  	
  Taxes

  	
  58

  
	
  3.02

  	
  Illegality

  	
  60

  
	
  3.03

  	
  Inability to Determine Rates

  	
  61

  
	
  3.04

  	
  Increased Costs; Reserves on
  Eurodollar Rate Loans

  	
  61

  
	
  3.05

  	
  Compensation for Losses

  	
  63

  
	
  3.06

  	
  Mitigation Obligations;
  Replacement of Lenders

  	
  63

  
	
  3.07

  	
  Survival

  	
  64

  



 


i

















 


ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS


 


	
  4.01

  	
  Conditions of Initial Credit
  Extension

  	
  64

  
	
  4.02

  	
  Conditions to all Credit
  Extensions

  	
  71

  



 


ARTICLE V

REPRESENTATIONS AND WARRANTIES


 


	
  5.01

  	
  Existence, Qualification and
  Power

  	
  72

  
	
  5.02

  	
  Authorization; No
  Contravention

  	
  72

  
	
  5.03

  	
  Governmental Authorization;
  Other Consents

  	
  73

  
	
  5.04

  	
  Binding Effect

  	
  73

  
	
  5.05

  	
  Financial Statements; No
  Material Adverse Effect

  	
  73

  
	
  5.06

  	
  Litigation

  	
  74

  
	
  5.07

  	
  No Default

  	
  74

  
	
  5.08

  	
  Ownership of Property; Liens;
  Investments

  	
  74

  
	
  5.09

  	
  Environmental Compliance

  	
  75

  
	
  5.10

  	
  Insurance

  	
  76

  
	
  5.11

  	
  Taxes

  	
  76

  
	
  5.12

  	
  ERISA Compliance

  	
  76

  
	
  5.13

  	
  Subsidiaries; Equity
  Interests; Loan Parties

  	
  77

  
	
  5.14

  	
  Margin Regulations;
  Investment Company Act

  	
  77

  
	
  5.15

  	
  Disclosure

  	
  78

  
	
  5.16

  	
  Compliance with Laws

  	
  78

  
	
  5.17

  	
  Intellectual Property;
  Licenses, Etc.

  	
  78

  
	
  5.18

  	
  Solvency

  	
  79

  
	
  5.19

  	
  Casualty, Etc.

  	
  79

  
	
  5.20

  	
  Health Care Matters.

  	
  79

  
	
  5.21

  	
  Labor Matters.

  	
  81

  
	
  5.22

  	
  Collateral Documents.

  	
  81

  



 


ARTICLE VI

AFFIRMATIVE COVENANTS


 


	
  6.01

  	
  Financial Statements

  	
  81

  
	
  6.02

  	
  Certificates; Other
  Information

  	
  82

  
	
  6.03

  	
  Notices

  	
  86

  
	
  6.04

  	
  Payment of Obligations

  	
  88

  
	
  6.05

  	
  Preservation of Existence,
  Etc.

  	
  88

  
	
  6.06

  	
  Maintenance of Properties

  	
  88

  
	
  6.07

  	
  Maintenance of Insurance

  	
  88

  
	
  6.08

  	
  Compliance with Laws

  	
  89

  
	
  6.09

  	
  Books and Records

  	
  89

  
	
  6.10

  	
  Inspection Rights

  	
  89

  
	
  6.11

  	
  Use of Proceeds

  	
  90

  
	
  6.12

  	
  Covenant to Guarantee
  Obligations and Give Security

  	
  90

  



 


ii

















 


	
  6.13

  	
  Compliance with Environmental
  Laws

  	
  93

  
	
  6.14

  	
  Preparation of
  Environmental/Seismic Reports

  	
  93

  
	
  6.15

  	
  Further Assurances

  	
  94

  
	
  6.16

  	
  Compliance with Terms of
  Leaseholds

  	
  94

  
	
  6.17

  	
  Interest Rate Hedging

  	
  94

  
	
  6.18

  	
  Material Contracts

  	
  94

  
	
  6.19

  	
  Post-Closing Covenants

  	
  94

  



 


ARTICLE VII

NEGATIVE COVENANTS


 


	
  7.01

  	
  Liens

  	
  95

  
	
  7.02

  	
  Indebtedness

  	
  96

  
	
  7.03

  	
  Investments

  	
  98

  
	
  7.04

  	
  Fundamental Changes

  	
  100

  
	
  7.05

  	
  Dispositions

  	
  101

  
	
  7.06

  	
  Restricted Payments

  	
  101

  
	
  7.07

  	
  Change in Nature of Business:
  Limitations on Excluded Subsidiaries

  	
  102

  
	
  7.08

  	
  Transactions with Affiliates

  	
  102

  
	
  7.09

  	
  Burdensome Agreements

  	
  102

  
	
  7.10

  	
  Use of Proceeds

  	
  103

  
	
  7.11

  	
  Financial Covenants

  	
  103

  
	
  7.12

  	
  Capital Expenditures

  	
  104

  
	
  7.13

  	
  Amendments of Organization
  Documents

  	
  104

  
	
  7.14

  	
  Accounting Changes

  	
  104

  
	
  7.15

  	
  Prepayments, Etc. of
  Indebtedness; Payments and Prepayments of the Second Lien Term Loan

  	
  104

  
	
  7.16

  	
  Amendment, Etc. of Related
  Documents and Indebtedness

  	
  104

  
	
  7.17

  	
  Designation of Senior Debt

  	
  105

  



 


ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES


 


	
  8.01

  	
  Events of Default

  	
  105

  
	
  8.02

  	
  Remedies upon Event of
  Default

  	
  108

  
	
  8.03

  	
  Application of Funds

  	
  109

  



 


ARTICLE IX

ADMINISTRATIVE AGENT


 


	
  9.01

  	
  Appointment and Authority

  	
  110

  
	
  9.02

  	
  Rights as a Lender

  	
  110

  
	
  9.03

  	
  Exculpatory Provisions

  	
  111

  
	
  9.04

  	
  Reliance by Administrative
  Agent

  	
  112

  
	
  9.05

  	
  Delegation of Duties

  	
  112

  
	
  9.06

  	
  Resignation of Administrative
  Agent

  	
  112

  
	
  9.07

  	
  Non-Reliance on
  Administrative Agent and Other Lenders

  	
  113

  



 


iii

















 


	
  9.08

  	
  Intercreditor Agreement

  	
  113

  
	
  9.09

  	
  No Other Duties, Etc.

  	
  114

  
	
  9.10

  	
  Administrative Agent
  May File Proofs of Claim

  	
  114

  
	
  9.11

  	
  Collateral and Guaranty
  Matters

  	
  114

  



 


ARTICLE X

MISCELLANEOUS


 


	
  10.01

  	
  Amendments, Etc.

  	
  115

  
	
  10.02

  	
  Notices; Effectiveness;
  Electronic Communications

  	
  117

  
	
  10.03

  	
  No Waiver; Cumulative
  Remedies

  	
  119

  
	
  10.04

  	
  Expenses; Indemnity; Damage
  Waiver

  	
  119

  
	
  10.05

  	
  Payments Set Aside

  	
  121

  
	
  10.06

  	
  Successors and Assigns

  	
  121

  
	
  10.07

  	
  Treatment of Certain
  Information; Confidentiality

  	
  125

  
	
  10.08

  	
  Right of Setoff

  	
  127

  
	
  10.09

  	
  Interest Rate Limitation

  	
  127

  
	
  10.10

  	
  Counterparts; Integration;
  Effectiveness

  	
  127

  
	
  10.11

  	
  Survival of Representations
  and Warranties

  	
  128

  
	
  10.12

  	
  Severability

  	
  128

  
	
  10.13

  	
  Replacement of Lenders

  	
  128

  
	
  10.14

  	
  Governing Law; Jurisdiction;
  Etc.

  	
  129

  
	
  10.15

  	
  Waiver of Jury Trial

  	
  130

  
	
  10.16

  	
  California Judicial Reference

  	
  130

  
	
  10.17

  	
  No Advisory or Fiduciary
  Responsibility

  	
  130

  
	
  10.18

  	
  USA PATRIOT Act Notice

  	
  131

  
	
   

  	
   

  	
   

  
	
  SIGNATURES

  	
  S-1

  



 


iv

















 


SCHEDULES


 


	
   

  	
  1.01

  	
  Certain EBITDA
  Add-Backs

  
	
   

  	
  2.01

  	
  Commitments and
  Applicable Percentages

  
	
   

  	
  4.01(a)(vi)

  	
  Pledged Real Property

  
	
   

  	
  4.01(a)(xv)

  	
  Exceptions to
  Audited Financial Statements

  
	
   

  	
  5.06

  	
  Disclosed
  Litigation

  
	
   

  	
  5.07

  	
  Material
  Contracts

  
	
   

  	
  5.08(b)

  	
  Existing Liens

  
	
   

  	
  5.08(c)

  	
  Owned Real
  Property

  
	
   

  	
  5.08(d)(i)

  	
  Leased Real
  Property (Lessee)

  
	
   

  	
  5.08(d)(ii)

  	
  Leased Real
  Property (Lessor)

  
	
   

  	
  5.08(e)

  	
  Existing
  Investments

  
	
   

  	
  5.09

  	
  Environmental
  Compliance

  
	
   

  	
  5.11

  	
  Tax Returns

  
	
   

  	
  5.12(c)

  	
  Past ERISA
  Events

  
	
   

  	
  5.13

  	
  Subsidiaries and
  Other Equity Investments; Loan Parties

  
	
   

  	
  5.21

  	
  Labor Matters

  
	
   

  	
  7.02

  	
  Existing
  Indebtedness

  
	
   

  	
  7.09

  	
  Burdensome
  Agreements

  
	
   

  	
  10.02

  	
  Administrative
  Agent’s Office, Certain Addresses for Notices

  



 


EXHIBITS


 


	
   

  	
  Form of

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  A

  	
  Committed Loan
  Notice

  
	
   

  	
  B

  	
  Swing Line Loan
  Notice

  
	
   

  	
  C-1

  	
  Term Note

  
	
   

  	
  C-2

  	
  Revolving Credit
  Note

  
	
   

  	
  D

  	
  Compliance
  Certificate

  
	
   

  	
  E

  	
  Assignment and
  Assumption

  
	
   

  	
  F

  	
  Calculation of
  Consolidated Membership

  



 


v

















 


CREDIT AGREEMENT


 


This FIRST LIEN CREDIT AGREEMENT (“Agreement”)
is entered into as of August 8, 2007,  among PROSPECT
MEDICAL HOLDINGS, INC., a Delaware corporation (“Holdings”), PROSPECT
MEDICAL GROUP, INC., a California professional corporation (together with
Holdings, each a “Borrower” and collectively, the “Borrowers”),
each lender from time to time party hereto (collectively, the “Lenders”
and individually, a “Lender”), and BANK OF AMERICA, N.A.,  as Administrative Agent, Swing Line Lender and L/C Issuer.


 


PRELIMINARY STATEMENTS:


 


The Borrowers have requested that the Lenders provide
a term loan facility and a revolving credit facility, and the Lenders have
indicated their willingness to lend and the L/C Issuer has indicated its
willingness to issue letters of credit, in each case, on the terms and subject
to the conditions set forth herein.


 


In consideration of the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:


 


ARTICLE
I

DEFINITIONS AND ACCOUNTING TERMS


 


1.01         Defined
Terms.  As used in this Agreement,
the following terms shall have the meanings set forth below:


 


“Acquisition Co.”
means Prospect Hospitals System LLC, a California limited liability company,
which entity’s name shall be changed on the Closing Date to Alta Hospitals
System, LLC.


 


“Administrative
Agent” means Bank of America in its capacity as administrative agent
under any of the Loan Documents, or any successor administrative agent.


 


“Administrative
Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.02, or such other
address or account as the Administrative Agent may from time to time notify to
the Borrowers and the Lenders.


 


“Administrative
Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.


 


“Affiliate”
means, with respect to any Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.


 


“Aggregate
Commitments” means the Commitments of all the Lenders.


 


“Aggregate Credit
Exposures” means, at any time, in respect of (a) the
Term Facility, the aggregate amount of the Term Loans, as the case
may be, outstanding at such time and (b) in respect of the Revolving
Credit Facility, the sum of (i) the unused portion of the 


 

















 


Revolving Credit Facility at such time and (ii) the
Total Revolving Credit Outstandings at such time.


 


“Agreement”
means this First Lien Credit Agreement, as the same may be amended, restated,
supplemented or modified from time to time.


 


“AMVI/Prospect”
means AMVI/Prospect Medical Group, a California general partnership, a/k/a
AMVI/Prospect Health Network.


 


“Applicable Fee Rate”
means, at any time, in respect of the Revolving Credit Facility, (a) from the Closing Date until December 31,
2007, 0.50% per annum and (b) thereafter, the applicable percentage per
annum set forth below determined by reference to the Consolidated Leverage
Ratio as set forth in the most recent Compliance Certificate received by the
Administrative Agent pursuant to Section 6.02(b):


 


Applicable
Fee Rate


 




	
  Pricing Level

  	
   

  	
  Consolidated Leverage Ratio

  	
   

  	
  Commitment 

  Fee

  	
   

  
	
  1

  	
   

  	
  Less than 3.00:1.00

  	
   

  	
  0.375

  	
  %

  
	
  2

  	
   

  	
  Greater than or equal to 3.00:1.00 but less than
  3.25:1.00

  	
   

  	
  0.375

  	
  %

  
	
  3

  	
   

  	
  Greater than or equal to 3.25:1.00 but less than
  3.50:1.00

  	
   

  	
  0.500

  	
  %

  
	
  4

  	
   

  	
  Greater than or equal to 3.50

  	
   

  	
  0.500

  	
  %

  






 


Any increase or decrease in
the Applicable Fee Rate resulting from a change in the Consolidated Leverage
Ratio shall become effective as of the first Business Day immediately following
the date a Compliance Certificate is delivered pursuant to Section 6.02(b);
provided, however, that if a Compliance Certificate is not
delivered when due in accordance with such Section, then Pricing Level 4
shall apply as of the first Business Day after the date on which such
Compliance Certificate was required to have been delivered.


 


Notwithstanding
anything to the contrary contained in this definition, the determination of the
Applicable Fee Rate for any period shall be subject to the provisions of Section 2.10(b).


 


“Applicable Percentage”
means (a) in respect of the Term Facility, with respect to any Term
Lender at any time, the percentage (carried out to the ninth decimal place) of
the Term Facility represented by (i) on or prior to the Closing Date, such Term Lender’s
Term Commitment at such time and (ii) thereafter, the principal
amount of such Term Lender’s
Term Loans at such time and (b) in respect of the Revolving Credit
Facility, with respect to any Revolving Credit Lender at any time, the
percentage (carried out to the ninth decimal place) of the Revolving Credit
Facility represented by such Revolving Credit Lender’s Revolving Credit
Commitment at such time.  If the
commitment of each Revolving Credit Lender to make Revolving Credit Loans and
the obligation of the L/C Issuer to make L/C Credit Extensions have been
terminated pursuant to Section 8.02, or if the Revolving Credit
Commitments have expired, then the Applicable Percentage of each Revolving
Credit Lender in respect of the Revolving 


 


2

















 


Credit Facility shall be determined based on the
Applicable Percentage of such Revolving Credit Lender in respect of the Revolving Credit Facility most
recently in effect, giving effect to any subsequent assignments.  The initial Applicable Percentage of each
Lender in respect of each Facility is set forth opposite the name of such
Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to
which such Lender becomes a party hereto, as applicable.


 


“Applicable Rate”
means (a) with respect to the Term Loan Facility, 2.75% per annum for Base
Rate Loans and 4.00% per annum for Eurodollar Rate Loans and (b) with
respect to the Revolving Credit Facility, (i) from the Closing Date to the date on which the Administrative Agent
receives a Compliance Certificate pursuant to Section 6.02(b) for
the fiscal quarter ending December 31, 2007,  2.75% per annum for Base Rate Loans and  4.00% per annum for Eurodollar Rate Loans
and Letter of Credit Fees and (ii) thereafter, the applicable percentage
per annum set forth below determined by reference to the Consolidated Leverage
Ratio as set forth in the most recent Compliance Certificate received by the
Administrative Agent pursuant to Section 6.02(b):


 


Applicable
Rate


 




	
  Pricing 

  Level

  	
   

  	
  Consolidated Leverage 

  Ratio

  	
   

  	
  Eurodollar Rate and 

  Letter of Credit Fees

  	
   

  	
  Base Rate

  	
   

  
	
  1

  	
   

  	
  Less than 3.00:1.00

  	
   

  	
  3.50

  	
  %

  	
  2.25

  	
  %

  
	
  2

  	
   

  	
  Greater than or equal to 3.00:1.00 but less than
  3.25:1.00

  	
   

  	
  3.75

  	
  %

  	
  2.50

  	
  %

  
	
  3

  	
   

  	
  Greater than or equal to 3.25:1.00 but less than
  3.50:1.00

  	
   

  	
  4.00

  	
  %

  	
  2.75

  	
  %

  
	
  4

  	
   

  	
  Greater than or equal to 3.50

  	
   

  	
  4.25

  	
  %

  	
  3.00

  	
  %

  






 


Any increase or decrease in
the Applicable Rate resulting from a change in the Consolidated Leverage Ratio
shall become effective as of the first Business Day immediately following the
date a Compliance Certificate is delivered pursuant to Section 6.02(b);
provided, however, that if a Compliance Certificate is not
delivered when due in accordance with such Section, then Pricing Level 4 shall
apply, in each case as of the first Business Day after the date on which such
Compliance Certificate was required to have been delivered.


 


Notwithstanding anything to
the contrary contained in this definition, the determination of the Applicable
Rate for any period shall be subject to the provisions of Section 2.10(b).


 


“Applicable Revolving
Credit Percentage” means with respect to any Revolving Credit Lender at any
time, such Revolving Credit Lender’s Applicable Percentage in respect of the
Revolving Credit Facility at such time.


 


“Appropriate Lender” means, at
any time, (a) with respect to either of the Term Facility or the
Revolving Credit Facility, a Lender that has a Commitment with respect to such
Facility or holds a Term Loan or a Revolving Credit Loan, respectively, at such
time, (b) with respect to the Letter of Credit Sublimit, (i) the L/C
Issuer and (ii) if any Letters of Credit 


 


3

















 


have been issued pursuant to Section 2.03(a),
the Revolving Credit Lenders and (c) with respect to the Swing Line
Sublimit, (i) the Swing Line Lender and (ii) if any Swing Line Loans
are outstanding pursuant to Section 2.04(a), the Revolving Credit
Lenders.


 


“Approved Fund”
means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.


 


“Arranger”
means Banc of America Securities LLC, in its capacity as sole lead arranger and
sole book manager.


 


“Assignable Option
Agreement” means that certain Third Amended and Restated Assignable Option
Agreement dated as of the Closing Date and executed by and among Dr. Terner,
PMS and PMG.


 


“Assignee Group”
means two or more Eligible Assignees that are Affiliates of one another or two
or more Approved Funds managed by the same investment advisor.


 


“Assignment and
Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 10.06(b)), and accepted by the Administrative
Agent, in substantially the form of Exhibit E or any other form
approved by the Administrative Agent.


 


“Attributable
Indebtedness” means, on any date, (a) in respect of any
Capitalized Lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP, (b) in respect of any Synthetic Lease Obligation, the
capitalized amount of the remaining lease or similar payments under the
relevant lease or other applicable agreement or instrument that would appear on
a balance sheet of such Person prepared as of such date in accordance with GAAP
if such lease or other agreement or instrument were accounted for as a
Capitalized Lease and (c) all Synthetic Debt of such Person.


 


“Audited Financial
Statements” means, collectively, (a) the audited consolidated
balance sheet of Holdings and its
Subsidiaries (including PMG and its Subsidiaries) for the fiscal year
ended September 30, 2006,
and the related consolidated statements of income or operations, shareholders’
equity and cash flows for such fiscal year of Holdings and its Subsidiaries (including PMG and its Subsidiaries),
including the notes thereto and (b) the audited consolidated balance sheet
of Alta Healthcare System, Inc. and its Subsidiaries for the fiscal year
ended December 31, 2006, and the related consolidated statements of income
or operations, shareholders’ equity and cash flows for such fiscal year of  Alta Healthcare System, Inc., and its
Subsidiaries, including the notes thereto.


 


“Availability
Period” means in respect of the Revolving Credit Facility, the
period from and including the Closing Date to the earliest of (a) the
Maturity Date for the Revolving Credit Facility, (b) the date of
termination of the Revolving Credit Commitments pursuant to Section 2.06,
and (c) the date of termination of the commitment of each Revolving Credit
Lender to make Revolving Credit Loans and of the obligation of the L/C Issuer
to make L/C Credit Extensions pursuant to Section 8.02.


 


4














 


“Bank of America”
means Bank of America, N.A. and its successors.


 


“Base Rate”
means for any day a fluctuating rate per annum equal to the higher of (a) the
Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in
effect for such day as publicly announced from time to time by Bank of America
as its “prime rate.”  The “prime rate” is
a rate set by Bank of America based upon various factors including Bank of
America’s costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. 
Any change in such rate announced by Bank of America shall take effect
at the opening of business on the day specified in the public announcement of
such change.


 


“Base Rate Loan”
means a Revolving Credit Loan or a Term
Loan that bears interest based on the Base Rate.


 


“Borrowers”
has the meaning specified in the introductory paragraph hereto.


 


“Borrower Agent”
means PMG.


 


“Borrower Materials”
has the meaning specified in Section 6.02.


 


“Borrowing”
means a Revolving Credit Borrowing, a Swing Line Borrowing or a
Term Borrowing, as the context may require.


 


 “Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close
under the Laws of, or are in fact closed in, the state where the Administrative
Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan,
means any such day on which dealings in Dollar deposits are conducted by and
between banks in the London interbank eurodollar market.


 


“Capital
Expenditures” means, with respect to any Person for any period, any
expenditure in respect of the purchase or other acquisition of any fixed or
capital asset (excluding normal replacements and maintenance which are properly
charged to current operations).


 


“Capitalized Leases”
means all leases that have been or should be, in accordance with GAAP, recorded
as capitalized leases.


 


“Capitated Contracts”
means, collectively, all of the Loan Parties’ contracts whether presently
existing or hereafter executed between Loan Parties and various health
maintenance organizations and all proceeds therefrom.


 


“Capitated Contract
Rights” means all of the Loan Parties’ rights to payment of any kind arising
from or out of Capitated Contracts or any other contracts or rights to payment
from health service contracts whether presently existing or hereafter executed
between Loan Parties and various health maintenance organizations.


 


“Cash Collateralize”
has the meaning specified in Section 2.03(g).


 


5

















 


“Cash Equivalents” means any
of the following types of Investments, to the extent owned by either Borrower
or any of their respective Subsidiaries free and clear of all Liens (other than
Liens created under the Collateral Documents and other Liens permitted hereunder):


 


(a)           readily
marketable obligations issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof having
maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and
credit of the United States of America is pledged in support thereof;


 


(b)           time
deposits with, or insured certificates of deposit or bankers’ acceptances of,
any commercial bank that (i) (A) is a Lender or (B) is organized
under the laws of the United States of America, any state thereof or the
District of Columbia or is the principal banking subsidiary of a bank holding
company organized under the laws of the United States of America, any state
thereof or the District of Columbia, and is a member of the Federal Reserve
System, (ii) issues (or the parent of which issues) commercial paper rated
as described in clause (c) of this definition and (iii) has combined
capital and surplus of at least $500,000,000, in each case with maturities of
not more than 90 days from the date of acquisition thereof;


 


(c)           commercial
paper issued by any issuer and rated at least “Prime-1” (or the then equivalent
grade) by Moody’s or at least “A-1” (or the then equivalent grade) by
S&P, in each case with maturities of not more than 180 days from the date
of acquisition thereof; and


 


(d)           Investments,
classified in accordance with GAAP as current assets of either Borrower or any
of their respective Subsidiaries, in money market investment programs
registered under the Investment Company Act of 1940, which are administered by
financial institutions that have the highest rating obtainable from either Moody’s
or S&P, and the portfolios of which are limited solely to Investments of
the character, quality and maturity described in clauses (a), (b) and (c) of
this definition.


 


“Cash Management
Agreement” means any agreement to provide cash management services, including
treasury, depository, overdraft, credit or debit card, electronic funds
transfer and other cash management arrangements.


 


“Cash Management Bank” means any
Person that, at the time it enters into a Cash Management Agreement, is a
Lender or an Affiliate of a Lender, in its capacity as a party to such Cash
Management Agreement.


 


“CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.


 


“CERCLIS” means the
Comprehensive Environmental Response, Compensation and Liability Information
System maintained by the U.S. Environmental Protection Agency.


 


“CFC” means a
Person that is a controlled foreign corporation under Section 957 of the
Code.


 


6

















 


“Change in Law”
means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or
directive (whether or not having the force of law) by any Governmental
Authority.


 


“Change of Control”
means an event or series of events by which:


 


(a)           (i) Any
Person or group (within the meaning of Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934) (other than Samuel S. Lee, the David and
Alexa Topper Family Trust U/D/T September 29, 1997) becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange
Act of 1934) of more than twenty percent (20%) of the Equity Interests (based
on voting power, in the event different classes of stock shall have different
voting powers) of Holdings, (ii) such Person or group shall otherwise
obtain the power to control the election of a majority of the board of
directors of Holdings, or (iii) during any period of twelve consecutive
calendar months, individuals who at the beginning of such period constituted
the board of directors of Holdings (together with any new directors whose
election by the board of directors of Holdings or whose nomination for election
by the stockholders of Holdings was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office; or


 


(b)           Holdings
shall cease to own and control all of the economic and voting rights associated
with ownership of 100% of the outstanding Equity Interests having voting rights
of all classes of PMS, SMM, ProMed or Acquisition Co. on a fully diluted basis;
or


 


(c)           PMS
shall cease to own and control all of the economic and voting rights associated
with ownership of 100% of the outstanding Equity Interests having voting rights
of all classes of PHR, on a fully diluted basis; or


 


(d)           Dr. Terner
shall cease to own and control all of the economic and voting rights associated
with ownership of 100% of the outstanding Equity Interests having voting rights
of all classes of PMG on a fully diluted basis or Dr. Terner institutes or
consents to the institution of any proceeding against him or his estate under
any Debtor Relief Law, or makes an assignment for the benefit of creditors or Dr. Terner
ceases to be duly licensed to practice in the medical industry in the State of
California or Dr. Terner ceases to be designated as a licensed
professional in accordance with the California Professional Corporation Act;
except that, if Dr. Terner shall cease to own and control such Equity
Interests by reason of death or disability, a Change of Control under this
clause (d) shall not be deemed to have occurred if Dr. Terner is
replaced by another owner and controlling shareholder of such capital Stock
reasonably acceptable to Administrative Agent and the Required Lenders within
sixty (60) days; or


 


7

















 


(e)           PMG
ceases to own and control all of the economic and voting rights associated with
ownership of one hundred percent (100%) of the outstanding Equity Interests of
all classes of each PMG Loan Party on a fully diluted basis (except with
respect to Nuestra Familia Medical Group, Inc., a California professional
corporation, in which case a Change of Control shall have occurred if PMG
ceases to own and control all of the economic and voting rights associated with
ownership of fifty five percent (55%) of the outstanding Equity Interests of
all classes of Nuestra Familia Medical Group, Inc., on a fully diluted
basis); or


 


(f)            the
outstanding Equity Interests of any Subsidiary (other than Nuestra Familia
Medical Group, Inc. and AMVI) ceases to be owned one hundred percent (100%)
by a Loan Party; or


 


(g)           any
Person or two or more Persons acting in concert shall have acquired by contract
or otherwise, or shall have entered into a contract or arrangement that, upon
consummation thereof, will result in its or their acquisition of the power to
exercise, directly or indirectly, a controlling influence over the management
or policies of Holdings, or
control over the equity securities of Holdings
entitled to vote for members of the board of directors or equivalent governing
body of Holdings on a
fully-diluted basis (and taking into account all such securities that such
Person or Persons have the right to acquire pursuant to any option right)
representing 25% or more of the
combined voting power of such securities.


 


“Closing Date”
means the first date all the conditions precedent in Section 4.01
are satisfied or waived in accordance with Section 10.01.


 


“CMS” means
Centers for Medicare and Medicaid Services.


 


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


 


“Collateral”
means all of the “Collateral”
and “Mortgaged Property” referred to in the Collateral Documents and all
of the other property that is or is intended under the terms of the Collateral
Documents to be subject to Liens in favor of the Administrative Agent for the
benefit of the Secured Parties.


 


“Collateral
Agreement” has the meaning specified in Section 4.01(a)(v).


 


“Collateral
Documents” means, collectively, the Collateral Agreement, the
Intercreditor Agreement, the Terner Pledge,  the Mortgages,
each intellectual property security agreement, and each other collateral
assignment, security agreement, pledge agreement or other similar agreement
delivered to the Administrative Agent pursuant to the terms hereof or pursuant
to Section 6.12, and each of the other agreements, instruments or
documents that creates or purports to create a Lien in favor of the
Administrative Agent for the benefit of the Secured Parties.


 


“Collection Account
Agreement” means each agreement with a depositary bank holding a Deposit
Account into which Governmental Receivables are initially deposited executed in
accordance with Section 4.6(b) of the Collateral Agreement.


 


8

















 


“Commitment”
means a Term Commitment or a Revolving Credit Commitment, as the context
may require.


 


“Committed Loan
Notice” means a notice of (a) a Term Borrowing, (b) a
Revolving Credit Borrowing, (c) a conversion of Loans from one Type to the
other, or (d) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a),
which, if in writing, shall be substantially in the form of Exhibit A.


 


“Company” means
Alta Healthcare System, Inc., a California corporation.


 


“Compliance
Certificate” means a certificate substantially in the form of Exhibit D.


 


“Consolidated EBITDA” means, at any date of
determination, an amount equal to Consolidated Net Income of the Loan Parties
and their Subsidiaries on a consolidated basis for the most recently completed
Measurement Period plus (a) the following to the extent deducted in
calculating such Consolidated Net Income: 
(i) Consolidated Interest Charges, (ii) the provision for
Federal, state, local and foreign income taxes payable, (iii) depreciation
and amortization expense and (iv) other non-recurring expenses reducing
such Consolidated Net Income which do not represent a cash item in such period
or any future period (in each case of or by Loan Parties and their Subsidiaries
for such Measurement Period) and minus (b) the following to the
extent included in calculating such Consolidated Net Income:  (i) Federal, state, local and foreign
income tax credits, (ii) all non-cash items increasing Consolidated Net
Income (in each case of or by Loan Parties and their Subsidiaries for such
Measurement Period), (iii) losses (or plus gains) from dispositions of
capital assets (including any fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets and all
securities); plus (iv) extraordinary losses (or plus gains) as defined
under GAAP net of related tax effects included in the determination of Consolidated
Net Income.  For purposes of this
Agreement, Consolidated EBITDA shall be adjusted on a pro forma basis,
in a manner reasonably acceptable to the Administrative Agent, to include, as
of the first day of any applicable period, any acquisitions and Dispositions of
assets permitted under this Agreement, including, without limitation,
adjustments reflecting any non-recurring costs and any extraordinary expenses
of any such permitted acquisitions and asset dispositions consummated during
such period calculated on a basis consistent with GAAP and Regulation S-X of
the Securities Exchange Act of 1934, as amended, or as approved by the
Administrative Agent.  For purposes of
this Agreement and the calculation of Consolidated Leverage Ratio and
Consolidated Fixed Charge Coverage Ratio, the add-backs identified on Schedule
1.01(a) shall be permitted in the amounts and for the periods set
forth on such Schedule.


 


“Consolidated Fixed Charge Coverage Ratio” means, at any date of
determination, the ratio of (a) (i) Consolidated EBITDA, less
(ii) the aggregate amount of all cash Capital Expenditures to (b) the
sum of (i) Consolidated Interest Charges, (ii) the aggregate
principal amount of all regularly scheduled principal payments or redemptions
or similar acquisitions for value of outstanding debt for borrowed money, but
excluding any such payments to the extent refinanced through the incurrence of
additional Indebtedness otherwise expressly permitted under Section 7.02,
and (iii) the aggregate amount of Federal, state, local and foreign 


 


9

















 


income taxes paid in cash,
in each case, of or by Holdings and its Subsidiaries for the most recently
completed Measurement Period.


 


 “Consolidated
Interest Charges” means, for any Measurement Period, the sum of (a) all
interest, premium payments, debt discount, fees, charges and related expenses
in connection with borrowed money (including capitalized interest) or in
connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, (b) all interest paid
or payable with respect to discontinued operations and (c) the portion of rent expense
under Capitalized Leases that is treated as interest in accordance with GAAP,
in each case, of or by Holdings and its Subsidiaries on a consolidated basis
for the most recently completed Measurement Period.


 


“Consolidated Leverage Ratio”
means, as of any date of determination, the ratio of (a) Consolidated
Total Indebtedness as of such date to  (b) Consolidated EBITDA of Holdings and its
Subsidiaries on a consolidated basis for the most recently completed
Measurement Period.


 


“Consolidated Net Income” means,
at any date of determination, the net income (or loss) of Holdings and its
Subsidiaries on a consolidated basis for the most recently completed
Measurement Period; provided that Consolidated Net Income shall exclude (a) extraordinary
gains and extraordinary losses for such Measurement Period, (b) the net
income of any Subsidiary during such Measurement Period to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
of such income is not permitted by operation of the terms of its Organization Documents
or any agreement, instrument or Law applicable to such Subsidiary during such
Measurement Period, except that Holdings’ equity in any net loss of any such
Subsidiary for such Measurement Period shall be included in determining Consolidated
Net Income, and (c) any income (or loss) for such Period of any Person if
such Person is not a Subsidiary, except that Holdings’ equity in the net income
of any such Person for such Measurement Period shall be included in
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such Period to Holdings or a Subsidiary as a dividend or
other distribution (and in the case of a dividend or other distribution to a
Subsidiary, such Subsidiary is not precluded from further distributing such
amount to Holdings as described in clause (b) of this proviso).


 


“Consolidated
Total Indebtedness” means, as of any date of determination, for Holdings
and its Subsidiaries on a consolidated basis, the sum of all Indebtedness of
Holdings and its Subsidiaries.


 


“Contractual
Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.


 


“Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.


 


10

















 


“Credit Extension”
means each of the following:  (a) a
Borrowing and (b) an L/C Credit Extension.


 


“Debt Rating”
means, as of any date of determination, the rating as  determined
by either S&P or Moody’s (collectively, the “Debt Ratings”) of each
Borrower’s non-credit-enhanced, senior unsecured long-term debt.


 


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


 


“Default”
means any event or condition that constitutes an Event of Default or that, with
the giving of any notice, the passage of time, or both, would be an Event of
Default.


 


“Default Rate”
means (a) when used with respect to Obligations other than Letter of
Credit Fees or Eurodollar Rate Loans, an interest rate equal to (i) the
Base Rate plus (ii) the Applicable Rate, if any, applicable to Base
Rate Loans plus (iii) 2% per annum, (b) when used with respect
to Obligations consisting of Eurodollar Rate Loans, an interest rate equal (i) the
Eurodollar Rate plus (ii) the Applicable Rate plus (iii) 2%
per annum and (c) when used with respect to Letter of Credit Fees, a rate
equal to the Applicable Rate plus 2% per annum.


 


“Defaulting Lender”
means any Lender that (a) has failed to fund any portion of the Term
Loans, Revolving Credit Loans, participations in L/C Obligations or
participations in Swing Line Loans required to be funded by it hereunder within
one Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within one Business Day of
the date when due, unless the subject of a good faith dispute, or (c) has
been deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.


 


“Disposition”
or “Dispose”
means the sale, transfer, license, lease or other disposition (including any
sale and leaseback transaction) of any property by any Person (or the granting
of any option or other right to do any of the foregoing), including any sale,
assignment, transfer or other disposal, with or without recourse, of any notes
or accounts receivable or any rights and claims associated therewith.


 


“Dollar”
and “$”
mean lawful money of the United States.


 


“Domestic
Subsidiary” means any Subsidiary that is organized under the laws of
any political subdivision of the United States.


 


“Dr. Terner”
means Jacob Y. Terner, M.D.


 


“Eligible Assignee”
means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii),
(v) and (vi) (subject to such consents, if any, as may
be required under Section 10.06(b)(iii)).


 


11

















 


“Environmental Laws”
means any and all Federal, state, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to human health, safety, pollution and the protection of
the environment or the release of any materials into the environment, including
those related to hazardous/biohazardous substances or wastes, air emissions and
discharges to waste or public systems.


 


“Environmental Liability”
means any liability, contingent or otherwise (including any liability for
damages, costs of environmental remediation, fines, penalties or indemnities),
of either Borrower, any other Loan Party or any of their respective
Subsidiaries directly or indirectly resulting from or based upon (a) violation
of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure
to any Hazardous Materials, (d) the release or threatened release of any
Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.


 


“Environmental Permit” means any
permit, approval, identification number, license or other authorization
required under any Environmental Law.


 


“Equity Interests” means,
with respect to any Person, all of the shares of capital stock of (or other
ownership or profit interests in) such Person, all of the warrants, options or
other rights for the purchase or acquisition from such Person of shares of
capital stock of (or other ownership or profit interests in) such Person, all
of the securities convertible into or exchangeable for shares of capital stock
of (or other ownership or profit interests in) such Person or warrants, rights
or options for the purchase or acquisition from such Person of such shares (or
such other interests), and all of the other ownership or profit interests in
such Person (including partnership, member or trust interests therein), whether
voting or nonvoting.


 


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


 


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


 


“ERISA Event”
means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by either Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by either Borrower or any
ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer
Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate
a Pension Plan or Multiemployer Plan; (e) an event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or Multiemployer
Plan; or (f) the imposition of any 


 


12

















 


liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon either
Borrower or any ERISA Affiliate.


 


“Eurodollar Rate”
means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate
per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”),
as published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by the Administrative Agent from time to
time) at approximately 11:00 a.m., London time, two Business Days prior to
the commencement of such Interest Period, for Dollar deposits (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period.  If such rate is not available at
such time for any reason, then the “Eurodollar Rate” for such Interest Period
shall be the rate per annum determined by the Administrative Agent to be the
rate at which deposits in Dollars for delivery on the first day of such
Interest Period in same day funds in the approximate amount of the Eurodollar
Rate Loan being made, continued or converted by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank of America’s London
Branch to major banks in the London interbank eurodollar market at their
request at approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period.


 


“Eurodollar Rate
Loan” means a Revolving Credit Loan, or a Term Loan that bears
interest at a rate based on the Eurodollar Rate.


 


“Event of Default”
has the meaning specified in Section 8.01.


 


“Excess
Cash Flow” means, for any
fiscal year of Holdings, the excess (if any) of (a) Consolidated EBITDA
for such fiscal year minus (b) the sum (for such fiscal year) of (i) Consolidated
Interest Charges actually paid in cash by the Borrowers or any of their
respective Subsidiaries, (ii) scheduled principal repayments, to the
extent actually made, of Term Loans pursuant to Section 2.07(a), (iii) all
income taxes actually paid in cash by the Borrowers or any of their respective
Subsidiaries and (iv) Capital Expenditures actually made by the Borrowers
or any of their respective Subsidiaries in such fiscal year (excluding Capital
Expenditures made in connection with an insurance and/or condemnation event and
reinvested in accordance with Section 2.05(b)(iv)).


 


“Excluded Subsidiary”
means Alta Healthcare Building Corporation.


 


“Excluded Taxes”
means, with respect to the Administrative Agent, any Lender, the L/C Issuer or
any other recipient of any payment to be made by or on account of any
obligation of either Borrower hereunder, (a) taxes imposed on or measured
by its overall net income (however denominated), and franchise taxes imposed on
it (in lieu of net income taxes), by the jurisdiction (or any political subdivision
thereof) under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable Lending Office is located, (b) any branch profits taxes imposed
by the United States or any similar tax imposed by any other jurisdiction in
which either Borrower is located and (c) in the case of a Foreign Lender
(other than an assignee pursuant to a request by the Borrower Agent under Section 10.13),
any withholding tax that is imposed on amounts payable to such Foreign Lender
at the time such Foreign Lender becomes a party hereto (or designates a new
Lending Office) or is attributable to such Foreign Lender’s failure or
inability (other than as a 


 


13

















 


result of a Change in Law) to comply with Section 3.01(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new Lending Office (or assignment),
to receive additional amounts from either Borrower with respect to such
withholding tax pursuant to Section 3.01(a).


 


“Existing Credit Agreements”
means, collectively, (a) that certain Credit Agreement dated as of June 1,
2007 among the Borrowers, Bank of America, as agent, and a syndicate of lenders
and (b) that certain Financing Agreement dated as of December 6, 2005
among the Company, Alta Hollywood Hospitals, Inc., Alta Los Angeles
Hospitals, Inc. and CIT Lending Services Corporation.


 


“Extraordinary
Receipt” means any cash received by or paid to or for the account of
any Person not in the ordinary course of business, including pension plan
reversions, proceeds of insurance (other than proceeds of business interruption
insurance to the extent such proceeds constitute compensation for lost earnings),
condemnation awards (and payments in lieu thereof), indemnity payments and any
purchase price adjustments.


 


“Facility” means the
Term Facility or the Revolving Credit Facility, as the context may
require.


 


“Federal Funds Rate”
means, for any day, the rate per annum 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 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 as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
(rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to
Bank of America on such day on such transactions as determined by the
Administrative Agent.


 


“Fee-For-Service
Accounts” means Accounts other than Capitated Contract Rights.


 


“Fee Letter”
means the letter agreement, dated May 23, 2007, among the Borrowers, the
Administrative Agent and the Arranger.


 


“Foreign Lender”
means any Lender that is organized under the laws of a jurisdiction other than
that in which either Borrower is resident for tax purposes.  For purposes of this definition, the United
States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.


 


“FRB”
means the Board of Governors of the Federal Reserve System of the United
States.


 


“Fund”
means any Person (other than a natural person) 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 its activities.


 


14














 


“GAAP”
means generally accepted accounting principles in the United States set forth
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 such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.


 


“Governmental
Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).


 


“Guarantee”
means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the “primary obligor”)
in any manner, whether directly or indirectly, and including any obligation of
such Person, direct or indirect, (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation, (ii) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other
obligation of the payment or performance of such Indebtedness or other
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation, or (iv) entered into for the purpose of
assuring in any other manner the obligee in respect of such Indebtedness or
other obligation of the payment or performance thereof or to protect such
obligee against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such Person securing any Indebtedness or other obligation
of any other Person, whether or not such Indebtedness or other obligation is
assumed by such Person (or any right, contingent or otherwise, of any holder of
such Indebtedness to obtain any such Lien). 
The amount of any Guarantee shall be deemed to be an amount equal to the
stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a
corresponding meaning.


 


“Guarantors”
means, collectively, the Subsidiaries of each Borrower (other than the Excluded
Subsidiary) and each other Subsidiary of the Borrowers that shall be required to execute and deliver a
guaranty or guaranty supplement pursuant to Section 6.12.


 


“Guaranty”
means, collectively, the Continuing Guaranty (First Lien) made by the Guarantors in favor of the Secured Parties,
together with each other guaranty and guaranty supplement delivered pursuant to
Section 6.12.


 


“Hazardous
Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon 


 


15

















 


gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.


 


“Health
Care Laws” means (i) any and all federal, state and local fraud and
abuse and self-referral laws, including, without limitation, the federal
Anti-Kickback Statute (42 U.S.C. § 1320a-7b), the Stark Law (42 U.S.C. § 1395nn
and § 1395x(q)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the
Emergency Medical Treatment and Labor Act.(42 U.S.C. § 1395dd), Sections
1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations
promulgated pursuant to such statutes; (ii) the federal Food, Drug &
Cosmetic Act (21 U.S.C. §§ 301 et seq.) and the regulations promulgated
thereunder; (iii) the Health Insurance Portability and Accountability Act
of 1996 (Pub. L. No. 104-191) and the regulations promulgated thereunder; (iv) Medicare
and the regulations promulgated thereunder; (v) Medicaid and the
regulations promulgated thereunder; (vi) the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173) and the
regulations promulgated thereunder; (vii) quality, safety and
accreditation standards and requirements of all applicable state laws or
regulatory bodies; (viii) requirements of Law relating to the ownership or
operation of a health care facility or business, or assets used in connection
therewith; (ix) requirements of Law relating to the billing or submission
of claims, collection of accounts receivable, underwriting the cost of, or
provision of management or administrative services in connection with, any and
all of the foregoing, by any Loan Party and its Subsidiaries, including, but
not limited to, laws and regulations relating to practice of medicine and other
health care professions, professional fee splitting, tax-exempt organization
and charitable trust law applicable to health care organizations, certificates
of need, certificates of operations and authority; and (x) any and all
other applicable health care laws, regulations, manual provisions, policies and
administrative guidance, each of (i) through (x) as may be amended
from time to time.


 


“Healthcare Service
Plan License” means a license issued by the California Department of
Corporations or the corresponding agency of another state and/or any other
applicable agency or successor.


 


“Hedge Bank” means any
Person that, at the time it enters into a Secured Hedge Agreement, is a Lender
or an Affiliate of a Lender, in its capacity as a party to such Secured Hedge
Agreement.


 


“Holdings” has the meaning specified in the introductory paragraph
hereto.


 


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


 


(a)           all
obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar
instruments;


 


(b)           the
maximum amount of all direct or contingent obligations of such Person arising
under letters of credit, including standby and commercial, solely to the 


 


16

















 


extent that such letters of credit are not fully cash collateralized,
bankers’ acceptances, bank guaranties, surety bonds and similar instruments;


 


(c)           net
obligations of such Person under any Swap Contract;


 


(d)           all
obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business
and not past due for more than 90 days after the date on which such trade
account was created);


 


(e)           indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;


 


(f)            all
Attributable Indebtedness in respect of Capitalized Leases and Synthetic Lease
Obligations of such Person and all Synthetic Debt of such Person;


 


(g)           all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any Equity Interest in such Person or any other
Person or any warrant, right or option to acquire such Equity Interest, valued,
in the case of a redeemable preferred interest, at the greater of its voluntary
or involuntary liquidation preference plus accrued and unpaid dividends;


 


(h)           all
Guarantees of such Person in respect of any of the foregoing; and


 


(i)            all
obligations owing in respect of Medicare and/or Medicaid.


 


For all purposes hereof, the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture
(other than a joint venture that is itself a corporation or limited liability
company) in which such Person is a general partner or a joint venturer, unless
such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.


 


“Indemnified Taxes”  means Taxes other than Excluded Taxes.


 


“Indemnitees”
has the meaning specified in Section 10.04(b).


 


“Information” has
the meaning specified in Section 10.07.


 


“Intercreditor
Agreement” means that certain Intercreditor Agreement of even date herewith
by and among the Administrative Agent, the Second Lien Administrative Agent and
each of the Credit Parties, as amended, restated, supplemented or otherwise
modified from time to time.


 


“Interest Payment
Date” means, (a) as to any Eurodollar Rate Loan, the last day
of each Interest Period applicable to such Loan and the Maturity Date of the
Facility under which 


 


17

















 


such Loan was made; provided, however,
that if any Interest Period for a Eurodollar Rate Loan exceeds three months,
the respective dates that fall every three months after the beginning of such
Interest Period shall also be Interest Payment Dates; and (b) as to any
Base Rate Loan or Swing Line Loan, the last Business Day of each March, June, September and December and
the Maturity Date of the Facility under which such Loan was made (with Swing
Line Loans being deemed made under the Revolving Credit Facility for purposes
of this definition).


 


“Interest Period”
means, as to each Eurodollar Rate Loan, the period commencing on the date such
Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar
Rate Loan and ending on the date one, two, three or six months thereafter, as
selected by the Borrower Agent in its Committed Loan Notice or such other period that is twelve months or
less requested by the Borrower Agent and consented to by all the Appropriate
Lenders; provided that:


 


(a)           any
Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall end
on the next preceding Business Day;


 


(b)           any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and


 


(c)           no
Interest Period shall extend beyond the Maturity Date of the Facility under
which such Loan was made.


 


“Investment”
means, as to any Person, any direct or indirect acquisition or investment by
such Person, whether by means of (a) the purchase or other acquisition of
Equity Interests of another Person, (b) a loan, advance or capital contribution
to, Guarantee or assumption of debt of, or purchase or other acquisition of any
other debt or interest in, another Person, or (c) the purchase or other
acquisition (in one transaction or a series of transactions) of assets of
another Person that constitute a business unit or all or a substantial part of the business of, such Person.  For purposes of covenant compliance, the
amount of any Investment shall be the amount actually invested, without
adjustment for subsequent increases or decreases in the value of such
Investment.


 


“IP Rights”
has the meaning specified in Section 5.17.


 


“IRS”
means the United States Internal Revenue Service.


 


“ISP” means, with
respect to any Letter of Credit, the “International Standby Practices 1998”
published by the Institute of International Banking Law & Practice, Inc.
(or such later version thereof as may be in effect at the time of issuance).


 


“Issuer Documents”
means with respect to any Letter of Credit, the Letter of Credit Application,
and any other document, agreement and instrument entered into by the L/C Issuer
and either Borrower (or any Subsidiary) or in favor of the L/C Issuer and
relating to such Letter of Credit.


 


18

















 


“Laws”
means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities (including Seismic
Compliance Laws, Health Care Laws, regulations and permits), including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.


 


“L/C Advance”
means, with respect to each Revolving Credit Lender, such Lender’s funding of
its participation in any L/C Borrowing in accordance with its Applicable
Revolving Credit Percentage.


 


“L/C Borrowing”
means an extension of credit resulting from a drawing under any Letter of
Credit which has not been reimbursed on the date when made or refinanced as a
Revolving Credit Borrowing.


 


“L/C Credit Extension”
means, with respect to any Letter of Credit, the issuance thereof or extension
of the expiry date thereof, or the increase of the amount thereof.


 


“L/C Issuer”
means Bank of America in its capacity as issuer of Letters of Credit hereunder,
or any successor issuer of Letters of Credit hereunder.


 


“L/C Obligations”
means, as at any date of determination, the aggregate amount available to be
drawn under all outstanding Letters of Credit plus the aggregate of all
Unreimbursed Amounts, including all L/C Borrowings.  For purposes of computing the amount
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any
date of determination a Letter of Credit has expired by its terms but any
amount may still be drawn thereunder by reason of the operation of Rule 3.14
of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.


 


“Lender”
has the meaning specified in the introductory paragraph hereto and, as the
context requires, includes the Swing Line Lender.


 


“Lending Office”
means, as to any Lender, the office or offices of such Lender described as such
in such Lender’s Administrative Questionnaire, or such other office or offices
as a Lender may from time to time notify the Borrower Agent and the
Administrative Agent.


 


“Letter of Credit”
means any standby letter of
credit issued hereunder.


 


“Letter of Credit
Application” means an application and agreement for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the L/C
Issuer.


 


“Letter of Credit
Expiration Date” means the day that is seven days prior to the
Maturity Date then in effect for the Revolving Credit Facility (or, if such day
is not a Business Day, the next preceding Business Day).


 


19

















 


“Letter of Credit Fee”
has the meaning specified in Section 2.03(i).


 


“Letter of Credit
Sublimit” means an amount equal to $5,000,000.  The Letter of
Credit Sublimit is part of, and not in addition to, the Revolving Credit
Facility.


 


“Lien”
means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or
other security interest or preferential arrangement in the nature of a security
interest of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any easement, right of way or other encumbrance
on title to real property, and any financing lease having substantially the
same economic effect as any of the foregoing).


 


“Loan”
means an extension of credit by a Lender to the Borrowers under Article II
in the form of a Term Loan, a Revolving Credit Loan or a Swing Line Loan.


 


“Loan Documents”
means, collectively, (a) this Agreement, (b) the Notes, (c) the
Guaranty, (d) the Collateral Documents, (e) the Fee Letter, (f) each
Issuer Document, (g) each Secured Hedge Agreement, (h) each Secured
Cash Management Agreement and (i) the
Terner Pledge; provided that for purposes of the definition of “Material
Adverse Effect” and Articles IV through IX, “Loan Documents”
shall not include Secured Hedge Agreements or Secured Cash Management
Agreements.


 


“Loan Parties”
means, collectively, each Borrower and each
Guarantor.


 


“Management Agreements”
means, the agreements identified as management agreements on Schedule 5.07.


 


“Material Adverse
Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, assets, properties, liabilities
(actual or contingent), condition (financial or otherwise) or prospects of the
Borrowers and their Subsidiaries taken as a whole; (b) a material
impairment of the rights and remedies of the Administrative Agent or any Lender
under any Loan Document, or of the ability of any Loan Party to perform its
obligations under any Loan Document or any Second Lien Loan Document to which
it is a party; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against any Loan Party of any Loan
Document to which it is a party.


 


 “Material Contract” means, with respect
to any Person, each contract to which such Person is a party that is material
to the business, condition (financial or otherwise), operations, performance,
properties or prospects of such Person; and, in the case of the Borrowers and
their Subsidiaries, “Material Contracts” shall include, among other contracts,
all Management Agreements and all Capitated Contracts.


 


“Maturity Date”
means (a) with respect to the Revolving Credit Facility, August 8,
2012 and (b) with respect to the Term Facility, August 8, 2014; provided,
however, that, in each case, if such date is not a Business Day, the
Maturity Date shall be the next preceding Business Day.


 


20

















 


“Measurement Period”
means, at any date of determination, the most recently completed four fiscal
quarters of Holdings or, if
fewer than four consecutive fiscal quarters of Holdings have been completed since the Closing Date, the fiscal
quarters of Holdings that have
been completed since the Closing Date.


 


“Medicaid” means
that government-sponsored entitlement program under Title XIX, P.L. 89-97 of
the Social Security Act, which provides federal grants to states for medical
assistance based on specific eligibility criteria, as set forth at Section 1396,
et seq. of Title 42 of the United States Code.


 


“Medicare” means that
government-sponsored insurance program under Title XVIII, P.L. 89-97, of the
Social Security Act, which provides for a health insurance system for eligible
elderly and disabled individuals, as set forth at Section 1395, et seq. of
Title 42 of the United States Code.


 


“Membership”
means, as to any Loan Party as of the end of any calendar month, the number of
Persons who are subject to Capitated Contracts with such Loan Party.


 


“Merger” means the merger of the Company with and into Acquisition Co.
as contemplated under the terms of the Merger Agreement.


 


“Merger Agreement” means that certain Agreement and
Plan of Reorganization dated as of July 25, 2007 by and among the Company,
Samuel S. Lee, The David & Alexa Topper Family Trust, U/D/T September 29,
1997, Holdings and Acquisition Co.


 


“Moody’s”
means Moody’s Investors Service, Inc. and any successor thereto.


 


“Mortgage” has the
meaning specified in Section 4.01(a)(vi).


 


“Mortgage Policy” has the
meaning specified in Section 4.01(a)(vi)(B).


 


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


 


“Net Cash Proceeds”
means, with respect to any Disposition by either Borrower or any of their respective Subsidiaries or any
Extraordinary Receipt received or paid to the account of either Borrower or any
of their respective Subsidiaries, the excess, if any, of (i) the sum of
cash and Cash Equivalents received in connection with such transaction
(including any cash or Cash Equivalents received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) over (ii) the sum of (A) the principal amount
of any Indebtedness that is secured by the applicable asset and that is
required to be repaid in connection with such transaction (other than
Indebtedness under the Loan Documents or the Second Lien Loan Documents), (B) the
reasonable and customary out-of-pocket expenses incurred by either Borrower  or such Subsidiary in connection with such transaction
and (C) income taxes reasonably estimated to be actually payable within
two years of the date of the relevant transaction as a result of any gain
recognized in connection therewith; 


 


21

















 


provided that, if the amount of any
estimated taxes pursuant to subclause (C) exceeds the amount of taxes
actually required to be paid in cash in respect of such Disposition, the
aggregate amount of such excess shall constitute Net Cash Proceeds.


 


“Note”
means a Term Note or a Revolving Credit Note, as the context may require.


 


“NPL” means the
National Priorities List under CERCLA.


 


“Obligations”
means all advances to, and debts, liabilities, obligations, covenants and
duties of, any Loan Party arising under any Loan Document or otherwise with
respect to any Loan or Letter of Credit, whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become due,
now existing or hereafter arising and including interest and fees that accrue
after the commencement by or against any Loan Party or any Affiliate thereof of
any proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed
claims in such proceeding.


 


“Obligor” means
any Person that is obligated to make payment with respect to any Capitated
Contract or other account receivable.


 


“Offset” means any
amount, including any overpayment made to a Loan Party or an Affiliate, with
respect to any Obligor that is to be repaid by offset against amounts then due
to such Loan Party by such Obligor. 
Offsets shall include any amounts constituting penalties or assessments
due to any state or federal tax authorities, amounts deemed by any Obligor to
be recoupments, inter-agency or inter-creditor offsets and recoupments and any
other amounts withheld or paid to any person or entity other than the
Administrative Agent to offset against any purported liability of any Loan
Party.


 


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


 


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


 


“Outstanding Amount”
means (a) with respect to Term Loans, Revolving Credit Loans and Swing
Line Loans on any date, the aggregate outstanding principal amount thereof
after giving effect to any borrowings and prepayments or repayments of Term
Loans, Revolving 


 


22

















 


Credit Loans and Swing Line Loans, as the case may be,
occurring on such date; and (b) with respect to any L/C Obligations on any
date, the amount of such L/C Obligations on such date after giving effect to
any L/C Credit Extension occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as a result
of any reimbursements by either Borrower of Unreimbursed Amounts.


 


“Participant”
has the meaning specified in Section 10.06(d).


 


“PBGC”
means the Pension Benefit Guaranty Corporation.


 


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


 


“Permits”
means any permit, approval, authorization, license, registration,
certification, certificate of authority, variance, permission, franchise,
qualification, order, filing or consent required from a Governmental Authority
or other Person under an applicable requirement of Law.


 


“Permitted Encumbrances” has the meaning specified in the
Mortgages.


 


“Person”
means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other
entity.


 


“PHR” means
Pinnacle Health Resources, a California corporation.


 


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


 


“Platform” has the
meaning specified in Section 6.02.


 


“PMG” means
Prospect Medical Group, Inc., a California professional corporation.


 


“PMG Loan Parties”
means PMG, Prospect Health Source Medical Group, Inc., Prospect
Professional Care Medical Group, Inc., Nuestra Familia Medical Group, Inc.,
APAC Medical Group, Inc., Prospect NWOC Medical Group, Inc., Sierra
Primary Care Medical Group, Inc., StarCare Medical Group, Inc.,
Pegasus Medical Group, Inc., Antelope Valley Medical Associates, Inc.,
Santa Ana/Tustin Physicians Group, Inc., AMVI/Prospect, Genesis HealthCare
of Southern California, A Medical Group, Inc., Pomona Valley Medical Group, Inc.,
Upland Medical Group, A Professional Medical Corporation, Prospect Physician
Associates, Inc. and each future direct or indirect subsidiary of PMG
required to be joined as a Guarantor pursuant to Section 6.12.


 


23

















 


“PMS” means
Prospect Medical Systems, Inc., a Delaware corporation.


 


“ProMed” means
ProMed Health Services Company, a California corporation.


 


“Public Lender”
has the meaning specified in Section 6.02.


 


“Real Property”
means, collectively, all real property together with all buildings and
improvements thereon and all appurtenances and rights pertaining thereto,
currently or formerly held by any of the Loan Parties that is or was used or
held for use in the operation of the Business.


 


“Register”
has the meaning specified in Section 10.06(c).


 


“Related Documents” means the Merger Agreement, the documents effecting the Merger, and
Assignable Option Agreement, and the Management Agreements (including any
Management Agreement with any seller under the Merger Agreement).


 


“Related Parties”
means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents and advisors of such Person and of such
Person’s Affiliates.


 


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


 


“Request for Credit
Extension” means (a) with respect to a Borrowing, conversion or
continuation of Term Loans or Revolving Credit Loans, a Committed Loan Notice, (b) with
respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with
respect to a Swing Line Loan, a Swing Line Loan Notice.


 


“Required Lenders”
means, as of any date of determination, Lenders holding more than 50% of the sum of the (a) Total Outstandings (with
the aggregate amount of each Revolving Credit Lender’s risk participation and
funded participation in L/C Obligations and Swing Line Loans being deemed “held”
by such Revolving Credit Lender for purposes of this definition) and (b) aggregate
unused Revolving Credit Commitments; provided that the unused Revolving
Credit Commitment of, and the portion of the Total Outstandings held or deemed
held by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.


 


“Required Revolving
Lenders” means, as of any date of determination, Revolving Credit Lenders
holding more than 50%  of the sum of the (a) Total
Revolving Credit Outstandings (with the aggregate amount of each Revolving
Credit Lender’s risk participation and funded participation in L/C Obligations
and Swing Line Loans being deemed “held” by such Revolving Credit Lender for
purposes of this definition) and (b) aggregate unused Revolving Credit
Commitments; provided that the unused Revolving Credit Commitment of,
and the portion of the Total Revolving Credit Outstandings held or deemed held
by, any Defaulting Lender shall be excluded for purposes of making a determination
of Required Revolving Lenders.


 


24














 


“Required Term Lenders”
means, as of any date of determination, Term Lenders holding more than 50% of the Term Facility on
such date; provided that the portion of the Term Facility held by any
Defaulting Lender shall be excluded for purposes of making a determination of
Required Term Lenders.


 


“Responsible
Officer” means the chief executive officer, president, chief
financial officer, treasurer, assistant treasurer or controller of a Loan Party
and any other officer of the applicable
Loan Party so designated by any of the foregoing officers in a notice to the
Administrative Agent.  Any
document delivered hereunder that is signed by a Responsible Officer of a Loan
Party shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Loan Party and
such Responsible Officer shall be conclusively presumed to have acted on behalf
of such Loan Party.


 


“Restricted Payment”
means any dividend or other distribution (whether in cash, securities or other
property) with respect to any capital stock or other Equity Interest of any
Person or any of its Subsidiaries, or any payment (whether in cash, securities
or other property), including any sinking fund or similar deposit, on account
of the purchase, redemption, retirement, defeasance, acquisition, cancellation
or termination of any such capital stock or other Equity Interest, or on
account of any return of capital to any Person’s stockholders, partners or
members (or the equivalent of any thereof), or any option, warrant or other
right to acquire any such dividend or other distribution or payment.


 


“Revolving Credit
Borrowing” means a borrowing consisting of simultaneous Revolving
Credit Loans of the same Type and, in the case of Eurodollar Rate Loans, having
the same Interest Period made by each of the Revolving Credit Lenders pursuant
to Section 2.01(b).


 


“Revolving Credit
Commitment” means, as to each Revolving Credit Lender, its
obligation to (a) make Revolving Credit Loans to the Borrowers pursuant to
Section 2.01(b), (b) purchase participations in L/C
Obligations, and (c) purchase participations in Swing Line Loans, in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender’s name on Schedule 2.01 under the caption
“Revolving Credit Commitment” or opposite such caption in the Assignment and
Assumption pursuant to which such Lender becomes a party hereto, as applicable,
as such amount may be adjusted from time to time in accordance with this Agreement.


 


“Revolving Credit
Facility” means, at any time, the aggregate amount of the Revolving
Credit Lenders’ Revolving Credit Commitments at such time.


 


“Revolving Credit
Lender” means, at any time, any Lender that has a Revolving Credit
Commitment at such time.


 


“Revolving Credit
Loan” has the meaning specified in Section 2.01(b).


 


“Revolving Credit
Note”
means a promissory note made by the Borrowers in favor of a Revolving Credit
Lender evidencing Revolving Credit Loans or Swing Line Loans, as the case may
be, made by such Revolving Credit Lender, substantially in the form of Exhibit C-2.


 


25

















 


“S&P”
means Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc., and any successor thereto.


 


“Seismic Compliance
Laws” means all Federal, state and local statutes (including California
State Senate Bill 1953), rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities related to seismic
evaluation, retrofit requirements, and disaster preparedness for hospitals
(including any requirements to assure the provision of services to the public
and continuity of care, structural soundness, maintenance of building contents,
and integrity of nonstructural systems).


 


“SEC”
means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.


 


“Second Lien
Administrative Agent” means Bank of America, N.A., in its capacity as the
administrative agent under the Second Lien Credit Agreement, and its successors
in such capacity.


 


“Second Lien Credit
Agreement” means that certain Second Lien Credit Agreement of even date
herewith by and among the Borrowers, the Second Lien Lenders, and the Second
Lien Administrative Agent, as the same may be amended, restated, supplemented
or modified from time to time in accordance with Section 7.16.


 


“Second Lien Lenders”
means the “Lenders” as defined in the Second Lien Credit Agreement.


 


“Second Lien Loan
Documents” means the “Loan Documents” as defined in the Second Lien Credit
Agreement.


 


“Second Lien
Obligations” means the “Obligations” as defined in the Second Lien Credit
Agreement.


 


“Second Lien Term Loan”
means the “Term Loan” as defined in the Second Lien Credit Agreement.


 


“Secured Cash Management Agreement” means any Cash Management Agreement
that is entered into by and between either Borrower and any Cash Management
Bank.


 


“Secured Hedge Agreement” means any interest rate Swap
Contract required or permitted
under Article VI or VII that is entered into by and between
either Borrower and any Hedge Bank.


 


“Secured Parties” means,
collectively, the Administrative Agent, the Lenders, the L/C Issuer, the Hedge
Banks, the Cash Management Banks, each co-agent or sub-agent appointed by the
Administrative Agent from time to time pursuant to Section 9.05,
and the other Persons the Obligations owing to which are or are purported to be
secured by the Collateral under the terms of the Collateral Documents.


 


“Social Security Act” means the
Social Security Act of 1965.


 


26

















 


“Solvent”
and “Solvency” mean,
with respect to any Person on any date of determination, that on such date (a) the
fair value of the property of such Person is greater than the total amount of
liabilities, including contingent liabilities, of such Person, (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay such debts and liabilities as they mature, (d) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person’s property would constitute
an unreasonably small capital, and (e) such Person is able to pay its
debts and liabilities, contingent obligations and other commitments as they
mature in the ordinary course of business. 
The amount of contingent liabilities at any time shall be computed as
the amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.


 


“SMM” means Sierra
Medical Management, Inc., a Delaware corporation.


 


“Subsidiary”
of a Person means a corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the shares of
securities or other interests having ordinary voting power for the election of
directors or other governing body (other than securities or interests having
such power only by reason of the happening of a contingency) are at the time
beneficially owned, or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or both, by such
Person.  Unless otherwise specified or
the context otherwise requires, all references herein to a “Subsidiary”
or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
Holdings and shall include the PMG Loan Parties; provided, however, that
the parties agree that Brotman Medical Center, Inc., a California
corporation, in which Holdings’ Subsidiary, Prospect Hospital Advisory Services, Inc.,
holds less than a majority or the shares, is not considered a Subsidiary.


 


“Swap Contract”
means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all
transactions of any kind, and the related confirmations, which are subject to
the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a “Master Agreement”),
including any such obligations or liabilities under any Master Agreement.


 


“Swap Termination
Value” means, in respect of any one or more Swap Contracts, after
taking into account the effect of any legally enforceable netting agreement
relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out 


 


27

















 


and termination value(s) determined in accordance
therewith, such termination value(s), and (b) for any date prior to the
date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon
one or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include a Lender or any
Affiliate of a Lender).


 


“Swing Line
Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.


 


“Swing Line Lender”
means Bank of America in its capacity as provider of Swing Line Loans, or any
successor swing line lender hereunder.


 


“Swing Line Loan”
has the meaning specified in Section 2.04(a).


 


“Swing Line Loan
Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b),
which, if in writing, shall be substantially in the form of Exhibit B.


 


“Swing Line
Sublimit” means an amount equal to the lesser of (a) $5,000,000 and (b) the Revolving
Credit Facility.  The Swing Line Sublimit
is part of, and not in addition to, the Revolving Credit Facility.


 


“Synthetic Debt”
means, with respect to any Person as of any date of determination thereof, all
obligations of such Person in respect of transactions entered into by such
Person that are intended to function primarily as a borrowing of funds but are
not otherwise included in the definition of “Indebtedness” or as a
liability on the consolidated balance sheet of such Person and its Subsidiaries
in accordance with GAAP.


 


“Synthetic Lease
Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating obligations that do not appear on the
balance sheet of such Person but which, upon the application of any Debtor
Relief Laws to such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).


 


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


 


“Term Borrowing”
means a borrowing consisting of Term Loans of the same Type and, in the case of
Eurodollar Rate Loans, having the same Interest Period made by each of the
Term Lenders pursuant to Section 2.01(a).


 


“Term Commitment”
means, as to each Term  Lender,
its obligation to make Term Loans to the Borrowers pursuant to Section 2.01(a) in
an aggregate principal amount at any one time outstanding not to exceed the
amount set forth opposite such Lender’s name on Schedule 2.01 under the
caption “Term Commitment” or opposite such caption in the Assignment and
Assumption pursuant to which such Term Lender becomes a party hereto, as 


 


28

















 


applicable, as such amount may be adjusted from time
to time in accordance with this Agreement.


 


“Term Facility”
means, at any time, (a) on or
prior to the Closing Date, the aggregate amount of the Term  Commitments
at such time and (b) thereafter, the aggregate principal amount of
the Term Loans of all Term  Lenders outstanding at such time.


 


“Term Lender”
means at any time, (a) on or prior to the Closing Date, any Lender that
has a Term Commitment at such time and (b) at any time after the Closing
Date, any Lender that holds Term Loans at such time.


 


“Term Loan”
means an advance made by any Term Lender under the Term Facility.


 


“Term Note” means
a promissory note made by the Borrowers in favor of a Term  Lender,
evidencing Term Loans made by such Term Lender, substantially in the
form of Exhibit C-1.


 


“Terner Pledge”
means that certain First Lien Pledge Agreement dated as of the Closing Date by Dr. Terner
in favor of the Administrative Agent, as such agreement may be amended,
restated, supplemented or otherwise modified from time to time.


 


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


 


“Third
Party Payor Programs”  means all third party payor
programs in which any of the Loan Parties or their respective Subsidiaries
participates (including, without limitation, Medicare, Medicaid, TRICARE or any
other federal or state health care programs, as well as Blue Cross and/or Blue
Shield, managed care plans, or any other private insurance programs)


 


“Threshold Amount”
means $3,000,000.


 


“Total Revolving
Credit Outstandings” means the aggregate Outstanding Amount of all
Revolving Credit Loans, Swing Line Loans and L/C Obligations.


 


“Total Outstandings”
means the aggregate Outstanding Amount of all Loans and all L/C Obligations.


 


“Transaction”  means,
collectively, (a) the consummation of the Merger, (b) the entering
into by the Loan Parties and their applicable Subsidiaries of the Loan
Documents, the Second Lien Loan Documents and the Related Documents to which
they are or are intended to be a party, (c) the refinancing of certain
outstanding Indebtedness of the Borrowers and their respective Subsidiaries
evidenced by the Existing Credit Agreements (and related documents) and the
termination of all commitments with respect thereto and (d) the payment of
the fees and expenses incurred in connection with the consummation of the
foregoing.


 


29

















 


“Type”
means, with respect to a Loan, its character as a Base Rate Loan or a
Eurodollar Rate Loan.


 


“UCC” means the
Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of
perfection or non-perfection or the priority of any security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New
York, “UCC” means the Uniform Commercial Code as in effect from
time to time in such other jurisdiction for purposes of the provisions hereof
relating to such perfection, effect of perfection or non-perfection or
priority.


 


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


 


“United States”
and “U.S.”
mean the United States of America.


 


“Unreimbursed
Amount” has the meaning specified in Section 2.03(c)(i).


 


“U.S. Loan Party”
means any Loan Party that is organized under the laws of one of the states of
the United States of America and that is not a CFC.


 


1.02         Other
Interpretive Provisions.  With
reference to this Agreement and each other Loan Document, unless otherwise
specified herein or in such other Loan Document:


 


(a)   The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation.”  The word “will”
shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any
definition of or reference to any agreement, instrument or other document
(including any Organization Document) shall be construed as referring to such
agreement, instrument or other document as from time to time amended, supplemented
or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein or in any other Loan Document), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (iii) the words “herein,” “hereof”
and “hereunder,” and words of similar import when used in any Loan
Document, shall be construed to refer to such Loan Document in its entirety and
not to any particular provision thereof, (iv) all references in a Loan
Document to Articles, Sections, Preliminary Statements, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Preliminary
Statements, Exhibits and Schedules to, the Loan Document in which such
references appear, (v) any reference to any law shall include all
statutory and regulatory provisions consolidating, amending, replacing or
interpreting such law and any reference to any law or regulation shall, unless
otherwise specified, refer to such law or regulation as amended, modified or
supplemented from time to time, and (vi) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and 


 


30

















 


all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.


 


(b)   In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from
and including;” the words “to” and “until” each mean “to but
excluding;” and the word “through” means “to and including.”


 


(c)   Section headings herein and in the other
Loan Documents are included for convenience of reference only and shall not
affect the interpretation of this Agreement or any other Loan Document.


 


1.03         Accounting
Terms.


 


(a)           Generally.  All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all
financial data (including financial ratios and other financial calculations)
required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time, applied in a manner consistent with that used in preparing the Audited
Financial Statements, except as otherwise specifically prescribed
herein.


 


(b)           Changes
in GAAP.  If at any time any change
in GAAP would affect the computation of any financial ratio or requirement set
forth in any Loan Document, and either the Borrower Agent or the Required
Lenders shall so request, the Administrative Agent, the Lenders and the
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 that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Borrowers
shall provide to the Administrative Agent and the Lenders financial statements
and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.


 


(c)           Consolidation
of Variable Interest Entities.  All
references herein to consolidated financial statements of Holdings and its
Subsidiaries or to the determination of any amount for Holdings and its
Subsidiaries on a consolidated basis or any similar reference shall, in each
case, be deemed to include each variable interest entity that Holdings is
required to consolidate pursuant to FASB Interpretation No. 46 –
Consolidation of Variable Interest Entities: an interpretation of ARB No. 51
(January 2003) as if such variable interest entity were a Subsidiary as
defined herein.


 


1.04         Rounding.  Any financial ratios required to be
maintained by the Borrowers pursuant to this Agreement shall be calculated by
dividing the appropriate component by the other component, carrying the result
to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).


 


1.05         Times
of Day.  Unless otherwise specified,
all references herein to times of day shall be references to Pacific time (daylight or standard, as
applicable).


 


31

















 


1.06         Letter
of Credit Amounts.  Unless otherwise
specified herein, the amount of a Letter of Credit at any time shall be deemed
to be the stated amount of such Letter of Credit in effect at such time; provided,
however, that with respect to any Letter of Credit that, by its terms or
the terms of any Issuer Document related thereto, provides for one or more
automatic increases in the stated amount thereof, the amount of such Letter of
Credit shall be deemed to be the maximum stated amount of such Letter of Credit
after giving effect to all such increases, whether or not such maximum stated
amount is in effect at such time.


 


1.07         Currency
Equivalents Generally.  Any amount
specified in this Agreement (other than in Articles II and X) or
any of the other Loan Documents to be in Dollars shall also include the
equivalent of such amount in any currency other than Dollars, such equivalent
amount thereof in the applicable currency to be determined by the
Administrative Agent at such time on the basis of the Spot Rate (as defined
below) for the purchase of such currency with Dollars.  For purposes of this Section 1.07,
the “Spot Rate” for a currency means the rate determined by the
Administrative Agent to be the rate quoted by the Person acting in such
capacity as the spot rate for the purchase by such Person of such currency with
another currency through its principal foreign exchange trading office at
approximately 11:00 a.m. on the date two Business Days prior to the date
of such determination; provided that the Administrative Agent may obtain
such spot rate from another financial institution designated by the
Administrative Agent if the Person acting in such capacity does not have as of
the date of determination a spot buying rate for any such currency.


 


ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS


 


2.01         The
Loans.


 


(a)           The
Term Borrowing.  Subject to the
terms and conditions set forth herein, each Term  Lender severally agrees
to make a single loan to the Borrowers on the Closing Date
in an amount  not to exceed such Term Lender’s
Term Commitment.  The  Term 
Borrowing shall consist of Term Loans made simultaneously by the
Term Lenders in accordance with their respective
Term Commitments.  Amounts borrowed
under this Section 2.01(a) and repaid or prepaid may not be
reborrowed.  Term Loans may be Base
Rate Loans or Eurodollar Rate Loans as further provided herein.


 


(b)           The
Revolving Credit Borrowings.  Subject
to the terms and conditions set forth herein, each Revolving Credit Lender
severally agrees to make loans (each such loan, a “Revolving Credit Loan”) to the Borrowers from time to
time, on any Business Day during the Availability Period, in an aggregate
amount not to exceed at any time outstanding the amount of such Lender’s
Revolving Credit Commitment; provided, however, that after giving
effect to any Revolving Credit Borrowing, (i) the Total Revolving Credit
Outstandings shall not exceed the Revolving Credit Facility, and (ii) the
aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus
such Revolving Credit Lender’s Applicable Revolving Credit Percentage of the
Outstanding Amount of all L/C Obligations, plus such Revolving Credit
Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of
all Swing Line Loans shall not exceed such Revolving Credit Lender’s Revolving
Credit Commitment.  Within the limits of
each Revolving Credit Lender’s Revolving Credit Commitment, and subject to the 


 


32

















 


other terms and conditions hereof, the Borrowers may borrow under this Section 2.01(b),
prepay under Section 2.05, and reborrow under this Section 2.01(b).  Revolving Credit Loans may be Base Rate Loans
or Eurodollar Rate Loans, as further provided herein.


 


2.02         Borrowings,
Conversions and Continuations of Loans.


 


(a)  Each Term Borrowing, each Revolving Credit
Borrowing, each conversion of Term Loans or Revolving Credit Loans from one
Type to the other, and each continuation of Eurodollar Rate Loans shall be made
upon the Borrower Agent’s irrevocable notice to the Administrative Agent, which
may be given by telephone.  Each such
notice must be received by the Administrative Agent not later than 11:00 a.m.
(i) three Business Days prior to the requested date of any Borrowing of,
conversion to or continuation of Eurodollar Rate Loans or of any conversion of
Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date
of any Borrowing of Base Rate Loans; provided,
however, that if the Borrower Agent wishes to request Eurodollar Rate
Loans having an Interest Period other than one, two, three or six months in
duration as provided in the definition of “Interest Period,” the applicable
notice must be received by the Administrative Agent not later than 11:00 a.m.
four Business Days prior to the requested date of such Borrowing, conversion or
continuation, whereupon the Administrative Agent shall give prompt notice to the
Appropriate Lenders of such request and determine whether the requested
Interest Period is acceptable to all of them. 
Not later than 11:00 a.m., three Business Days before the requested
date of such Borrowing, conversion or continuation, the Administrative Agent
shall notify the Borrower Agent (which notice may be by telephone) whether or
not the requested Interest Period has been consented to by all the Lenders.  Each telephonic notice by the Borrower Agent
pursuant to this Section 2.02(a) must be confirmed promptly by
delivery to the Administrative Agent of a written Committed Loan Notice,
appropriately completed and signed by a Responsible Officer of the Borrower
Agent.  Each Borrowing of, conversion to
or continuation of Eurodollar Rate Loans shall be in a principal amount of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof.  Except as provided in Sections 2.03(c) and
2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in
a principal amount of $500,000 or a whole multiple of $100,000 in excess
thereof.  Each Committed Loan Notice  (whether telephonic or written) shall specify
(i) whether the Borrowers are requesting a Term Borrowing, a
Revolving Credit Borrowing, a conversion of Term Loans or Revolving Credit
Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the
requested date of the Borrowing, conversion or continuation, as the case may be
(which shall be a Business Day), (iii) the principal amount of Loans to be
borrowed, converted or continued, (iv) the Type of Loans to be borrowed or
to which existing Term Loans or Revolving Credit Loans are to be converted, and
(v) if applicable, the duration of the Interest Period with respect
thereto.  If the Borrower Agent fails to
specify a Type of Loan in a Committed Loan Notice or if the Borrower Agent
fails to give a timely notice requesting a conversion or continuation, then the
applicable Term Loans or Revolving Credit Loans shall be made as, or converted
to, Base Rate Loans.  Any such automatic conversion
to Base Rate Loans shall be effective as of the last day of the Interest Period
then in effect with respect to the applicable Eurodollar Rate Loans.  If the Borrower Agent requests a Borrowing
of, conversion to, or continuation of Eurodollar Rate Loans in any such
Committed Loan Notice, but fails to specify an Interest Period, the Borrowers
will be deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary
herein, a Swing Line Loan may not be converted to a Eurodollar Rate Loan.


 


33

















 


(b)           Following
receipt of a Committed Loan Notice, the Administrative Agent shall promptly
notify each Lender of the amount of its Applicable Percentage under the
applicable Facility of the applicable Term Loans or Revolving Credit
Loans, and if no timely notice of a conversion or continuation is provided by
the Borrower Agent, the Administrative Agent shall notify each Lender of the
details of any automatic conversion to Base Rate Loans described in Section 2.02(a).  In the case of a Term Borrowing or a
Revolving Credit Borrowing, each Appropriate Lender shall make the amount of
its Loan available to the Administrative Agent in immediately available funds
at the Administrative Agent’s Office not later than 1:00 p.m. on the
Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable
conditions set forth in Section 4.02 (and, if such Borrowing is the
initial Credit Extension, Section 4.01), the Administrative Agent
shall make all funds so received available to the Borrowers in like funds as
received by the Administrative Agent either by (i) crediting the account
of the Borrowers on the books of Bank of America with the amount of such funds
or (ii) wire transfer of such funds, in each case in accordance with
instructions provided to (and reasonably acceptable to) the Administrative
Agent by the Borrower Agent; provided, however, that if, on the
date a Committed Loan Notice with respect to a Revolving Credit Borrowing is
given by the Borrower Agent, there are L/C Borrowings outstanding, then the
proceeds of such Revolving Credit Borrowing, first, shall be applied to
the payment in full of any such L/C Borrowings, and second, shall be
made available to the Borrowers as provided above.


 


(c)           Except
as otherwise provided herein, a Eurodollar Rate Loan may be continued or
converted only on the last day of an Interest Period for such Eurodollar Rate
Loan.  During the existence of a Default,
no Loans may be requested as, converted to or continued as Eurodollar Rate
Loans without the consent of the Required Lenders.


 


(d)           The
Administrative Agent shall promptly notify the Borrower Agent and the Lenders
of the interest rate applicable to any Interest Period for Eurodollar Rate
Loans upon determination of such interest rate. 
At any time that Base Rate Loans are outstanding, the Administrative
Agent shall notify the Borrower Agent and the Lenders of any change in Bank of
America’s prime rate used in determining the Base Rate promptly following the
public announcement of such change.


 


(e)           After
giving effect to all Term Borrowings, all conversions of Term Loans
from one Type to the other, and all continuations of Term Loans as the
same Type, there shall not be more than 4 Interest Periods in effect in respect
of the Term Facility.  After giving
effect to all Revolving Credit Borrowings, all conversions of Revolving Credit
Loans from one Type to the other, and all continuations of Revolving Credit
Loans as the same Type, there shall not be more than 4 Interest Periods in
effect in respect of the Revolving Credit Facility.


 


2.03         Letters
of Credit.


 


(a)  The Letter of Credit Commitment.  (i)  Subject to the terms and conditions
set forth herein, (A) the L/C Issuer agrees, in reliance upon the
agreements of the Revolving Credit Lenders set forth in this Section 2.03,
(1) from time to time on any Business Day during the period from the
Closing Date until the Letter of Credit Expiration Date, to issue Letters of
Credit for the account of the Borrowers or
any of their respective Subsidiaries, and to amend or extend Letters of
Credit previously issued by it, in accordance with Section 2.03(b),
and (2) to honor 


 


34

















 


drawings under the
Letters of Credit; and (B) the Revolving Credit Lenders severally agree to
participate in Letters of Credit issued for the account of either of the
Borrowers or any of their respective
Subsidiaries and any drawings thereunder; provided that after
giving effect to any L/C Credit Extension with respect to any Letter of Credit,
(x) the Total Revolving Credit Outstandings shall not exceed the Revolving
Credit Facility, (y) the aggregate Outstanding Amount of the Revolving
Credit Loans of any Revolving Credit Lender, plus such Lender’s
Applicable Revolving Credit Percentage of the Outstanding Amount of all L/C
Obligations, plus such Lender’s Applicable Revolving Credit Percentage
of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s
Revolving Credit Commitment, and (z) the Outstanding Amount of the L/C
Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Borrower Agent for the
issuance or amendment of a Letter of Credit shall be deemed to be a representation
by the Borrowers that the L/C Credit Extension so requested complies with the
conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to
the terms and conditions hereof, the Borrowers’ ability to obtain Letters of
Credit shall be fully revolving, and accordingly the Borrowers may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit that
have expired or that have been drawn upon and reimbursed.


 


(ii)           The L/C Issuer
shall not issue any Letter of Credit if:


 


(A)                  subject to Section 2.03(b)(iii),
the expiry date of such requested Letter of Credit would occur more than twelve
months after the date of issuance or last extension, unless the Required
Revolving Lenders have approved such expiry date; or


 


(B)                   the expiry date of such
requested Letter of Credit would occur after the Letter of Credit Expiration
Date, unless all the Revolving Credit Lenders have approved such expiry date.


 


(iii)          The L/C Issuer shall not be under any
obligation to issue any Letter of Credit if:


 


(A)                  any order, judgment or decree
of any Governmental Authority or arbitrator shall by its terms purport to
enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any
Law applicable to the L/C Issuer or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction over
the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the
issuance of letters of credit generally or such Letter of Credit in particular
or shall impose upon the L/C Issuer with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which the L/C Issuer is not
otherwise compensated hereunder) not in effect on the Closing Date, or shall
impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not
applicable on the Closing Date and which the L/C Issuer in good faith deems
material to it;


 


(B)                   the issuance of such Letter
of Credit would violate one or more policies of the L/C Issuer applicable to
letters of credit generally;


 


35














 


(C)                   except as otherwise agreed by
the Administrative Agent and the L/C Issuer, such Letter of Credit is in an
initial stated amount less than $50,000;


 


(D)                  such Letter of Credit is to be
denominated in a currency other than Dollars;


 


(E)                   such
Letter of Credit contains any provisions for automatic reinstatement of the
stated amount after any drawing thereunder; or


 


(F)                   a default of any Lender’s
obligations to fund under Section 2.03(c) exists or any Lender
is at such time a Defaulting Lender hereunder, unless the L/C Issuer has
entered into satisfactory arrangements with the Borrowers or such Lender to
eliminate the L/C Issuer’s risk with respect to such Lender.


 


(iv)          The L/C Issuer shall not amend any
Letter of Credit if the L/C Issuer would not be permitted at such time to issue
such Letter of Credit in its amended form under the terms hereof.


 


(v)           The L/C Issuer shall be under no
obligation to amend any Letter of Credit if (A) the L/C Issuer would have
no obligation at such time to issue such Letter of Credit in its amended form
under the terms hereof, or (B) the beneficiary of such Letter of Credit
does not accept the proposed amendment to such Letter of Credit.


 


(vi)          The L/C Issuer shall act on behalf of
the Revolving Credit Lenders with respect to any Letters of Credit issued by it
and the documents associated therewith, and the L/C Issuer shall have all of
the benefits and immunities (A) provided to the Administrative Agent in Article IX
with respect to any acts taken or omissions suffered by the L/C Issuer in
connection with Letters of Credit issued by it or proposed to be issued by it
and Issuer Documents pertaining to such Letters of Credit as fully as if the
term “Administrative Agent” as used in Article IX included the L/C
Issuer with respect to such acts or omissions, and (B) as additionally
provided herein with respect to the L/C Issuer.


 


(b)           Procedures
for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of
Credit.


 


(i)            Each Letter of
Credit shall be issued or amended, as the case may be, upon the request of the
Borrower Agent delivered to the L/C Issuer (with a copy to the Administrative
Agent) in the form of a Letter of Credit Application, appropriately completed
and signed by a Responsible Officer of the Borrower Agent.  Such Letter of Credit Application must be
received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m.
at least two Business Days (or such later date and time as the Administrative
Agent and the L/C Issuer may agree in a particular instance in their sole
discretion) prior to the proposed issuance date or date of amendment, as the
case may be.  In the case of a request
for an initial issuance of a Letter of Credit, such Letter of Credit
Application shall specify in form and detail satisfactory to the L/C
Issuer:  (A) the proposed issuance
date of the requested Letter of Credit (which shall be a Business Day); (B) the
amount thereof; (C) the expiry date thereof; (D) the applicable
Borrower; (E) the


 


36

















 


name and
address of the beneficiary thereof; (F) the documents to be presented by
such beneficiary in case of any drawing thereunder; (G) the full text of
any certificate to be presented by such beneficiary in case of any drawing
thereunder; (H) the purpose and nature of the requested Letter of Credit;
and (I) such other matters as the L/C Issuer may require.  In the case of a request for an amendment of
any outstanding Letter of Credit, such Letter of Credit Application shall
specify in form and detail satisfactory to the L/C Issuer (1) the Letter
of Credit to be amended; (2) the proposed date of amendment thereof (which
shall be a Business Day); (3) the nature of the proposed amendment; and (4) such
other matters as the L/C Issuer may require. 
Additionally, the Borrower Agent shall furnish to the L/C Issuer and the
Administrative Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment, including any Issuer
Documents, as the L/C Issuer or the Administrative Agent may require.


 


(ii)           Promptly after receipt of any Letter
of Credit Application, the L/C Issuer will confirm with the Administrative
Agent (by telephone or in writing) that the Administrative Agent has received a
copy of such Letter of Credit Application from the Borrower Agent and, if not,
the L/C Issuer will provide the Administrative Agent with a copy thereof.  Unless the L/C Issuer has received written
notice from any Revolving Credit Lender, the Administrative Agent or any Loan
Party, at least one Business Day prior to the requested date of issuance or
amendment of the applicable Letter of Credit, that one or more applicable
conditions contained in Article IV shall not then be satisfied,
then, subject to the terms and conditions hereof, the L/C Issuer shall, on the
requested date, issue a Letter of Credit for the account of the applicable
Borrower (or the
applicable Subsidiary) or enter into the applicable amendment, as the
case may be, in each case in accordance with the L/C Issuer’s usual and
customary business practices. 
Immediately upon the issuance of each Letter of Credit, each Revolving
Credit Lender shall be deemed to, and hereby irrevocably and unconditionally
agrees to, purchase from the L/C Issuer a risk participation in such Letter of
Credit in an amount equal to the product of such Revolving Credit Lender’s
Applicable Revolving Credit Percentage times the amount of such Letter
of Credit.


 


(iii)          If the Borrower Agent so requests in any
applicable Letter of Credit Application, the L/C Issuer may, in its sole and
absolute discretion, agree to issue a Letter of Credit that has automatic
extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such
Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such
extension at least once in each twelve-month period (commencing with the date
of issuance of such Letter of Credit) by giving prior notice to the beneficiary
thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be
agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the L/C Issuer,
the Borrower Agent shall not be required to make a specific request to the L/C
Issuer for any such extension.  Once an
Auto-Extension Letter of Credit has been issued, the Revolving Credit Lenders
shall be deemed to have authorized (but may not require) the L/C Issuer to
permit the extension of such Letter of Credit at any time to an expiry date not
later than the Letter of Credit Expiration Date; provided, however,
that the L/C Issuer shall not permit any such extension if (A) the L/C
Issuer has determined that it would not be permitted, or would have no
obligation 


 


37

















 


at
such time to issue such Letter of Credit in its revised form (as extended)
under the terms hereof (by reason of the provisions of clause (ii) or (iii) of
Section 2.03(a) or otherwise), or (B) it has received
notice (which may be by telephone or in writing) on or before the day that is
seven Business Days before the Non-Extension Notice Date (1) from the
Administrative Agent that the Required Revolving Lenders have elected not to
permit such extension or (2) from the Administrative Agent, any Revolving
Credit Lender or the Borrower Agent that one or more of the applicable
conditions specified in Section 4.02 is not then satisfied, and in
each such case directing the L/C Issuer not to permit such extension.


 


(iv)          Promptly after its delivery of any
Letter of Credit or any amendment to a Letter of Credit to an advising bank
with respect thereto or to the beneficiary thereof, the L/C Issuer will also
deliver to the Borrower Agent and the Administrative Agent a true and complete
copy of such Letter of Credit or amendment.


 


(c)           Drawings
and Reimbursements; Funding of Participations.


 


(i)            Upon receipt from the beneficiary of
any Letter of Credit of any notice of a drawing under such Letter of Credit,
the L/C Issuer shall notify the Borrower Agent and the Administrative Agent
thereof.  Not later than 11:00 a.m.
on the date of any payment by the L/C Issuer under a Letter of Credit (each
such date, an “Honor Date”), the applicable Borrower shall reimburse the
L/C Issuer through the Administrative Agent in an amount equal to the amount of
such drawing.  If such Borrower fails to
so reimburse the L/C Issuer by such time, the Administrative Agent shall
promptly notify each Revolving Credit Lender of the Honor Date, the amount of
the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of
such Revolving Credit Lender’s Applicable Revolving Credit Percentage
thereof.  In such event, the applicable
Borrower shall be deemed to have requested a Revolving Credit Borrowing of Base
Rate Loans to be disbursed on the Honor Date in an amount equal to the
Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02
for the principal amount of Base Rate Loans, but subject to the amount of the
unutilized portion of the Revolving Credit Commitments and the conditions set
forth in Section 4.02 (other than the delivery of a Committed Loan
Notice).  Any notice given by the L/C
Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may
be given by telephone if immediately confirmed in writing; provided that
the lack of such an immediate confirmation shall not affect the conclusiveness
or binding effect of such notice.


 


(ii)           Each Revolving Credit Lender shall
upon any notice pursuant to Section 2.03(c)(i) make funds
available to the Administrative Agent for the account of the L/C Issuer at the
Administrative Agent’s Office in an amount equal to its Applicable Revolving
Credit Percentage of the Unreimbursed Amount not later than 1:00 p.m. on
the Business Day specified in such notice by the Administrative Agent,
whereupon, subject to the provisions of Section 2.03(c)(iii), each
Revolving Credit Lender that so makes funds available shall be deemed to have
made a Base Rate Loan to the Borrowers in such amount.  The Administrative Agent shall remit the funds
so received to the L/C Issuer.


 


38

















 


(iii)          With respect to any Unreimbursed
Amount that is not fully refinanced by a Revolving Credit Borrowing of Base
Rate Loans because the conditions set forth in Section 4.02 cannot
be satisfied or for any other reason, the applicable Borrower shall be deemed
to have incurred from the L/C Issuer an L/C Borrowing in the amount of the
Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due
and payable on demand (together with interest) and shall bear interest at the
Default Rate.  In such event, each
Revolving Credit Lender’s payment to the Administrative Agent for the account
of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be
deemed payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this Section 2.03.


 


(iv)          Until each Revolving Credit Lender
funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.03(c) to
reimburse the L/C Issuer for any amount drawn under any Letter of Credit,
interest in respect of such Lender’s Applicable Revolving Credit Percentage of
such amount shall be solely for the account of the L/C Issuer.


 


(v)           Each Revolving Credit Lender’s
obligation to make Revolving Credit Loans or L/C Advances to reimburse the L/C
Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c),
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense
or other right which such Lender may have against the L/C Issuer, any Borrower
or any other Person for any reason whatsoever; (B) the occurrence or
continuance of a Default; or (C) any other occurrence, event or condition,
whether or not similar to any of the foregoing; provided, however,
that each Revolving Credit Lender’s obligation to make Revolving Credit Loans
pursuant to this Section 2.03(c) is subject to the conditions
set forth in Section 4.02 (other than delivery by the Borrower
Agent of a Committed Loan Notice ).  No
such making of an L/C Advance shall relieve or otherwise impair the obligation
of each Borrower to reimburse the L/C Issuer for the amount of any payment made
by the L/C Issuer under any Letter of Credit, together with interest as
provided herein.


 


(vi)          If any Revolving Credit Lender fails
to make available to the Administrative Agent for the account of the L/C Issuer
any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii),
the L/C Issuer shall be entitled to recover from such Lender (acting through
the Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the L/C Issuer at a rate per annum equal to the
greater of the Federal Funds Rate and a rate determined by the L/C Issuer in
accordance with banking industry rules on interbank compensation, plus any
administrative, processing or similar fees customarily charged by the L/C
Issuer in connection with the foregoing. 
If such Lender pays such amount (with interest and fees as aforesaid),
the amount so paid shall constitute such Lender’s Committed Loan included in
the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C
Borrowing, as the case may be.  A
certificate of the L/C Issuer submitted to any Revolving Credit Lender 


 


39

















 


(through the Administrative
Agent) with respect to any amounts owing under this Section 2.03(c)(vi) shall
be conclusive absent manifest error.


 


(d)           Repayment
of Participations.


 


(i)            At any time after the L/C Issuer has
made a payment under any Letter of Credit and has received from any Revolving
Credit Lender such Lender’s L/C Advance in respect of such payment in
accordance with Section 2.03(c), if the Administrative Agent
receives for the account of the L/C Issuer any payment in respect of the
related Unreimbursed Amount or interest thereon (whether directly from a
Borrower or otherwise, including proceeds of Cash Collateral applied thereto by
the Administrative Agent), the Administrative Agent will distribute to such
Lender its Applicable Revolving Credit Percentage thereof in the same funds as
those received by the Administrative Agent.


 


(ii)           If any payment received by the
Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is
required to be returned under any of the circumstances described in Section 10.05
(including pursuant to any settlement entered into by the L/C Issuer in its
discretion), each Revolving Credit Lender shall pay to the Administrative Agent
for the account of the L/C Issuer its Applicable Revolving Credit Percentage
thereof on demand of the Administrative Agent, plus interest thereon
from the date of such demand to the date such amount is returned by such
Lender, at a rate per annum equal to the Federal Funds Rate from time to time
in effect.  The obligations of the
Lenders under this clause shall survive the payment in full of the Obligations
and the termination of this Agreement.


 


(e)           Obligations
Absolute.  The obligation of the
Borrowers to reimburse the L/C Issuer for each drawing under each Letter of
Credit and to repay each L/C Borrowing shall be joint and several, absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances, including the following:


 


(i)            any lack of validity or
enforceability of such Letter of Credit, this Agreement, or any other Loan
Document;


 


(ii)           the existence of any claim,
counterclaim, setoff, defense or other right that either Borrower or any of
their respective Subsidiaries may have at any time against any beneficiary or
any transferee of such Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the L/C Issuer or any other
Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;


 


(iii)          any draft, demand, certificate or
other document presented under such Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under such Letter of Credit;


 


40

















 


(iv)          any payment by the L/C Issuer under
such Letter of Credit against presentation of a draft or certificate that does
not strictly comply with the terms of such Letter of Credit; or any payment
made by the L/C Issuer under such Letter of Credit to any Person purporting to
be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of such Letter of Credit, including any arising
in connection with any proceeding under any Debtor Relief Law; or


 


(v)           any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, either Borrower or any of their respective Subsidiaries.


 


The Borrower Agent shall promptly examine a copy of
each Letter of Credit and each amendment thereto that is delivered to it and,
in the event of any claim of noncompliance with the Borrower Agent’s
instructions or other irregularity, the Borrower Agent will immediately notify
the L/C Issuer.  Each Borrower shall be
conclusively deemed to have waived any such claim against the L/C Issuer and
its correspondents unless such notice is given as aforesaid.


 


(f)            Role
of L/C Issuer.  Each Lender and each
Borrower agree that, in paying any drawing under a Letter of Credit, the L/C
Issuer shall not have any responsibility to obtain any document (other than any
sight draft, certificates and documents expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such
document.  None of the L/C Issuer, the
Administrative Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the L/C Issuer shall be liable to any
Lender for (i) any action taken or omitted in connection herewith at the
request or with the approval of the Revolving Credit Lenders or the Required
Revolving Lenders, as applicable; (ii) any action taken or omitted in the
absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any document or
instrument related to any Letter of Credit or Issuer Document.  Each Borrower hereby assumes all risks of the
acts or omissions of any beneficiary or transferee with respect to its use of
any Letter of Credit; provided, however, that this assumption is
not intended to, and shall not, preclude each Borrower’s pursuing such rights
and remedies as it may have against the beneficiary or transferee at law or
under any other agreement.  None of the
L/C Issuer, the Administrative Agent, any of their respective Related Parties
nor any correspondent, participant or assignee of the L/C Issuer shall be
liable or responsible for any of the matters described in clauses (i) through
(v) of Section 2.03(e); provided, however, that
anything in such clauses to the contrary notwithstanding, the applicable
Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be
liable to such Borrower, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered by the applicable
Borrower which such Borrower proves were caused by the L/C Issuer’s willful
misconduct or gross negligence or the L/C Issuer’s willful failure to pay under
any Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit.  In furtherance
and not in limitation of the foregoing, the L/C Issuer may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of


 


41

















 


any notice or information to the contrary, and the L/C Issuer shall not
be responsible for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign a Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason.


 


(g)           Cash
Collateral.  Upon the request of the
Administrative Agent, (i) if the L/C Issuer has honored any full or
partial drawing request under any Letter of Credit and such drawing has
resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit
Expiration Date, any L/C Obligation for any reason remains outstanding, the
Borrowers shall, in each case, immediately Cash Collateralize the then
Outstanding Amount of all L/C Obligations. 
Sections 2.05 and 8.02(c) set forth certain
additional requirements to deliver Cash Collateral hereunder.  For purposes of this Section 2.03,
Section 2.05 and Section 8.02(c), “Cash Collateralize” means to pledge and deposit
with or deliver to the Administrative Agent, for the benefit of the L/C Issuer
and the Lenders, as collateral for the L/C Obligations, cash or deposit account
balances pursuant to documentation in form and substance satisfactory to the
Administrative Agent and the L/C Issuer (which documents are hereby consented
to by the Lenders).  Derivatives of such
term have corresponding meanings.  Each
Borrower hereby grants to the Administrative Agent, for the benefit of the L/C
Issuer and the Lenders, a security interest in all such cash, deposit accounts
and all balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in
blocked, non-interest bearing deposit accounts at Bank of America.  If at any time the Administrative Agent
determines that any funds held as Cash Collateral are subject to any right or
claim of any Person other than the Administrative Agent or that the total
amount of such funds is less than the aggregate Outstanding Amount of all L/C
Obligations, the Borrowers will, forthwith upon demand by the Administrative
Agent to either Borrower, pay to the Administrative Agent, as additional funds
to be deposited as Cash Collateral, an amount equal to the excess of (x) such
aggregate Outstanding Amount over (y) the total amount of funds, if any,
then held as Cash Collateral that the Administrative Agent determines to be
free and clear of any such right and claim. 
Upon the drawing of any Letter of Credit for which funds are on deposit
as Cash Collateral, such funds shall be applied, to the extent permitted under
applicable Laws, to reimburse the L/C Issuer.


 


(h)           Applicability
of ISP.  Unless otherwise expressly
agreed by the L/C Issuer and the Borrowers when a Letter of Credit is issued,
the rules of the ISP shall apply to each standby Letter of Credit.


 


(i)            Letter
of Credit Fees.  The Borrowers shall
pay to the Administrative Agent for the account of each Revolving Credit Lender
in accordance with its Applicable Revolving Credit Percentage a Letter of
Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal
to the Applicable Rate times the daily amount available to be drawn
under such Letter of Credit.  For
purposes of computing the daily amount available to be drawn under any Letter
of Credit, the amount of such Letter of Credit shall be determined in
accordance with Section 1.06. 
Letter of Credit Fees shall be (i) due and payable on the first
Business Day after the end of each March, June, September and December,
commencing with the first such date to occur after the issuance of such Letter
of Credit, on the Letter of Credit Expiration Date and thereafter on demand and
(ii) computed on a quarterly basis in arrears.  If there is any change in the Applicable Rate
during any quarter, the daily amount available to be drawn under each Letter of
Credit shall be computed and multiplied by the Applicable Rate separately for
each period 


 


42

















 


during such quarter that such Applicable Rate was in effect.  Notwithstanding anything to the contrary
contained herein, upon the request of the Required Revolving Lenders, while any
Event of Default exists, all Letter of Credit Fees shall accrue at the Default
Rate.


 


(j)            Fronting
Fee and Documentary and Processing Charges Payable to L/C Issuer.  The Borrowers shall pay directly to the L/C
Issuer for its own account a fronting fee with respect to each Letter of
Credit, at a rate of 0.125%, computed on the daily amount available to be drawn
under such Letter of Credit on a quarterly basis in arrears.  Such fronting fee shall be due and payable on
the tenth Business Day after the end of each March,
June, September and December in respect of the most recently-ended quarterly period (or
portion thereof, in the case of the first payment), commencing with the first
such date to occur after the issuance of such Letter of Credit, on the Letter
of Credit Expiration Date and thereafter on demand.  For purposes of computing the daily amount
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.06.  In addition, the Borrowers shall pay directly
to the L/C Issuer for its own account the customary issuance, presentation,
amendment and other processing fees, and other standard costs and charges, of
the L/C Issuer relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and
charges are due and payable on demand and are nonrefundable.


 


(k)           Conflict
with Issuer Documents.  In the event
of any conflict between the terms hereof and the terms of any Issuer Document,
the terms hereof shall control.


 


(l)            Letters
of Credit Issued for Subsidiaries.  Notwithstanding that a Letter of Credit
issued or outstanding hereunder is in support of any obligations of, or is for
the account of, a Subsidiary, the Borrowers shall be jointly and severally
obligated to reimburse the L/C Issuer hereunder for any and all drawings under
such Letter of Credit.  Each Borrower
hereby acknowledges that the issuance of Letters of Credit for the account of
any of their respective Subsidiaries inures to the benefit of the Borrowers,
and that the Borrowers’ business derives substantial benefits from the
businesses of such Subsidiaries.


 


2.04         Swing
Line Loans.


 


(a)  The Swing Line.  Subject to the terms and conditions set forth
herein, the Swing Line Lender agrees, in reliance upon the agreements of the
other Lenders set forth in this Section 2.04, to make loans (each
such loan, a “Swing Line Loan”) to the Borrowers from time to time on any
Business Day during the Availability Period in an aggregate amount not to exceed
at any time outstanding the amount of the Swing Line Sublimit, notwithstanding
the fact that such Swing Line Loans, when aggregated with the Applicable
Revolving Credit Percentage of the Outstanding Amount of Revolving Credit Loans
and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the
amount of such Lender’s Revolving Credit Commitment; provided, however,
that after giving effect to any Swing Line Loan, (i) the Total Revolving
Credit Outstandings shall not exceed the Revolving Credit Facility at such
time, and (ii) the aggregate Outstanding Amount of the Revolving Credit
Loans of any Revolving Credit Lender at such time, plus such Revolving
Credit Lender’s Applicable Revolving Credit Percentage of the Outstanding
Amount of all L/C Obligations at such time, plus such Revolving Credit
Lender’s Applicable Revolving Credit Percentage of the Outstanding Amount of
all Swing Line Loans at such time shall not exceed such Lender’s Revolving
Credit Commitment, and provided  further  


 


43

















 


that neither Borrower
shall use the proceeds of any Swing Line Loan to refinance any outstanding
Swing Line Loan.  Within the foregoing
limits, and subject to the other terms and conditions hereof, the Borrowers may
borrow under this Section 2.04, prepay under Section 2.05,
and reborrow under this Section 2.04.  Each Swing Line Loan shall bear interest only
at a rate based on the Base Rate. 
Immediately upon the making of a Swing Line Loan, each Revolving Credit
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees
to, purchase from the Swing Line Lender a risk participation in such Swing Line
Loan in an amount equal to the product of such Revolving Credit Lender’s
Applicable Revolving Credit Percentage times the amount of such Swing
Line Loan.


 


(b)           Borrowing
Procedures.  Each Swing Line
Borrowing shall be made upon the Borrower Agent’s irrevocable notice to the
Swing Line Lender and the Administrative Agent, which may be given by
telephone.  Each such notice must be
received by the Swing Line Lender and the Administrative Agent not later than
1:00 p.m. on the requested borrowing date, and shall specify (i) the
amount to be borrowed, which shall be a minimum of $500,000, (ii) the applicable Borrower,
and (iii) the requested borrowing date, which shall be a Business
Day.  Each such telephonic notice must be
confirmed promptly by delivery to the Swing Line Lender and the Administrative
Agent of a written Swing Line Loan Notice, appropriately completed and signed
by a Responsible Officer of the Borrower Agent. 
Promptly after receipt by the Swing Line Lender of any telephonic Swing
Line Loan Notice, the Swing Line Lender will confirm with the Administrative
Agent (by telephone or in writing) that the Administrative Agent has also
received such Swing Line Loan Notice and, if not, the Swing Line Lender will
notify the Administrative Agent (by telephone or in writing) of the contents
thereof.  Unless the Swing Line Lender
has received notice (by telephone or in writing) from the Administrative Agent
(including at the request of any Revolving Credit Lender) prior to 2:00 p.m.
on the date of the proposed Swing Line Borrowing (A) directing the Swing
Line Lender not to make such Swing Line Loan as a result of the limitations set
forth in the first proviso to the first sentence of Section 2.04(a),
or (B) that one or more of the applicable conditions specified in Article IV
is not then satisfied, then, subject to the terms and conditions hereof, the
Swing Line Lender will, not later than 3:00 p.m. on the borrowing date
specified in such Swing Line Loan Notice, make the amount of its Swing Line
Loan available to the applicable Borrower at its office by crediting the
account of the applicable Borrower on the books of the Swing Line Lender in
immediately available funds.


 


(c)           Refinancing
of Swing Line Loans.


 


The Swing Line Lender at any
time in its sole and absolute discretion may request, on behalf of the
Borrowers (each of which hereby irrevocably authorizes the Swing Line Lender to
so request on its behalf), that each Revolving Credit Lender make a Base Rate
Loan in an amount equal to such Lender’s Applicable Revolving Credit Percentage
of the amount of Swing Line Loans then outstanding.  Such request shall be made in writing (which
written request shall be deemed to be a Committed Loan Notice for purposes
hereof) and in accordance with the requirements of Section 2.02,
without regard to the minimum and multiples specified therein for the principal
amount of Base Rate Loans, but subject to the unutilized portion of the
Revolving Credit Facility and the conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the
Borrower Agent with a copy of the applicable Committed Loan Notice promptly
after delivering such notice to 


 


44

















 


the Administrative Agent.  Each Revolving Credit Lender shall make an
amount equal to its Applicable Revolving Credit Percentage of the amount
specified in such Committed Loan Notice available to the Administrative Agent
in immediately available funds for the account of the Swing Line Lender at the
Administrative Agent’s Office not later than 1:00 p.m. on the day
specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii),
each Revolving Credit Lender that so makes funds available shall be deemed to
have made a Base Rate Loan to the applicable Borrower in such amount.  The Administrative Agent shall remit the
funds so received to the Swing Line Lender.


 


(i)            If for any reason any Swing Line
Loan cannot be refinanced by such a Revolving Credit  Borrowing in accordance with Section 2.04(c)(i),
the request for Base Rate Loans submitted by the Swing Line Lender as set forth
herein shall be deemed to be a request by the Swing Line Lender that each of
the Revolving Credit Lenders fund its risk participation in the relevant Swing
Line Loan and each Revolving Credit Lender’s payment to the Administrative
Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall
be deemed payment in respect of such participation.


 


(ii)           If any Revolving Credit Lender fails
to make available to the Administrative Agent for the account of the Swing Line
Lender any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i),
the Swing Line Lender shall be entitled to recover from such Lender (acting
through the Administrative Agent), on demand, such amount with interest thereon
for the period from the date such payment is required to the date on which such
payment is immediately available to the Swing Line Lender at a rate per annum
equal to the greater of the Federal Funds Rate and a rate determined by the
Swing Line Lender in accordance with banking industry rules on interbank
compensation, plus any administrative, processing or similar fees customarily
charged by the Swing Line Lender in connection with the foregoing.  If such Lender pays such amount (with
interest and fees as aforesaid), the amount so paid shall constitute such
Lender’s Committed Loan included in the relevant Committed Borrowing or funded
participation in the relevant Swing Line Loan, as the case may be.  A certificate of the Swing Line Lender
submitted to any Lender (through the Administrative Agent) with respect to any
amounts owing under this clause (iii) shall be conclusive absent manifest
error.


 


(iii)          Each Revolving Credit Lender’s
obligation to make Revolving Credit Loans or to purchase and fund risk
participations in Swing Line Loans pursuant to this Section 2.04(c) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, either Borrower or
any other Person for any reason whatsoever, (B) the occurrence or
continuance of a Default, or (C) any other occurrence, event or condition,
whether or not similar to any of the foregoing; provided, however,
that each Revolving Credit Lender’s obligation to make Revolving Credit Loans
pursuant to this Section 2.04(c) is subject to the conditions
set forth in Section 4.02. 
No such funding of risk participations shall relieve or otherwise impair
the obligation of the Borrowers to repay Swing Line Loans, together with
interest as provided herein.


 


45














 


(d)           Repayment
of Participations.


 


At any time after any Revolving
Credit Lender has purchased and funded a risk participation in a Swing Line
Loan, if the Swing Line Lender receives any payment on account of such Swing
Line Loan, the Swing Line Lender will distribute to such Revolving Credit
Lender its Applicable Revolving Credit Percentage thereof in the same funds as
those received by the Swing Line Lender.


 


(i)            If any payment received by the Swing
Line Lender in respect of principal or interest on any Swing Line Loan is
required to be returned by the Swing Line Lender under any of the circumstances
described in Section 10.05 (including pursuant to any settlement
entered into by the Swing Line Lender in its discretion), each Revolving Credit
Lender shall pay to the Swing Line Lender its Applicable Revolving Credit
Percentage thereof on demand of the Administrative Agent, plus interest
thereon from the date of such demand to the date such amount is returned, at a
rate per annum equal to the Federal Funds Rate. 
The Administrative Agent will make such demand upon the request of the
Swing Line Lender.  The obligations of
the Lenders under this clause shall survive the payment in full of the
Obligations and the termination of this Agreement.


 


(e)           Interest
for Account of Swing Line Lender. 
The Swing Line Lender shall be responsible for invoicing the Borrowers
for interest on the Swing Line Loans. 
Until each Revolving Credit Lender funds its Base Rate Loan or risk
participation pursuant to this Section 2.04 to refinance such
Revolving Credit Lender’s Applicable Revolving Credit Percentage of any Swing
Line Loan, interest in respect of such Applicable Revolving Credit Percentage
shall be solely for the account of the Swing Line Lender.


 


(f)            Payments
Directly to Swing Line Lender.  The
Borrowers shall make all payments of principal and interest in respect of the
Swing Line Loans directly to the Swing Line Lender.


 


2.05         Prepayments.


 


(a) 
Optional.


 


(i)            Generally.              Subject to Section 2.05(a)(ii) and
the last two sentences of this Section 2.05(a)(i), the Borrowers
may, upon notice to the Administrative Agent, at any time or from time to time
voluntarily prepay the Term Loan and Revolving Credit Loans in whole or in
part; provided that (A) such notice must be received by the
Administrative Agent not later than 11:00 a.m. (1) three Business
Days prior to any date of prepayment of Eurodollar Rate Loans and (2) on
the date of prepayment of Base Rate Loans; (B) any prepayment of
Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof; and (C) any prepayment of Base
Rate Loans shall be in a principal amount of $500,000 or a whole multiple of
$100,000 in excess thereof or, in each case, if less, the entire principal amount
thereof then outstanding.  Each such
notice shall specify the date and amount of such prepayment and the Type(s) of
Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the
Interest Period(s) of such Loans. 
The Administrative Agent will promptly notify each


 


46

















 


Lender of its
receipt of each such notice, and of the amount of such Lender’s ratable portion
of such prepayment (based on such Lender’s Applicable Percentage in respect of the
relevant Facility).  If such notice is
given by the Borrower Agent, the Borrowers shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein.  Any prepayment of a
Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount
prepaid, together with any additional amounts required pursuant to Section 3.05.  Each prepayment of the outstanding Term Loans
pursuant to this Section 2.05(a) shall be applied to the
principal repayment installments thereof in inverse order of maturity, and each
such prepayment shall be paid to the Lenders in accordance with their
respective Applicable Percentages in respect of each of the relevant
Facilities.


 


(ii)           Prepayment Premiums.


 


(A)       Notwithstanding anything herein to the
contrary, all prepayments of the Term Loan that are made in accordance with
this Section 2.05(a) prior to the first anniversary of the
Closing Date shall be subject to a prepayment premium equal to the present
value, as determined by Holdings and certified by a Responsible Officer of
Holdings to the Administrative Agent, of (1) all required interest
payments due on such Term Loans from the date of prepayment through and
including the first anniversary of the Closing Date (excluding accrued
interest) (assuming that the interest rate applicable to all such interest is
the swap rate at the close of business on the third Business Day prior to the
date of such prepayment with the termination date nearest to the first anniversary
of the Closing Date plus the Applicable Rate for Eurodollar Rate Loans) plus (2) the
prepayment premium that would be due pursuant to Section 2.05(a)(ii)(B) if
such prepayment were made on the day after the first anniversary of the Closing
Date, in each case discounted to the date of prepayment on a quarterly basis
(assuming a 360-day year and actual days elapsed) at a rate equal to the sum of
such swap rate plus 0.50%.


 


(B)        Notwithstanding anything herein to the
contrary, all prepayments of the Term Loan that are made in accordance with
this Section 2.05(a) prior to the second anniversary of the
Closing Date, but on or after the first anniversary of the Closing Date, shall
be subject to an additional premium equal to the amount of such prepayment
multiplied by 1%, with respect to each such prepayment made prior to the second
anniversary of the Closing Date.  On or
after the second  anniversary of the Closing Date,
no premiums or penalties shall be payable pursuant to this Section 2.05(a)(ii) in
connection with any prepayments of the Term Loan.


 


Swing Line
Loans.             The
Borrowers may, upon notice to the Swing Line Lender (with a copy to the
Administrative Agent), at any time or from time to time, voluntarily prepay
Swing Line Loans in whole or in part without premium or penalty; provided
that (A) such notice must be received by the Swing Line Lender and the
Administrative Agent not later than 1:00 p.m. on the date of the
prepayment, and (B) any such prepayment shall be in a minimum principal
amount of $100,000.  Each such notice
shall specify the date and 


 


47

















 


amount of such
prepayment.  If such notice is given by
the Borrower Agent, the applicable Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein.


 


(b)           Mandatory.


 


(i)            Within five
Business Days after financial statements have been delivered pursuant to Section 6.01(a) and
the related Compliance Certificate has been delivered pursuant to Section 6.02(b),
the Borrowers shall prepay an aggregate principal amount of Loans equal to the
excess (if any) of (A) 50% of Excess Cash Flow for the fiscal year covered
by such financial statements over (B) the aggregate principal amount of Term
Loans prepaid pursuant to Section 2.05(a)(i) (such prepayments
to be applied as set forth in clause (v) below).


 


(ii)           If any Borrower or any of its
Subsidiaries Disposes of any property (other than any Disposition of any
property permitted by Sections 7.05(b), (c), (d) or (e))
which results in the realization by such Person of Net Cash Proceeds, the
Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of
such Net Cash Proceeds immediately upon receipt thereof by such Person (such prepayments
to be applied as set forth in clause (v) below); provided, however, that, with respect to any Net Cash
Proceeds realized under a Disposition described in this Section 2.05(b)(ii),
at the election of the Borrowers (as notified by the Borrower Agent to the
Administrative Agent on or prior to the date of such Disposition), and so long
as no Default shall have occurred and be continuing, the Borrowers or such
Subsidiary may reinvest all or any portion of such Net Cash Proceeds in
operating assets so long as within 270 days after the receipt of such Net Cash
Proceeds, such purchase shall have been consummated (as certified by the
Borrowers in writing to the Administrative Agent); and provided  further,
however, that any Net Cash Proceeds not subject to such definitive
agreement or so reinvested shall be immediately applied to the prepayment of
the Loans as set forth in this Section 2.05(b)(ii).


 


(iii)          Upon the incurrence or issuance by either Borrower  or
any of their respective Subsidiaries of any Indebtedness (other than
Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.02),
the Borrowers shall prepay an aggregate principal amount of Loans equal to 100%
of all Net Cash Proceeds received therefrom immediately upon receipt thereof by
either Borrower or such
Subsidiary (such prepayments to be applied as set forth in clause (v) below).


 


(iv)          Upon any Extraordinary Receipt
received by or paid to or for the account of either Borrower or any of their
Subsidiaries, and not otherwise included in clause (ii) or (iii) of
this Section 2.05(b), the Borrower shall prepay an aggregate
principal amount of Loans equal to 50% of all Net Cash Proceeds received
therefrom immediately upon receipt thereof by such Borrower or such Subsidiary
(such prepayments to be applied as set forth in clause (v) below); provided, however, that
with respect to any proceeds of insurance, condemnation awards (or payments in
lieu thereof) or indemnity payments, at the election of the applicable Borrower
(as notified by the Borrower Agent to the Administrative Agent on or prior to
the date of receipt of such insurance proceeds, 


 


48

















 


condemnation
awards or indemnity payments), and so long as no Default shall have occurred
and be continuing, the applicable Borrower or such Subsidiary may apply within
270 days after the receipt of such cash proceeds to replace or repair the
equipment, fixed assets or real property in respect of which such cash proceeds
were received; and provided, further, however, that any
cash proceeds not so applied shall be immediately applied to the prepayment of
the Loans as set forth in this Section 2.05(b)(iv).


 


Each prepayment of Loans
pursuant to the foregoing provisions of this Section 2.05(b) shall
be applied first to the Term
Facility and to the principal repayment installments thereof in inverse order
of maturity, second to the extent
of any excess, to repay the Revolving Credit Loans (without  a corresponding permanent reduction in the
Revolving Credit Commitment),
and third, to the extent of any
excess, to reduce the outstanding principal balance of the Second Lien Term
Loan as required pursuant to Section 2.05 of the Second Lien Credit
Agreement.  Notwithstanding the
foregoing, regardless of whether there are amounts outstanding under the
Revolving Credit Facility, each Term Lender having outstanding Term Loans may
elect to decline its Applicable Percentage of any mandatory prepayment by
notifying the Administrative Agent within three days of receipt of the notice
of such prepayment.  All mandatory
prepayments declined in accordance with the foregoing shall be re-offered to
those Term Lenders under this Agreement who have initially accepted such
prepayment (such re-offer to be made to each such Term Lender based on the
percentage which such Lender’s Term Loans represents of the aggregate Term
Loans of all such Term Lenders who have initially accepted such
prepayment).  In the event of such a
re-offer, the relevant Term Lenders may elect to decline, by notice to the
Administrative Agent within two days of such re-offering, all of the amount of
such prepayment that is re-offered to them, in which case the aggregate amount
of the prepayment that would have been applied to prepay such Term Loans pursuant
to such re-offer but was so declined shall be applied first to repay the Revolving Credit Loans
(without  a corresponding permanent
reduction in the Revolving Credit Commitment),
second to the extent of any excess, to reduce the outstanding principal balance
of the Second Lien Term Loan as required pursuant to Section 2.05
of the Second Lien Credit Agreement, and third, to the extent of any remaining funds, to the
Borrowers.  Any Term Lender that does not
promptly notify the Administrative Agent in accordance with the foregoing that
it is declining a mandatory prepayment shall automatically be deemed to have
accepted such prepayment and any re-offer in respect thereof.


 


(v)           If for any reason the Total Revolving
Credit Outstandings at any time exceed the Revolving Credit Facility at such
time, the Borrowers shall immediately prepay Revolving Credit Loans, Swing Line
Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations (other
than the L/C Borrowings) in an aggregate amount equal to such excess.


 


2.06         Termination
or Reduction of Commitments.


 


(a) 
Optional.  The Borrowers may, upon
notice to the Administrative Agent, terminate the Revolving Credit Facility,
the Letter of Credit Sublimit or the Swing Line Sublimit, or from time to time
permanently reduce the Revolving Credit Facility, the Letter of Credit


 


49

















 


Sublimit or the Swing
Line Sublimit; provided that (i) any such notice shall be received
by the Administrative Agent not later than 11:00 a.m. five Business Days
prior to the date of termination or reduction, (ii) any such partial
reduction shall be in an aggregate amount of $5,000,000 or any whole multiple
of $1,000,000 in excess thereof and (iii) the Borrowers shall not
terminate or reduce (A) the Revolving Credit Facility if, after giving
effect thereto and to any concurrent prepayments hereunder, the Total Revolving
Credit Outstandings would exceed the Revolving Credit Facility, (B) the
Letter of Credit Sublimit if, after giving effect thereto, the Outstanding
Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed
the Letter of Credit Sublimit, or (C) the Swing Line Sublimit if, after
giving effect thereto and to any concurrent prepayments hereunder, the
Outstanding Amount of Swing Line Loans would exceed the Letter of Credit
Sublimit.


 


(b)           Mandatory.


 


(i)            The aggregate
Term  Commitments shall be automatically and permanently reduced to zero
on the date of the Term Borrowing.


 


(ii)           If after giving effect to any
reduction or termination of Revolving Credit Commitments under this Section 2.06,
the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the Revolving
Credit Facility at such time, the Letter of Credit Sublimit or the Swing Line
Sublimit, as the case may be, shall be automatically reduced by the amount of
such excess.


 


(c)           Application
of Commitment Reductions; Payment of Fees. 
The Administrative Agent will promptly notify the Lenders of any
termination or reduction of the Letter of Credit Sublimit, Swing Line Sublimit
or the Revolving Credit Commitment under this Section 2.06.  Upon any reduction of the Revolving Credit
Commitments, the Revolving Credit Commitment of each Revolving Credit Lender
shall be reduced by such Lender’s Applicable Revolving Credit Percentage of
such reduction amount.  All fees in
respect of the Revolving Credit Facility accrued until the effective date of
any termination of the Revolving Credit Facility shall be paid on the effective
date of such termination.


 


2.07         Repayment
of Loans.


 


(a)           Term
Loans.  The Borrowers, jointly and
severally, shall repay to the Term Lenders the aggregate principal amount of
all Term Loans outstanding on the last Business Day of each March, June, September and
December, commencing with the first such date to occur after the Closing Date,
in equal quarterly installments of $1,250,000; provided, however,
that the final principal repayment installment of the Term Loans shall be
repaid on the Maturity Date for the Term Facility and in any event shall
be in an amount equal to the aggregate principal amount of all Term Loans
outstanding on such date.


 


(b)           Revolving
Credit Loans.  The Borrowers, jointly
and severally, shall repay to the Revolving Credit Lenders on the Maturity Date
for the Revolving Credit Facility the aggregate principal amount of all
Revolving Credit Loans outstanding on such date.


 


50

















 


(c)           Swing
Line Loans.  The Borrowers, jointly
and severally, shall repay each Swing Line Loan on the earlier to occur of (i) the
date ten Business Days after such Loan is made and (ii) the Maturity Date
for the Revolving Credit Facility.


 


2.08         Interest.


 


(a)           Subject
to the provisions of Section 2.08(b), (i) each Eurodollar Rate
Loan under a Facility shall bear interest on the outstanding principal amount
thereof for each Interest Period at a rate per annum equal to the Eurodollar
Rate for such Interest Period plus the Applicable Rate for such
Facility; (ii) each Base Rate Loan under a Facility shall bear interest on
the outstanding principal amount thereof from the applicable borrowing date at
a rate per annum equal to the Base Rate plus the Applicable Rate for
such Facility; and (iii) each Swing Line Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Base Rate plus the Applicable Rate for the
Revolving Credit Facility.


 


(b)           (i) 
If any amount of principal of any Loan is not paid when due (without regard to
any applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.


 


(ii)           If any amount (other than principal
of any Loan) payable by either Borrower under any Loan Document is not paid
when due (without regard to any applicable grace periods), whether at stated
maturity, by acceleration or otherwise, then upon the request of the Required Lenders
such amount shall thereafter bear interest at a fluctuating interest rate per
annum at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.


 


(iii)          Upon the request of the Required
Lenders, while any Event of Default exists, the Borrowers shall pay interest on
the principal amount of all outstanding Obligations hereunder at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Laws.


 


(iv)          Accrued and unpaid interest on past
due amounts (including interest on past due interest) shall be due and payable
upon demand.


 


(c)           Interest
on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable
in accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.


 


2.09         Fees.  In addition to certain fees described in Sections
2.03(i) and (j):


 


(a)           Commitment
Fee.  The Borrowers, jointly and
severally, shall pay to the Administrative Agent for the account of each
Revolving Credit Lender in accordance with its Applicable Revolving Credit
Percentage, a commitment fee equal to the Applicable Fee Rate times the
actual daily amount by which the Revolving Credit Facility exceeds the sum of (i) the


 


51

















 


Outstanding Amount of Revolving Credit Loans
and (ii) the Outstanding Amount of L/C Obligations.  Swingline Loans shall not be considered
utilization of the Revolving Credit Facility for purposes of this
calculation.  The commitment fee shall
accrue at all times during the Availability Period, including at any time during
which one or more of the conditions in Article IV is not met, and
shall be due and payable quarterly in arrears on the last Business Day of each
March, June, September and December, commencing with the first such date
to occur after the Closing Date, and on the last day of the Availability Period
for the Revolving Credit Facility.  The
commitment fee shall be calculated quarterly in arrears, and if there is any
change in the Applicable Fee Rate during any quarter, the actual daily amount
shall be computed and multiplied by the Applicable Fee Rate separately for each
period during such quarter that such Applicable Fee Rate was in effect.


 


(b)           Other
Fees.  (i)  The Borrowers,
jointly and severally, shall pay to the Arranger and the Administrative Agent for
their own respective accounts and for the accounts of the Lenders fees in the
amounts and at the times specified in the Fee Letter (without duplication of
any fees payable pursuant to the Second Lien Credit Agreement).  Such fees shall be fully earned when paid and
shall not be refundable for any reason whatsoever.


 


(ii)           The Borrower shall pay to the Lenders
such fees as shall have been separately agreed upon in writing in the amounts
and at the times so specified.  Such fees
shall be fully earned when paid and shall not be refundable for any reason
whatsoever.


 


2.10         Computation
of Interest and Fees; Retroactive
Adjustments of Applicable Rate.


 


(a)  All
computations of interest for Base Rate Loans when the Base Rate is determined
by Bank of America’s “prime rate” shall be made on the basis of a year of 365
or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more fees or interest, as applicable, being paid than if computed on
the basis of a 365-day year).  Interest
shall accrue on each Loan for the day on which the Loan is made, and shall not
accrue on a Loan, or any portion thereof, for the day on which the Loan or such
portion is paid, provided that any Loan that is repaid on the same day
on which it is made shall, subject to Section 2.12(a), bear
interest for one day.  Each determination
by the Administrative Agent of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent manifest error.


 


(b)           If, as a result of any restatement of or other adjustment
to the financial statements of Holdings or for any other reason, either
Borrower or the Lenders determine that (i) the Consolidated Leverage Ratio
as calculated by the Borrowers as of any applicable date was inaccurate and (ii) a
proper calculation of the Consolidated Leverage Ratio would have resulted in
higher pricing for such period, the Borrowers shall immediately and
retroactively be obligated to pay to the Administrative Agent for the account
of the applicable Lenders, promptly on demand by the Administrative Agent (or,
after the occurrence of an actual or deemed entry of an order for relief with
respect to either Borrower under the Bankruptcy Code of the United States,
automatically and without further action by the Administrative Agent, any
Lender or the L/C Issuer), an amount equal to the excess of the amount of
interest and fees that should have been paid for such period over the amount of
interest and fees actually paid for such period.  This


 


52

















 


paragraph
shall not limit the rights of the Administrative Agent, any Lender or the L/C
Issuer, as the case may be, under Section 2.03(c)(iii), 2.03(i) or
2.08(b) or under Article VIII.  The Borrowers’ obligations under this
paragraph shall survive the termination of the Aggregate Commitments and the
repayment of all other Obligations hereunder.


 


2.11         Evidence
of Debt.


 


(a)  The Credit Extensions made by each Lender
shall be evidenced by one or more accounts or records maintained by such Lender
and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative
Agent and each Lender shall be conclusive absent manifest error of the amount
of the Credit Extensions made by the Lenders to the Borrowers and the interest
and payments thereon.  Any failure to so
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Borrowers hereunder to pay any amount owing with respect
to the Obligations.  In the event of any
conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters,
the accounts and records of the Administrative Agent shall control in the
absence of manifest error.  Upon the
request of any Lender made through the Administrative Agent, the Borrowers
shall execute and deliver to such Lender (through the Administrative Agent) a
Note, which shall evidence such Lender’s Loans in addition to such accounts or
records.  Each Lender may attach
schedules to its Note and endorse thereon the date, Type (if applicable),
amount and maturity of its Loans and payments with respect thereto.


 


(b)           In
addition to the accounts and records referred to in Section 2.11(a),
each Lender and the Administrative Agent shall maintain in accordance with its
usual practice accounts or records evidencing the purchases and sales by such
Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the
accounts and records maintained by the Administrative Agent and the accounts
and records of any Lender in respect of such matters, the accounts and records
of the Administrative Agent shall control in the absence of manifest error.


 


2.12         Payments
Generally; Administrative Agent’s Clawback.


 


(a)           General.  All payments to be made by either Borrower
shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.  Except as
otherwise expressly provided herein, all payments by either Borrower hereunder
shall be made to the Administrative Agent, for the account of the respective
Lenders to which such payment is owed, at the Administrative Agent’s Office in
Dollars and in immediately available funds not later than 2:00 p.m. on the
date specified herein.  The
Administrative Agent will promptly distribute to each Lender its Applicable
Percentage in respect of the relevant Facility (or other applicable share as
provided herein) of such payment in like funds as received by wire transfer to
such Lender’s Lending Office.  All
payments received by the Administrative Agent after 2:00 p.m. shall be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue.  If any
payment to be made by the Borrowers shall come due on a day other than a
Business Day, payment shall be made on the next following Business Day, and
such extension of time shall be reflected on computing interest or fees, as the
case may be.


 


53

















 


(b)           Presumptions
by Administrative Agent.


 


Funding by
Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed date of any Borrowing of
Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans,
prior to 12:00 noon on the date of such Borrowing) that such Lender will not
make available to the Administrative Agent such Lender’s share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with Section 2.02 (or,
in the case of a Borrowing of Base Rate Loans, that such Lender has made such
share available in accordance with and at the time required by Section 2.02)
and may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount.  In such event, if
a Lender has not in fact made its share of the applicable Borrowing available
to the Administrative Agent, then the applicable Lender on the one hand and the
Borrowers on the other severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount in immediately available funds
with interest thereon, for each day from and including the date such amount is
made available to either Borrower to but excluding the date of payment to the
Administrative Agent, at (A) in the case of a payment to be made by such
Lender, the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on
interbank compensation, plus any administrative, processing or similar fees
customarily charged by the Administrative Agent in connection with the
foregoing, and (B) in the case of a payment to be made by the Borrowers,
the interest rate applicable to Base Rate Loans.  If the Borrowers and such Lender shall pay
such interest to the Administrative Agent for the same or an overlapping period,
the Administrative Agent shall promptly remit to the Borrowers the amount of
such interest paid by the Borrowers for such period.  If such Lender pays its share of the
applicable Borrowing to the Administrative Agent, then the amount so paid shall
constitute such Lender’s Loan included in such Borrowing.  Any payment by the Borrowers shall be without
prejudice to any claim the Borrowers may have against a Lender that shall have
failed to make such payment to the Administrative Agent.


 


(i)            Payments by Borrowers;
Presumptions by Administrative Agent. 
Unless the Administrative Agent shall have received notice from the
Borrowers prior to the time at which any payment is due to the Administrative
Agent for the account of the Lenders or the L/C Issuer hereunder that the
Borrowers will not make such payment, the Administrative Agent may assume that
the Borrowers have made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Appropriate Lenders or
the L/C Issuer, as the case may be, the amount due.  In such event, if the Borrowers have not in
fact made such payment, then each of the Appropriate Lenders or the L/C Issuer,
as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or the L/C Issuer,
in immediately available funds with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date
of payment to the Administrative Agent, at the greater of the Federal Funds
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.


 


54














 


A notice of the Administrative Agent to any Lender or
the Borrower Agent with respect to any amount owing under this subsection (b) shall
be conclusive, absent manifest error.


 


(c)           Failure
to Satisfy Conditions Precedent.  If
any Lender makes available to the Administrative Agent funds for any Loan to be
made by such Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to the Borrowers by the Administrative
Agent because the conditions to the applicable Credit Extension set forth in Article IV
are not satisfied or waived in accordance with the terms hereof, the
Administrative Agent shall return such funds (in like funds as received from
such Lender) to such Lender, without interest.


 


(d)           Obligations
of Lenders Several.  The obligations
of the Lenders hereunder to make Term Loans and Revolving Credit Loans, to fund
participations in Letters of Credit and Swing Line Loans and to make payments
pursuant to Section 10.04(c) are several and not joint.  The failure of any Lender to make any Loan,
to fund any such participation or to make any payment under Section 10.04(c) on
any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be responsible
for the failure of any other Lender to so make its Loan, to purchase its
participation or to make its payment under Section 10.04(c).


 


(e)           Funding
Source.  Nothing herein shall be
deemed to obligate any Lender to obtain the funds for any Loan in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for any Loan in any particular place
or manner.


 


(f)            Insufficient
Funds.  If at any time insufficient
funds are received by and available to the Administrative Agent to pay fully
all amounts of principal, L/C Borrowings, interest and fees then due hereunder,
such funds shall be applied (i) first, toward payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and (ii) second,
toward payment of principal and L/C Borrowings then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of principal
and L/C Borrowings then due to such parties.


 


2.13         Sharing
of Payments by Lenders.  If any
Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of (a) Obligations in respect of any the
Facilities due and payable to such Lender hereunder and under the other Loan
Documents at such time in excess of its ratable share (according to the
proportion of (i) the amount of such Obligations due and payable to such
Lender at such time to (ii) the aggregate amount of the Obligations in
respect of the Facilities due and payable to all Lenders hereunder and under
the other Loan Documents at such time) of payments on account of the
Obligations in respect of the Facilities due and payable to all Lenders
hereunder and under the other Loan Documents at such time obtained by all the
Lenders at such time or (b) Obligations in respect of any of the
Facilities owing (but not due and payable) to such Lender hereunder and under
the other Loan Documents at such time in excess of its ratable share (according
to the proportion of (i) the amount of such Obligations owing (but not due
and payable) to such Lender at such time to (ii) the aggregate amount of
the Obligations in respect of the Facilities owing (but not due and payable) to
all Lenders hereunder and under the other Loan Documents at such time) of
payment 


 


55

















 


on account of the
Obligations in respect of the Facilities owing (but not due and payable) to all
Lenders hereunder and under the other Loan Documents at such time obtained by
all of the Lenders at such time then the Lender receiving such greater
proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase
(for cash at face value) participations in the Loans and subparticipations in
L/C Obligations and Swing Line Loans of the other Lenders, or make such other
adjustments as shall be equitable, so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of Obligations in respect of the Facilities then due and payable to the Lenders
or owing (but not due and payable) to the Lenders, as the case may be, provided
that:


 


(i)            if any such
participations or subparticipations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and


 


(ii)           the provisions of
this Section shall not be construed to apply to (A) any payment made
by the Borrowers pursuant to and in accordance with the express terms of this
Agreement or (B) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or
subparticipations in L/C Obligations or Swing Line Loans to any assignee or
participant, other than to the Borrowers or any Subsidiary thereof (as to which
the provisions of this Section shall apply).


 


Each Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrowers rights of setoff and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the
Borrowers in the amount of such participation.


 


2.14         Obligations
Joint and Several.


 


(a)                           Nature
of Obligations.  Each of the
Borrowers shall be jointly and severally liable for the Obligations, however incurred.  References to the Borrowers with respect to
the Obligations or any portion thereof shall mean each Borrower on a joint and
several basis.


 


(b)                           Bankruptcy
Limitations.  Notwithstanding anything to the
contrary contained in this Agreement, it is the intention of each Borrower, the
Administrative Agent and the Lenders that, in any proceeding involving the
bankruptcy, reorganization, arrangement, adjustment of debts, relief of
debtors, dissolution or insolvency or any similar proceeding with respect to
any Borrower or its assets, the amount of such Borrower’s obligations with
respect to the Obligations shall be equal to, but not in excess of, the maximum
amount thereof not subject to avoidance or recovery by operation of Applicable
Insolvency Laws (as defined below) after giving effect to Section 2.14(c).  To that end, but only in the event and to the
extent that after giving effect to Section 2.14(c), such Borrower’s
obligations with respect to the Obligations or any payment made pursuant to
such Obligations would, but for the operation of the first sentence of this Section 2.14(b),
be subject to avoidance or recovery in any such proceeding under Applicable
Insolvency Laws after giving effect to Section 2.14(c), the amount
of such 


 


56

















 


Borrower’s obligations with respect to the
Obligations shall be limited to the largest amount which, after giving effect
thereto, would not, under Applicable Insolvency Laws, render such Borrower’s
obligations with respect to the Obligations unenforceable or avoidable or
otherwise subject to recovery under Applicable Insolvency Laws.  To the extent any payment actually made
pursuant to the Obligations exceeds the limitation of the first sentence of
this Section 2.14(b) and is otherwise subject to avoidance and
recovery in any such proceeding under Applicable Insolvency Laws, the amount
subject to avoidance shall in all events be limited to the amount by which such
actual payment exceeds such limitation and the Obligations as limited by the
first sentence of this Section 2.14(b) shall in all events remain
in full force and effect and be fully enforceable against such Borrower.  The first sentence of this Section 2.14(b) is
intended solely to preserve the rights of the Administrative Agent and the
Lenders hereunder against such Borrower in such proceeding to the maximum
extent permitted by Applicable Insolvency Laws and neither such Borrower nor
any other Person shall have any right or claim under such sentence that would
not otherwise be available under Applicable Insolvency Laws in such
proceeding.  For the purposes of this Section 2.14(b),
“Applicable Insolvency Laws” means
all applicable laws governing bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent
transfers or conveyances or other similar laws, whether foreign or domestic
(including, without limitation, 11 U.S.C. Sections 544, 547, 548 and 550
and other “avoidance” provisions of Title 11 of the United States Code, as
amended or supplemented).


 


(c)           Agreement
for Contribution.  The Borrowers
hereby agree among themselves that, if either Borrower shall make an Excess
Payment (as defined below), such Borrower shall have a right of contribution
from the other Borrower in an amount equal to such other Borrower’s
Contribution Share (as defined below) of such Excess Payment.  The payment obligations of any Borrower under
this Section 2.14(c) shall be subordinate and subject in right
of payment to the Obligations until such time as the Obligations have been paid
in full, and neither Borrower shall exercise any right or remedy under this Section 2.14(c) against
the other Borrower until such Obligations have been paid in full.  For purposes of this Section 2.14(c),
(i) “Excess Payment” shall mean the amount paid by any Borrower in excess
of its Ratable Share of any Obligations; (ii) “Ratable Share” shall mean,
for any Borrower in respect of any payment of Obligations, the ratio (expressed
as a percentage) as of the date of such payment of Obligations of (A) the
amount by which the aggregate present fair salable value of all of its assets
and properties exceeds the amount of all debts and liabilities of such Borrower
(including probable contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of such Borrower hereunder) to (B) the
amount by which the aggregate present fair salable value of all assets and
other properties of all of the Borrowers exceeds the amount of all of the debts
and liabilities (including probable contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of the Borrowers
hereunder) of the Borrowers; provided, however, that, for purposes of
calculating the Ratable Shares of the Borrowers in respect of any payment of
Obligations, any Borrower that became a Borrower subsequent to the date of any
such payment shall be deemed to have been a Borrower on the date of such
payment and the financial information for such Borrower as of the date such
Borrower became a Borrower shall be utilized for such Borrower in connection
with such payment; and (iii) “Contribution Share” shall mean, for any
Borrower in respect of any Excess Payment made by any other Borrower, the ratio
(expressed as a percentage) as of the date of such Excess Payment of (A) the
amount by 


 


57

















 


which the aggregate present fair salable
value of all of its assets and properties exceeds the amount of all debts and
liabilities of such Borrower (including probable contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of such
Borrower hereunder) to (B) the amount by which the aggregate present fair
salable value of all assets and other properties of the Borrower other than the
maker of such Excess Payment exceeds the amount of all of the debts and
liabilities (including probable contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of the Borrowers) of
the Borrower other than the maker of such Excess Payment.  Each Borrower recognizes and acknowledges
that the rights to contribution arising hereunder shall constitute an asset in
favor of the party entitled to such contribution.  No Borrower shall have any right of
subrogation, indemnity or reimbursement under applicable law in respect of any
payment of Obligations (other than the contribution rights set forth in this Section 2.14(c))
against any other Borrower.  No Person
other than a Lender or a Borrower may rely on the provisions of this Section 2.14(c).


 


2.15         PMG
as Borrower Agent.  Holdings hereby irrevocably
appoints and authorizes PMG, and PMG hereby accepts such appointment and agrees
to act, as the Borrower Agent (a) to provide the Administrative Agent with
all notices with respect to all Borrowings obtained for the benefit of the
Borrowers and all other notices and instructions under this Agreement, (b) to
take such action on behalf of the Borrowers as the Borrower Agent deems
appropriate on its behalf to obtain Borrowings and to exercise such other
powers as are reasonably incidental thereto to carry out the purposes of this
Agreement and (c) to act as its agent for service of process and notices
required to be delivered under this Agreement or the other Loan Documents, it
being understood and agreed that receipt by the Borrower Agent of any summons,
notice or other similar item shall be deemed effective receipt by the Borrowers
and their Subsidiaries.


 


ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY


 


3.01         Taxes.


 


(a)  Payments Free of Taxes.  Any and all payments by or on account of any
obligation of the Borrowers
hereunder or under any other Loan Document shall be made free and clear of and
without reduction or withholding for any Indemnified Taxes or Other Taxes, provided
that if either Borrower shall be required by applicable law to deduct any
Indemnified Taxes (including any Other Taxes) from such payments, then (i) the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, any Lender or the L/C Issuer, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions been made, (ii) such Borrower shall make such deductions
and (iii) the Borrowers shall timely pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.


 


(b)           Payment
of Other Taxes by the Borrowers. 
Without limiting the provisions of subsection (a) above, the
Borrowers shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.


 


58

















 


(c)           Indemnification
by the Borrowers.  The Borrowers
shall, jointly and severally,
indemnify the Administrative Agent, each Lender and the L/C Issuer, within 10
days after demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section) paid by the
Administrative Agent, such Lender or the L/C Issuer, as the case may be, and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the
amount of such payment or liability delivered to the Borrower Agent by a Lender
or the L/C Issuer (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the L/C
Issuer, shall be conclusive absent manifest error.


 


(d)           Evidence
of Payments.  As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by either Borrower to a
Governmental Authority, the applicable Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.


 


(e)           Status
of Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which either Borrower is resident for tax purposes, or
any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower Agent
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower Agent or the
Administrative Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate of withholding.  In addition, any Lender, if requested by the
Borrower Agent or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower Agent or the Administrative Agent as will enable the Borrowers or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.


 


Without limiting the generality of the foregoing, if
either Borrower is resident for tax purposes in the United States, any Foreign
Lender shall deliver to the Borrower Agent and the Administrative Agent (in
such number of copies as shall be requested by the recipient) on or prior to
the date on which such Foreign Lender becomes a Lender under this Agreement
(and from time to time thereafter upon the request of the Borrower Agent or the
Administrative Agent, but only if such Foreign Lender is legally entitled to do
so), whichever of the following is applicable:


 


(i)            duly completed
copies of Internal Revenue Service Form W-8BEN claiming eligibility for
benefits of an income tax treaty to which the United States is a party,


 


(ii)           duly completed
copies of Internal Revenue Service Form W-8ECI,


 


59

















 


(iii)          in the case of a
Foreign Lender claiming the benefits of the exemption for portfolio interest
under section 881(c) of the Code, (A) a certificate to the effect
that such Foreign Lender is not (1) a “bank” within the meaning of section
881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of either
Borrower within the meaning of section 881(c)(3)(B) of the Code, or (3) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the
Code and (B) duly completed copies of 
Internal Revenue Service Form W-8BEN, or


 


(iv)          any other form
prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with
such supplementary documentation as may be prescribed by applicable law to
permit the Borrowers to determine the withholding or deduction required to be
made.


 


(f)            Treatment
of Certain Refunds.  If the
Administrative Agent, any Lender or the L/C Issuer determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrowers or with respect to which the
Borrowers have paid additional amounts pursuant to this Section, it shall
pay to the Borrowers  an amount equal to
such refund (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrowers under this Section with respect to the
Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Administrative Agent, such Lender or the L/C Issuer, as the
case may be, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund), provided that the
Borrowers, upon the request of the Administrative Agent, such Lender or the L/C
Issuer, agree to repay the amount paid over to the Borrowers (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent, such Lender or the L/C Issuer if the
Administrative Agent, such Lender or the L/C Issuer is required to repay such
refund to such Governmental Authority. 
This subsection shall not be construed to require the Administrative
Agent, any Lender or the L/C Issuer to make available its tax returns (or any
other information relating to its taxes that it deems confidential) to either
Borrower or any other Person.


 


3.02         Illegality.  If any Lender determines that any Law has
made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund Eurodollar Rate Loans, or to determine or charge interest rates based upon
the Eurodollar Rate, or any Governmental Authority has imposed material
restrictions on the authority of such Lender to purchase or sell, or to take
deposits of, Dollars in the London interbank market, then, on notice thereof by
such Lender to the Borrower Agent through the Administrative Agent, any
obligation of such Lender to make or continue Eurodollar Rate Loans or to
convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such
Lender notifies the Administrative Agent and the Borrower Agent that the
circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, the Borrower
Agent shall, upon demand from such Lender (with a copy to the Administrative
Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such
Lender to Base Rate Loans, either on the last day of the Interest Period therefor,
if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to
such day, or immediately, if such Lender may not lawfully continue to maintain
such Eurodollar Rate Loans.  Upon any
such prepayment or conversion, the Borrowers shall also pay accrued interest on
the amount so prepaid or converted.


 


60

















 


3.03         Inability to Determine Rates.  If the Required Lenders determine that for
any reason in connection with any request for a Eurodollar Rate Loan or a
conversion to or continuation thereof that (a) Dollar deposits are not
being offered to banks in the London interbank eurodollar market for the
applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate
and reasonable means do not exist for determining the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the
Eurodollar Rate for any requested Interest Period with respect to a proposed
Eurodollar Rate Loan does not adequately and fairly reflect the cost to such
Lenders of funding such Loan, the Administrative Agent will promptly so notify
the Borrower Agent and each Lender. 
Thereafter, the obligation of the Lenders to make or maintain Eurodollar
Rate Loans shall be suspended until the Administrative Agent (upon the
instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Borrower
Agent may revoke any pending request for a Borrowing of, conversion to or
continuation of Eurodollar Rate Loans or, failing that, will be deemed to have
converted such request into a request for a Committed Borrowing of Base Rate
Loans in the amount specified therein.


 


3.04         Increased Costs; Reserves on Eurodollar Rate Loans.


 


(a)  Increased
Costs Generally.  If any Change in
Law shall:


 


(i)            impose, modify or
deem applicable any reserve, special deposit, compulsory loan, insurance charge
or similar requirement against assets of, deposits with or for the account of,
or credit extended or participated in by, any Lender (except any reserve
requirement contemplated
by Section 3.04(e)) or the L/C Issuer;


 


(ii)           subject any Lender
or the L/C Issuer to any tax of any kind whatsoever with respect to this
Agreement, any Letter of Credit, any participation in a Letter of Credit or any
Eurodollar Rate Loan made by it, or change the basis of taxation of payments to
such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes
or Other Taxes covered by Section 3.01 and the imposition of, or
any change in the rate of, any Excluded Tax payable by such Lender or the L/C
Issuer); or


 


(iii)          impose on any
Lender or the L/C Issuer or the London interbank market any other condition,
cost or expense affecting this Agreement or Eurodollar Rate Loans made by such
Lender or any Letter of Credit or participation therein;


 


and the result of any of
the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make
any such Loan), or to increase the cost to such Lender or the L/C Issuer of
participating in, issuing or maintaining any Letter of Credit (or of
maintaining its obligation to participate in or to issue any Letter of Credit),
or to reduce the amount of any sum received or receivable by such Lender or the
L/C Issuer hereunder (whether of principal, interest or any other amount) then,
upon request of such Lender or the L/C Issuer, the Borrowers will pay to such
Lender or the L/C Issuer, as the case may be, such additional amount or amounts
as will compensate such Lender or the L/C Issuer, as the case may be, for such
additional costs incurred or reduction suffered.


 


61

















 


(b)           Capital
Requirements.  If any Lender or the
L/C Issuer determines that any Change in Law affecting such Lender or the L/C
Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s
holding company, if any, regarding capital requirements has or would have the
effect of reducing the rate of return on such Lender’s or the L/C Issuer’s
capital or on the capital of such Lender’s or the L/C Issuer’s holding company,
if any, as a consequence of this Agreement, the Commitments of such Lender or
the Loans made by, or participations in Letters of Credit held by, such Lender,
or the Letters of Credit issued by the L/C Issuer, to a level below that which
such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding
company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the L/C Issuer’s policies and the policies of
such Lender’s or the L/C Issuer’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
L/C Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s
holding company for any such reduction suffered.


 


(c)           Certificates
for Reimbursement.  A certificate of
a Lender or the L/C Issuer setting forth the amount or amounts necessary to
compensate such Lender or the L/C Issuer or its holding company, as the case
may be, as specified in subsection (a) or (b) of this Section and
delivered to the Borrower Agent shall be conclusive absent manifest error.  The Borrowers shall pay such Lender or the
L/C Issuer, as the case may be, the amount shown as due on any such certificate
within 10 days after receipt thereof.


 


(d)           Delay
in Requests.  Failure or delay on the
part of any Lender or the L/C Issuer to demand compensation pursuant to the
foregoing provisions of this Section shall not constitute a waiver of such
Lender’s or the L/C Issuer’s right to demand such compensation, provided
that the Borrowers shall not be required to compensate a Lender or the L/C
Issuer pursuant to the foregoing provisions of this Section for any
increased costs incurred or reductions suffered more than nine months prior to
the date that such Lender or the L/C Issuer, as the case may be, notifies the
Borrower Agent of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or the L/C Issuer’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period referred
to above shall be extended to include the period of retroactive effect
thereof).


 


(e)           Reserves
on Eurodollar Rate Loans.  The
Borrowers shall pay to each Lender, as long as such Lender shall be required to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as “Eurocurrency
liabilities”), additional interest on the unpaid principal amount of each
Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such
Loan by such Lender (as determined by such Lender in good faith, which
determination shall be conclusive), which shall be due and payable on each date
on which interest is payable on such Loan, provided the Borrower Agent
shall have received at least 10 days’ prior notice (with a copy to the
Administrative Agent) of such additional interest from such Lender.  If a Lender fails to give notice 10 days
prior to the relevant Interest Payment Date, such additional interest shall be
due and payable 10 days from receipt of such notice.


 


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3.05         Compensation for Losses.  Upon demand of any Lender (with a copy to the
Administrative Agent) from time to time, the Borrowers shall promptly
compensate such Lender for and hold such Lender harmless from any loss, cost or
expense incurred by it as a result of:


 


(a)   any continuation, conversion, payment or
prepayment of any Loan other than a Base Rate Loan on a day other than the last
day of the Interest Period for such Loan (whether voluntary, mandatory,
automatic, by reason of acceleration, or otherwise);


 


(b)   any failure by either Borrower (for a reason
other than the failure of such Lender to make a Loan) to prepay, borrow,
continue or convert any Loan other than a Base Rate Loan on the date or in the
amount notified by the Borrower Agent; or


 


(c)   any assignment of a Eurodollar Rate Loan on a
day other than the last day of the Interest Period therefor as a result of a
request by the Borrowers (through the Borrower Agent) pursuant to Section 10.13;


 


including any loss
of anticipated profits and any loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were obtained.  The
Borrowers shall also pay any customary administrative fees charged by such
Lender in connection with the foregoing.


 


For purposes of calculating amounts payable by the
Borrowers to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each
Eurodollar Rate Loan made by it at the Eurodollar
Rate for such Loan by a matching deposit or other borrowing in the
London interbank eurodollar market for a comparable amount and for a comparable
period, whether or not such Eurodollar Rate Loan was in fact so funded.


 


3.06         Mitigation
Obligations; Replacement of Lenders.


 


(a)           Designation of a Different Lending Office.  If
any Lender requests compensation under Section 3.04, or either
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender gives a notice pursuant to Section 3.02, then 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 to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04,
as the case may be, in the future, or eliminate the need for the notice
pursuant to Section 3.02, as applicable, and (ii) in each
case, would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  Each Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.


 


(b)           Replacement
of Lenders.  If any Lender requests
compensation under Section 3.04, or if either Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 3.01, the Borrowers
may replace such Lender in accordance with Section 10.13.


 


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3.07         Survival.  All of the Borrowers’ obligations under this Article III
shall survive termination of the Aggregate Commitments and repayment of all
other Obligations hereunder.


 


ARTICLE
IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS


 


4.01         Conditions
of Initial Credit Extension.  The
obligation of the L/C Issuer and each Lender to make its initial Credit
Extension hereunder is subject to satisfaction of the following conditions
precedent:


 


(a)   The Administrative Agent’s receipt of the
following, each of which shall be originals or facsimiles (followed promptly by
originals) unless otherwise specified, each properly executed by a Responsible
Officer of the signing Loan Party, each dated the Closing Date (or, in the case
of certificates of governmental officials, a recent date before the Closing
Date) and each in form and substance satisfactory to the Administrative Agent
and each of the Lenders:


 


(i)            executed counterparts of this
Agreement and the Guaranty, sufficient in number for distribution to the
Administrative Agent, each Lender and the Borrowers;


 


(ii)           a Note or Notes executed by the
Borrowers in favor of each Lender requesting a Note;


 


(iii)          the Terner Pledge executed by Dr. Terner;


 


(iv)          the Amended and Restated Assignable
Option Agreement duly executed by PMS, PMG and Dr. Terner;


 


(v)           a first lien security agreement
(together with each other security agreement and security agreement supplement
delivered pursuant to Section 6.12, in each case as amended, the “Collateral
Agreement”), duly executed by each Loan Party, together with:


 


(A)          certificates
representing all certificated pledged Equity Interests referred to therein accompanied by undated stock powers executed
in blank and instruments evidencing pledged debt indorsed in blank,


 


(B)           the
Administrative Agent shall have received the results of Lien searches
(including a search as to judgments, pending litigation and tax matters), in
form and substance reasonably satisfactory thereto, made against the Loan
Parties and certain of the sellers under the Merger Agreement under the Uniform
Commercial Code (or applicable judicial docket) as in effect in any state in
which any of the assets of such Loan Party are located, indicating among other
things that its assets are free and 


 


64

















 


clear of any Lien except Permitted Encumbrances and the other Liens
permitted under the Loan Documents,


 


(C)           proper Financing Statements in form
appropriate for filing under the Uniform Commercial Code of all
jurisdictions that the Administrative Agent may deem necessary or desirable in
order to perfect the Liens created under the Collateral Agreement, covering the
Collateral described in the Collateral Agreement,


 


(D)          completed
requests for information, dated on or before the date of the initial Credit
Extension, listing all effective
financing statements filed in the jurisdictions referred to in clause (B) above
that name any Loan Party as debtor, together with copies of such other
financing statements,


 


(E)           evidence
of the completion of all other actions, recordings and filings of or with
respect to the Collateral Agreement that the Administrative Agent may deem
necessary or desirable in order to perfect the Liens created thereby,


 


(F)           the deposit account control agreements and the  securities account control agreements as
referred to in the Collateral Agreement and duly executed by the appropriate
parties, in each case perfecting Liens against such accounts in accordance with
the Collateral Agreement, and the Administrative Agent shall be satisfied with
the Loan Parties’ cash management system with respect to Medicaid/Medicare
receivables,


 


(G)           evidence
that all other action that the Administrative Agent may deem necessary or
desirable in order to perfect the Liens created under the Collateral Agreement
has been taken (including receipt of duly executed payoff letters, UCC-3
termination statements and landlords’ and bailees’ waiver and consent
agreements) and all filing and recording fees and taxes shall have been duly
paid; and


 


(H)          to
the extent applicable, intellectual property security agreements in recordable
form and otherwise acceptable to the Administrative Agent and duly executed by
each applicable Loan Party, together with evidence that all action that the
Administrative Agent may deem necessary or desirable in order to perfect the
Liens created under the Collateral Agreement has been taken;


 


(vi)          first lien deeds of trust, trust deeds, deeds to secure
debt, and mortgages covering the properties listed on Schedule 4.01(a)(vi) (together
with the Assignments of Leases and Rents referred to therein and each other
mortgage delivered pursuant to Section 6.12, in each case as
amended, the “Mortgages”),
duly executed by the appropriate Loan Party, together with:


 


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(A)                              evidence
that counterparts of the Mortgages have been duly executed, acknowledged and
delivered and are in form suitable for filing or recording in all filing or
recording offices that the Administrative Agent may deem necessary or desirable
in order to create a valid first and subsisting Lien on the property described
therein in favor of the Administrative Agent for the benefit of the Secured
Parties and that all filing, documentary, stamp, intangible and recording taxes
and fees have been paid,


 


(B)                                fully
paid American Land Title Association Lender’s Extended Coverage title insurance
policies (the “Mortgage Policies”), with endorsements and in amounts
acceptable to the Administrative Agent, issued, coinsured and reinsured by
title insurers acceptable to the Administrative Agent, insuring the Mortgages
to be valid first and subsisting Liens on the property described therein, free
and clear of all defects (including, but not limited to, mechanics’ and
materialmen’s Liens) and encumbrances, excepting only Permitted Encumbrances
and other Liens permitted under the Loan Documents, and providing for such
other affirmative insurance (including endorsements for future advances under
the Loan Documents, for mechanics’ and materialmen’s Liens and for zoning of the
applicable property) and such coinsurance and direct access reinsurance as the
Administrative Agent may deem necessary or desirable,


 


(C)                                property
condition assessments as to the properties described in the Mortgages, from
professional firms acceptable to the Administrative Agent,


 


(D)                               an
environmental assessment report from an environmental consulting firm
acceptable to the Lenders, which report (1) shall be addressed to the
Administrative Agent and the Lenders or otherwise permit reliance by the
Administrative Agent and the Lenders thereon, (2) shall identify existing
and potential environmental concerns, (3) shall quantify related costs and
liabilities, associated with any facilities of either Borrower or any of their respective Subsidiaries and (4) shall
be satisfactory to the Lenders with respect to the nature and amount of any
matters covered thereby and the Lenders
shall be satisfied with the Borrowers’ plans with respect thereto,


 


(E)                                 estoppel and consent agreements executed by
each of the lessors of the leased real properties listed on Schedule 5.08(d)(i),
together with legal descriptions sufficient for recording in the real property
records of the applicable county; provided, however, that to the
extent that any estoppel and consent agreements for the leased real properties
listed on Schedule 5.08(d)(i) are not obtained prior to the Closing
Date, the Borrowers shall use commercially reasonable efforts deliver such
agreements and memoranda within 60 days following the Closing Date,


 


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(F)                                 evidence
of the insurance required by the terms of the Mortgages, and


 


(G)                                evidence
that all other action that the Administrative Agent may deem necessary or
desirable in order to create valid first and subsisting Liens on the property
described in the Mortgages has been taken;


 


(vii)                           such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Loan Party as the
Administrative Agent may require evidencing the identity, authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible
Officer in connection with this Agreement and the other Loan Documents to which
such Loan Party is a party or is to be a party;


 


(viii)                        such
documents and certifications as the Administrative Agent may reasonably require
to evidence that each Loan Party is duly organized or formed, and that each Borrower and each Loan Party is validly
existing, in good standing and qualified to engage in business in each jurisdiction where its ownership,
lease or operation of properties or the conduct of its business requires such
qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;


 


(ix)                                a
favorable opinion of Theodora Oringher Miller and Richman PC, counsel to the
Loan Parties, addressed to the Administrative Agent and each Lender, as to such
matters concerning the Loan Parties and the Loan Documents as the
Administrative Agent or the Required Lenders may reasonably request;


 


(x)                                   a favorable opinion of Strategic Law
Partners, LLP, counsel for the
Company and its Subsidiaries, delivered in connection with the Merger which
opinion is either (A) addressed to the Administrative Agent and the
Lenders or (B) accompanied by a reliance letter from such counsel
addressed to the Administrative Agent and the Lenders that expressly states
that the Administrative Agent and the Lenders may rely on such opinion;


 


(xi)                                evidence
of the receipt of all Governmental Approvals (including all applicable
healthcare and other applicable regulatory), shareholder and third party
consents (including Hart-Scott-Rodino clearance) and approvals necessary or, in
the opinion of the Administrative Agent, desirable in connection with the
Transactions and the related financings and other transactions contemplated
hereby and expiration of all applicable waiting periods without any action
being taken by any authority that could restrain, prevent or impose any
material adverse conditions on the Borrowers and their Subsidiaries or such
other transactions or that could seek or threaten any of the foregoing, and no
law or regulation shall be applicable which in the reasonable judgment of the
Administrative Agent could have such an effect;


 


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(xii)                             a
Business Associate Agreement duly executed by each Loan Party and
AMVI/Prospect;


 


(xiii)                          a
certificate of a Responsible Officer of each Loan Party either (A) attaching
copies of all consents, licenses and approvals required in connection with the
consummation by such Loan Party of the Transaction and the execution, delivery
and performance by such Loan Party and the validity against such Loan Party of
the Loan Documents to which it is a party, and such consents, licenses and
approvals shall be in full force and effect, or (B) stating that no such
consents, licenses or approvals are so required;


 


(xiv)                         evidence that the Borrowers have obtained corporate/corporate family
ratings from Moody’s and S&P, as applicable, of at least B3/B-,
respectively, and in each case, with a stable outlook or better;


 


(xv)                            a
certificate signed by a Responsible Officer of each Borrower certifying (A) that
the conditions specified in Sections 4.02(a) and (b) have
been satisfied, (B) except
as set forth on Schedule 4.01(a)(xv), that there has been no event or
circumstance since the date of the Audited Financial Statements that has had or
could be reasonably expected to have, either individually or in the aggregate, a
Material Adverse Effect; and (C) a
calculation as of the last day of the fiscal quarter of Holdings most recently
ended prior to the Closing Date reflecting that the Consolidated
Leverage Ratio of Holdings and its Subsidiaries (which ratio shall be calculated
reflecting the Transactions contemplated hereby on a pro forma basis) is not
greater than 3.5:1.0;


 


(xvi)                         pro forma
consolidated financial statements of Holdings and its Subsidiaries as of as of the last day of the fiscal quarter of
Holdings most recently ended prior to the Closing Date giving effect to
all elements of the Transactions, and forecasts prepared by management of the
Borrowers, each in form satisfactory to the Lenders, of balance sheets, income
statements and cash flow statements on a monthly basis for the first year
following the Closing Date and on an annual basis for each year thereafter
during the term of this Agreement;


 


(xvii)                      the annual
(or other audited) financial statements of each of (A) the Borrowers and
their respective Subsidiaries and (B) the Company and its Subsidiaries for
the fiscal years ended 2004, 2005, and 2006, and interim financial statements
of each of (A) the Borrowers and their respective Subsidiaries and (B) the
Company and its Subsidiaries dated of the end of the most recent fiscal quarter
for which financial statements are available;


 


(xviii)                   evidence that
all Loans will be in full compliance with the Federal Reserve’s margin
regulations;


 


(xix)                           certificates
attesting to the Solvency of each Loan Party before and after giving effect to
the Transaction, from each Borrower’s chief financial officer;


 


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(xx)                              the
Lenders shall be satisfied with the amount, terms, conditions and holders of
all intercompany indebtedness and all material indebtedness and other material
liabilities owing to third parties to be outstanding on and after the Closing
Date;


 


(xxi)                           evidence that all insurance required to be
maintained pursuant to the Loan Documents has been obtained and is in effect,
together with the certificates of insurance, naming the Administrative Agent,
on behalf of the Lenders, as an additional insured or loss payee, as the case
may be, under all insurance policies maintained with respect to the assets and
properties of the Loan Parties that constitutes Collateral;


 


(xxii)                        certified
copies of each of the Related Documents, duly executed by the parties thereto,
together with all agreements, instruments and other documents delivered in
connection therewith as the Administrative Agent shall request;


 


(xxiii)                     certified copies of a certificate of merger
or other confirmation satisfactory to the Lenders of the consummation of the
Merger from the Secretary of State of the State of California;


 


(xxiv)                    a duly completed Compliance Certificate as
of the last day of the fiscal quarter of Holdings ended March 31, 2007,
signed by chief executive officer, chief financial officer, treasurer or
controller of Holdings;


 


(xxv)                       evidence that each Existing Credit
Agreement has been, or concurrently with the Closing Date is being, terminated
and all Liens securing obligations under each Existing Credit Agreement have
been, or concurrently with the Closing Date are being, released;


 


(xxvi)                    evidence that Holdings has received
approval from the American Stock Exchange for the listing of common shares of
Holdings stock thereon in connection with the conversion of the preferred
equity issued to Samuel S. Lee and The David and Alexa Topper Family
Trust U/D/T September 29, 1997;


 


(xxvii)                 a
copy of each duly-executed Voting Agreement delivered in connection with the
Merger Agreement;


 


(xxviii)              duly
executed counterparts to the Intercreditor Agreement; and


 


(xxix)                      such other
assurances, certificates, documents, consents, reports, audits or opinions as
the Administrative Agent, the L/C Issuer, the Swing Line Lender or any Lender
reasonably may require.


 


(b)         (i) All fees
required to be paid to the Administrative Agent and the Arranger on or before
the Closing Date shall have been paid and (ii) all fees required to be
paid to the Lenders on or before the Closing Date shall have been paid.


 


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(c)          Unless waived by the
Administrative Agent, the Borrowers shall have paid all fees, charges and
disbursements of counsel to the Administrative Agent (directly to such counsel
if requested by the Administrative Agent) to the extent invoiced prior to or on
the Closing Date, plus such additional amounts of such fees, charges and
disbursements as shall constitute its reasonable estimate of such fees, charges
and disbursements incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude a
final settling of accounts between the Borrowers and the Administrative Agent).


 


(d)         (i) The final terms and conditions of
each aspect of the Merger, including, without limitation, all tax aspects
thereof, shall be satisfactory to the Lenders and the Merger shall have been consummated  strictly
in accordance with the terms of the Merger Agreement, without any waiver or
amendment not consented to by the Lenders of any term, provision or condition
set forth therein, and in compliance with all applicable requirements of Law;
(ii) the Lenders shall be reasonably satisfied with the Merger Agreement
(including all schedules and exhibits thereto) which shall provide for an
aggregate purchase price not in excess of $144,000,000 (less the indebtedness
of the Company), and all other agreements, instruments and documents relating
to the Merger; (iii) and the Related Documents shall not have been
altered, amended or otherwise changed or supplemented prior to the Closing Date
or any condition therein waived without the prior written consent of the
Lenders; and (iv) in connection with any and all judgment liens shown of
record as a Lien against any real or personal property of any Loan Party, the
Borrowers shall have provided the Administrative Agent either (A) evidence
reasonably acceptable to the Administrative Agent that such judgment lien has
been satisfied and that the applicable Loan Party has, or is diligently
pursuing, a release of lien to be filed in all public records, with such
release of lien to be so filed in any event no later than thirty (30) days
after the Closing Date or (B) if the Lien has not been paid, or if the
applicable Loan Party is unable to establish to the satisfaction of the
Administrative Agent that such judgment lien has been paid and is no long of
force and effect, the Borrowers have deposited funds with an escrow agent reasonably
acceptable to the Administrative Agent in an amount sufficient to pay in full
each such judgment lien and have delivered to the Administrative Agent a demand
from the corresponding judgment creditor for each such outstanding judgment
lien; and (iv) in connection with any and all state and federal tax liens
shown of record as a Lien against any Loan Party’s personal or real property,
the Borrowers shall have delivered to the Administrative Agent evidence
acceptable to the Administrative Agent that each such tax lien has been
satisfied and that the applicable Loan Party has, or is diligently pursuing, a
release of lien to be filed in all public records, with such release of lien to
be so filed in any event no later than thirty (30) days after the Closing Date.


 


(e)          The
Lenders shall have completed a due diligence investigation of the Borrowers,
the Company and their respective Subsidiaries in scope, and with results,
satisfactory to the Lenders, and shall have been given such access to the
management, records, books of account, contracts and properties of the
Borrowers, the Company, their respective Subsidiaries and shall have received
such financial, business and other information regarding each of the foregoing
Persons and businesses as they shall have requested, including information as
to possible contingent liabilities, tax matters, 


 


70

















 


collective
bargaining agreements and other arrangements with employees, and no changes or
developments shall have occurred, and no new or additional information shall
have been received or discovered by the Administrative Agent or the Lenders
regarding the Borrowers, the Company and their respective Subsidiaries or the
Transaction after May 23, 2007 that (A) either individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect or (B) purports
to adversely affect the Facilities or any other aspect of the Transaction, and
nothing shall have come to the attention of the Lenders during the course of
such due diligence investigation to lead them to believe (i) that the
Information Memorandum was or has become misleading, incorrect or incomplete in
any material respect, (ii) that, following the consummation of the
Transaction, Holdings would not have good and marketable title to all material
assets of the Company and its Subsidiaries reflected in the Information
Memorandum or (iii) that the Transaction will have a Material Adverse
Effect.


 


(f)            The Lenders shall be
satisfied with the pro forma capital and ownership structure and the
shareholder arrangements of the Loan Parties and their Affiliates after giving
effect to the Transactions, including, without limitation,  the respective charter and bylaws (or equivalent
document/agreement) of each Loan Party and each agreement or instrument
relating thereto.


 


(g)         No action, suit,
investigation or proceeding shall be pending or, to the knowledge of the
Borrowers or the Company, or any Subsidiary thereof, threatened in any court or
before any arbitrator or Governmental Authority that could reasonably be
expected to have a Material Adverse Effect.


 


(h)         (i) the Second Lien
Loan Documents shall be in form and substance satisfactory to the
Administrative Agent and (ii) concurrent with the closing of the Facilities
and the funding of the Term Loan, the Borrowers shall have borrowed $50,000,000
pursuant to, and in accordance with, the Second Lien Credit Agreement.


 


Without limiting the generality of the provisions of
the last paragraph of Section 9.03, for purposes of determining
compliance with the conditions specified in this Section 4.01, each
Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.


 


4.02                           Conditions
to all Credit Extensions.  The
obligation of each Lender to honor any Request for Credit Extension (other than
a Committed Loan Notice requesting only a conversion of Loans to the other
Type, or a continuation of Eurodollar Rate Loans) is subject to the following
conditions precedent:


 


(a)          The representations and
warranties of the Borrowers contained in Article V or any other
Loan Document, or which are contained in any document furnished at any time
under or in connection herewith or therewith, shall be true and correct on and
as of the date of such Credit Extension, except to the extent that such
representations and 


 


71

















 


warranties specifically refer
to an earlier date, in which case they shall be true and correct as of such earlier
date, and except that for purposes of this Section 4.02, the
representations and warranties contained in Sections 5.05(a) and (b) shall
be deemed to refer to the most recent statements furnished pursuant to Sections
6.01(a) and (b), respectively.


 


(b)         No Default shall exist,
or would result from such proposed Credit Extension or from the application of
the proceeds thereof.


 


(c)          The Administrative Agent
and, if applicable, the L/C Issuer or the Swing Line Lender shall have received
a Request for Credit Extension in accordance with the requirements hereof.


 


Each Request for Credit Extension (other than a
Committed Loan Notice requesting only a conversion of Loans to the other Type
or a continuation of Eurodollar Rate Loans) submitted by the Borrowers shall be
deemed to be a representation and warranty that the conditions specified in Sections
4.02(a) and (b) have been satisfied on and as of the date of the
applicable Credit Extension.


 


ARTICLE
V

REPRESENTATIONS AND WARRANTIES


 


Each Borrower
represents and warrants to the Administrative Agent and the Lenders that:


 


5.01                           Existence,
Qualification and Power.  Each Loan
Party and each of its Subsidiaries (a) is duly organized or formed,
validly existing and, as applicable, in good standing under the Laws of the
jurisdiction of its incorporation or organization, (b) has all requisite
power and authority and all requisite governmental licenses, authorizations,
consents and approvals to (i) own or lease its assets and carry on its
business and (ii) execute, deliver and perform its obligations under the
Loan Documents and Related Documents to which it is a party and consummate the
Transaction, and (c) is duly qualified and is licensed and, as applicable,
in good standing under the Laws of each jurisdiction where its ownership, lease
or operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clause (b)(i) or
(c), to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect.


 


5.02                           Authorization;
No Contravention.  The execution,
delivery and performance by each Loan Party of each Loan Document and Related
Document to which such Person is or is to be a party have been duly authorized
by all necessary corporate or other organizational action, and do not and will
not (a) contravene the terms of any of such Person’s Organization
Documents; (b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, or require any payment to be made under (i) any
Contractual Obligation to which such Person is a party or affecting such Person
or the properties of such Person or any of its Subsidiaries (other than Liens
arising under the Second Lien Loan Documents) or (ii) any order, injunction,
writ or decree of any Governmental Authority or any arbitral award to which
such Person or its property is subject; or (c) violate any Law.


 


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5.03                           Governmental
Authorization; Other Consents.  No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or
required in connection with (a) the execution, delivery or performance by,
or enforcement against, any Loan Party of this Agreement or any other Loan
Document or Related Document, or for the consummation of the Transaction, (b) the
grant by any Loan Party of the Liens granted by it pursuant to the Collateral
Documents, (c) the perfection or maintenance of the Liens created under
the Collateral Documents (including the first priority nature thereof) or (d) the
exercise by the Administrative Agent or any Lender of its rights under the Loan
Documents or the remedies in respect of the Collateral pursuant to the Collateral
Documents.  All applicable waiting
periods in connection with the Transaction have expired without any action
having been taken by any Governmental Authority restraining, preventing or
imposing materially adverse conditions upon the Transaction or the rights of
the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose
of, or to create any Lien on, any properties now owned or hereafter acquired by
any of them.


 


5.04                           Binding
Effect.  This Agreement has been, and
each other Loan Document, when delivered hereunder, will have been, duly
executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is
party thereto in accordance with its terms.


 


5.05                           Financial
Statements; No Material Adverse Effect. 
(a)  The Audited Financial Statements (i) were prepared in
accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; (ii) fairly present
the financial condition of the Borrowers and their respective Subsidiaries as
of the date thereof and their results of operations for the period covered
thereby in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein; and (iii) show
all material indebtedness and other liabilities, direct or contingent, of the
Borrowers and their Subsidiaries as of the date thereof, including liabilities
for taxes, material commitments and Indebtedness.


 


(b)                                 The unaudited consolidated
balance sheet of Holdings and its Subsidiaries dated March 31, 2007, and the
related consolidated statements of income or operations, shareholders’ equity
and cash flows for the fiscal quarter ended on that date (i) were prepared
in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein, and (ii) fairly
present the financial condition of Holdings and its Subsidiaries as of the
date thereof and their results of operations for the period covered thereby,
subject, in the case of clauses (i) and (ii), to the absence of footnotes
and to normal year-end audit adjustments.


 


(c)                                  Except as set forth on Schedule
4.01(a)(xv), since the date of the Audited Financial Statements, there has
been no event or circumstance, either individually or in the aggregate, that
has had or could reasonably be expected to have a Material Adverse Effect.


 


(d)                                 The consolidated and
consolidating pro forma balance sheet of Holdings and its Subsidiaries as at March 31,
2007, and the related consolidated and consolidating pro forma statements
of income and cash flows of the Borrowers and their Subsidiaries for the 


 


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twelve months then
ended, certified by the chief financial officer or treasurer of the Borrowers,
copies of which have been furnished to each Lender, fairly present the consolidated
and consolidating pro forma financial condition of Holdings and its Subsidiaries as at such date and the consolidated
and consolidating pro forma results of operations of Holdings and its Subsidiaries for the period ended on such date,
in each case giving effect to the Transaction, all in accordance with GAAP.


 


(e)                                  The consolidated and
consolidating forecasted balance sheet, statements of income and cash flows of Holdings and its Subsidiaries delivered
pursuant to Section 4.01 or Section 6.01(d) were
prepared in good faith on the basis of the assumptions stated therein, which
assumptions were fair in light of the conditions existing at the time of
delivery of such forecasts, and represented, at the time of delivery, the
Borrowers’ best estimate of its future financial condition and performance.


 


5.06                           Litigation.  There are no actions, suits, proceedings,
claims or disputes pending or, to the knowledge of either Borrower after due
and diligent investigation, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, by or against either Borrower
or any of their respective Subsidiaries or against any of their properties or
revenues that (a) purport to affect or pertain to this Agreement, any
other Loan Document, or any Related Document, (b) except as disclosed on Schedule
5.06(b), purport to affect or pertain to the consummation of the
Transaction or (c) except as specifically disclosed in Schedule 5.06(c),
either individually or in the aggregate, if determined adversely, could
reasonably be expected to have a Material Adverse Effect.


 


5.07                           No
Default.  Schedule 5.07 sets
forth a complete and accurate list of all Material Contracts to which any Loan
Party is a party.  Neither any Loan Party
nor any Subsidiary thereof is in default under or with respect to, or a party
to, any Contractual Obligation that could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or
would result from the consummation of the transactions contemplated by this
Agreement or any other Loan Document.


 


5.08                           Ownership
of Property; Liens; Investments.


 


(a)                                  Each Loan Party and each of its
Subsidiaries has good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary
conduct of its business, except for such defects in title as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.


 


(b)                                 Schedule 5.08(b) sets forth a complete and
accurate list of all Liens on the property or assets of each Loan Party and
each of its Subsidiaries, showing as of the date hereof the lienholder thereof,
the principal amount of the obligations secured thereby and the property or
assets of such Loan Party or such Subsidiary subject thereto.  The property of each Loan Party and each of
its Subsidiaries is subject to no Liens, other than Liens set forth on Schedule 5.08(b),
and as otherwise permitted by Section 7.01.


 


(c)                                  Schedule 5.08(c) sets forth a complete and
accurate list of all real property owned by each Loan Party and each of its
Subsidiaries, showing as of the date hereof the street 


 


74

















 


address, county or other relevant jurisdiction, state, record owner and
book and estimated fair value thereof. 
Each Loan Party and each of its Subsidiaries has good, marketable and
insurable fee simple title to the real property owned by such Loan Party or
such Subsidiary, free and clear of all Liens, other than Liens created or
permitted by the Loan Documents.


 


(d)                                 (i)  Schedule 5.08(d)(i) sets
forth a complete and accurate list of all leases of real property under which
any Loan Party or any Subsidiary of a Loan Party is the lessee, showing as of
the date hereof the street address, county or other relevant jurisdiction,
state, lessor, lessee, expiration date and annual rental cost thereof.  Each such lease is the legal, valid and
binding obligation of the lessor thereof, enforceable in accordance with its
terms.


 


(ii)                                  Schedule
5.08(d)(ii) sets forth a complete and accurate list of all leases of
real property under which any Loan Party or any Subsidiary of a Loan Party is
the lessor, showing as of the date hereof the street address, county or other
relevant jurisdiction, state, lessor, lessee, expiration date and annual rental
cost thereof.  Each such lease is the
legal, valid and binding obligation of the lessee thereof, enforceable in accordance
with its terms.


 


(e)                                  Schedule 5.08(e) sets forth a complete and
accurate list of all Investments held by any Loan Party or any Subsidiary of a
Loan Party on the date hereof, showing as of the date hereof the amount,
obligor or issuer and maturity, if any, thereof.


 


5.09                           Environmental
Compliance.


 


(a)                                  (i) each of the Loan
Parties and their respective Subsidiaries is in compliance with all
Environmental Laws except where non-compliance would not, individually or in
the aggregate, have a Material Adverse Effect; and (ii) all operations or
activities upon, or any use, occupancy or operation of the Real Property, are
in compliance with all Environmental Laws except where non-compliance could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.


 


(b)                                 No Loan
Party has stored, manufactured, used, generated or dumped any Hazardous
Materials on, in, under or upon any of the Real Property, except for uses and
temporary storage of Hazardous Materials reasonably necessary to the customary
operation of a general acute care hospital in material compliance with
applicable Environmental Laws.


 


(c)                                  None
of the Real Property is listed or proposed for listing on the NPL or on the
CERCLIS or any analogous foreign, state or local list or is adjacent to any
such property.


 


(d)                                 No
Loan Party has ever received any written communication from a Governmental
Authority or any other Person that alleges that such Loan Party is not in
material compliance with Environmental Laws or is otherwise subject to
liability relating to Environmental Laws;


 


(e)                                  There is no claim pending or, to
either Borrower’s knowledge, threatened against any Loan Party or any of the
Real Property, and
no material work, repairs, remedy, remediation, clean-up, construction or
capital expenditures are required by any Environmental Laws with respect to the
Real Property in order for the continued lawful use of the Real Property 


 


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operated by any Loan Party as of the Closing Date, as it has been and
is currently used, subject to such exceptions that would not have a Material
Adverse Effect;


 


(f)                                    Each of the Loan Parties is in
compliance with OSHA requirements respecting friable asbestos, if any, located
on the Real Property, or any portion thereof, except where non-compliance would
not have a Material Adverse Effect; and in this regard, each Loan Party has
properly implemented an operations and maintenance training program where
required for certain of its employees in the proper handling and removal of
asbestos in compliance with OSHA requirements except where non-compliance would
not have a Material Adverse Effect;


 


(g)                                 There are no above or
underground storage tanks located on or beneath the Real Property except as
disclosed on Schedule 5.09.  All
above or underground storage tanks currently operated on any of the Real
Property by any Loan Party, if any, are in compliance with applicable
Environmental Laws, except where non-compliance would not have a Material
Adverse Effect.  For any underground
storage tanks which were formerly located on any Real Property, and of which
any Loan Party has knowledge, such tanks were removed or closed in place in
compliance with applicable Environmental Laws except where non-compliance would
not have a Material Adverse Effect, and any remediation work required as a
result of any release, leakage or discharge of Hazardous Materials from such
tanks or related lines has been fully completed in accordance with
Environmental Laws and accepted by the applicable Governmental Authority, subject
to such exceptions that would not have a Material Adverse Effect.


 


5.10                           Insurance.  The properties of the Borrowers and their
respective Subsidiaries are insured with financially sound and reputable
insurance companies not Affiliates of the Borrowers, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the Borrowers or the applicable Subsidiary operates.


 


5.11                           Taxes.  Other than as set forth on Schedule 5.11,
the Borrowers and their respective Subsidiaries have filed all Federal, state
and other material tax returns and reports required to be filed, and have paid
all Federal, state and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings diligently conducted and for which
adequate reserves have been provided in accordance with GAAP.  There is no proposed tax assessment against
any Borrower or any Subsidiary that would, if made, have a Material Adverse
Effect.  Neither any Loan Party nor any
Subsidiary thereof is party to any tax sharing agreement.  The
Merger will not be taxable to either Borrower or any of their respective
Subsidiaries (including the Company) or AMVI/Prospect.


 


5.12                           ERISA
Compliance.  (a)  Each Plan is
in compliance in all material respects with the applicable provisions of ERISA,
the Code and other Federal or state Laws. 
Each Plan that is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with
respect thereto and, to the best knowledge of each Borrower, nothing has
occurred which would prevent, or cause the loss of, such qualification.  Each Borrower and each 


 


76

















 


ERISA Affiliate have made all required contributions to each Plan
subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412
of the Code has been made with respect to any Plan.


 


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


 


(c)                                  (i) Except as set forth on Schedule
5.12(c), no ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) neither Borrower
nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither
Borrower nor any ERISA Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.


 


5.13                           Subsidiaries;
Equity Interests; Loan Parties.  No Loan Party has any Subsidiaries
other than those specifically disclosed in Part (a) of Schedule
5.13, and all of the outstanding Equity Interests in such Subsidiaries have
been validly issued, are fully paid and non-assessable and are owned by a Loan
Party in the amounts specified on Part (a) of Schedule 5.13
free and clear of all Liens except those created under the Collateral
Documents.  No Loan Party has any equity investments in any other corporation
or entity other than those specifically disclosed in Part (b) of Schedule
5.13.  All of the outstanding Equity
Interests in Holdings have been validly issued, are fully paid and
non-assessable and Holdings’ authorized Equity Interests are set forth on Part (c) of
Schedule 5.13.  Set forth on Part (d) of
Schedule 5.13 is a complete and accurate list of all Loan Parties,
showing as of the Closing Date (as to each Loan Party) the jurisdiction of its
incorporation, the address of its principal place of business and its U.S.
taxpayer identification number or, in the case of any non-U.S. Loan Party that
does not have a U.S. taxpayer identification number, its unique identification
number issued to it by the jurisdiction of its incorporation.  The copy of the charter of each Loan Party
and each amendment thereto provided pursuant to Section 4.01(a)(viii) is a true and correct copy of
each such document, each of which is valid and in full force and effect.


 


5.14                           Margin
Regulations; Investment Company Act.


 


(a)                                  Neither Borrower is engaged or
will engage, principally or as one of its important activities, in the business
of purchasing or carrying margin stock (within the meaning of Regulation U
issued by the FRB), or extending credit for the purpose of purchasing or carrying
margin stock.


 


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(b)           None
of the Borrowers, any Person Controlling either Borrower, or any Subsidiary of
either Borrower is or is required to be registered as an “investment company”
under the Investment Company Act of 1940.


 


5.15         Disclosure.  The Borrowers have disclosed to the
Administrative Agent and the Lenders all agreements, instruments and corporate
or other restrictions to which they or any of their respective Subsidiaries or any other Loan Party is subject,
and all other matters known to it, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate
or other information furnished (whether in writing or orally) by or on behalf
of any Loan Party to the Administrative Agent or any Lender in connection with
the transactions contemplated hereby and the negotiation of this Agreement or
delivered hereunder or under any other Loan Document (in each case as modified
or supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrowers represent only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.


 


5.16         Compliance
with Laws.  Each Loan Party and each
Subsidiary thereof is in compliance in all respects with the requirements of
all Laws (including all Health Care Laws and Seismic Compliance Laws (giving
effect to any extensions or exemptions then in existence), all applicable
Medicare and Medicaid rules and regulations, and to the extent applicable,
the California Department of Managed Care financial solvency regulations) and
all orders, writs, injunctions and decrees applicable to it or to its
properties, except in such instances in which (a) such requirement of Law
or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. 
There is no basis for (a) any Offsets asserted or threatened to be
asserted against any Loan Party by any Obligor (including but not limited to
amounts due to Medicare or the IRS), or (b) any overdue or delinquent
liabilities or Indebtedness which could give rise to a right of a federal
Governmental Authority or any other Person to offset or levy with respect to
such liabilities or Indebtedness against any accounts receivable of a Loan
Party or payments due thereon.  No
condition exists and no event has occurred which, in itself or with the giving
of notice or lapse of time or both, would result in the suspension, revocation,
impairment, forfeiture or non-renewal of any governmental consent or permit
applicable to any Loan Party or any facility owned or operated by it.


 


5.17         Intellectual
Property; Licenses, Etc.  Each Loan
Party and each of its Subsidiaries own, or possess the right to use, all of the
trademarks, service marks, trade names, copyrights, patents, patent rights,
franchises, licenses and other intellectual property rights (collectively, “IP
Rights”) that are reasonably necessary for the operation of their
respective businesses, without conflict with the rights of any other
Person.  To the best knowledge of each
Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by any Loan Party or any of its Subsidiaries infringes upon any
rights held by any other Person.  No
claim or litigation regarding any of the foregoing is pending or, to the best
knowledge of each Borrower, 


 


78

















 


threatened, which, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.


 


5.18         Solvency.  Each Loan Party is, individually and together
with its Subsidiaries on a consolidated basis, Solvent.


 


5.19         Casualty,
Etc.  Neither the businesses nor the
properties of any Loan Party or any of its Subsidiaries are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that, either individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.


 


5.20         Health
Care Matters.


 


(a)           Compliance with Health Care Laws; Permits.  Without limiting the
generality of Section 5.16, each Loan Party and each of its
Subsidiaries, and any Person acting on their behalf, is in compliance in all
material respects with all Health Care Laws applicable to it, its products and
its properties or other assets or its business or operation, including its
provision of professional services.  Each
Loan Party and each of its Subsidiaries, and any Person acting on their behalf,
has in effect all material Permits, including, without limitation, all material
Permits necessary for it to own, lease or operate its properties and other
assets and to carry on its business and operations, including its provision of
professional services, as presently conducted. 
All such material Permits are in full force and effect and there has
occurred no default under, or violation of, any such material Permit.  No action, demand, or investigation by any
Governmental Authority and no suit, action or proceeding by any other person,
in each case with respect to each Loan Party, any of its Subsidiaries, any
Person acting on their behalf, or any of their respective properties, other
assets or provision of professional services under any requirements of Law, is
pending or, to the knowledge of any Loan Party or its Subsidiaries, threatened.


 


(b)           Filings. 
All reports,
documents, claims, notices or approvals required to be filed, obtained,
maintained or furnished to any Governmental Authority have been so filed,
obtained, maintained or furnished, and all such reports, documents, claims and
notices were complete and correct in all material respects on the date filed
(or were corrected in or supplemented by a subsequent filing).


 


(c)           Material Statements.  No Loan Party nor any of
its Subsidiaries, nor any officer, affiliate, employee or agent of any Loan
Party or any of its Subsidiaries, has made an untrue statement of a material
fact or fraudulent statement to any Governmental Authority, failed to disclose
a material fact required to any Governmental Authority, or committed an act,
made a statement, or failed to make a statement that, at the time such
disclosure was made, would reasonably be expected to constitute a violation of
any Health Care Law.  No Loan Party nor
any of its Subsidiaries, nor any officer, affiliate or employee of any Loan
Party, nor to any Loan Party’s knowledge, any agent of any Loan Party or any of
its Subsidiaries, has made any untrue statement of fact regarding claims
incurred but not reported.


 


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(d)           Billing. 
Each Loan Party, each of its Subsidiaries and each
contracting physician of a Loan Party or Subsidiary (to the extent required)
has the requisite provider number or other Permit to bill the Medicare program
(to the extent such entity participates in the Medicare program), the
respective Medicaid program in the state or states in which such entity
operates, and all other Third Party Payor Programs, including but not limited
to Capitated Contracts with managed care organizations, that each Loan Party
and each of its Subsidiaries currently bill. 
There is no investigation, audit, claim review, or other action pending,
or to the knowledge of any Loan Party or its Subsidiaries, threatened which
could result in a revocation, suspension, termination, probation, restriction,
limitation, or non-renewal of any Third Party Payor provider number or result
in any Loan Party’s or any Subsidiaries’ exclusion from any Third Party Payor
Program.  No Loan Party nor each of its
Subsidiaries has billed or received any payment or reimbursement in excess of
amounts allowed by any Health Care Law or other Law.


 


(e)           Proceedings.  There are no facts,
circumstances or conditions that would reasonably be expected to form the basis
for any material investigation, suit, claim, audit, action (legal or
regulatory) or proceeding (legal or regulatory) by a Governmental Authority
against or affecting any Loan Party or any of its Subsidiaries relating to any
of the Health Care Laws.


 


(f)            Prohibited Transactions.  Neither
the Loan Parties nor any Subsidiary nor any Person acting on behalf of the Loan
Parties or any Subsidiary is a party to any contract, lease agreement or other
arrangement (including any joint venture or consulting agreement) with any
physician, health care facility, hospital, nursing facility, home health agency
or other person who is in a position to make or influence referrals to or
otherwise generate business to provide services, lease space, lease equipment
or engage in any other venture or activity, other than agreements which are in
compliance with all applicable Health Care Laws.  Neither the Loan Parties nor any Subsidiary,
nor any person acting on behalf of the Loan Parties or any Subsidiary, directly
or indirectly:  (1) offered, paid or
received any remuneration, in cash or in kind, to, or made any financial
arrangements with, any past, present or potential patient, supplier, medical
staff member, referral source, contractor or Third Party Payor of the Loan
Parties and/or any Subsidiary in order to illegally obtain or refer business or
receive payments from such person; (2) given, received or agreed to give
or receive, or is aware that there has been made or that there is any illegal
agreement to make or receive, any illegal gift or gratuitous payment of any
kind, nature or description (whether in money, property or services) to any
past, present or potential patient, supplier, contractor, Third Party Payor or
any other person; (3) made or agreed to make, or is aware that there has
been made or that there is  any agreement to make, any
contribution, payment or gift of funds or property to, or for the private use
of, any governmental official, employee or agent where either the contribution,
payment or gift or the purpose of such contribution, payment or gift is or was
illegal under the laws of any government entity having jurisdiction over such
payment, contribution or gift; (4) established or maintained any
unrecorded fund or asset for any purpose or made any misleading, false or
artificial entries on any of its books or records for any reason; or (5) made,
or agreed to make, or is aware that there has been made or that there is any
agreement to make, any payment to any person with the intention or understanding
that any part of such payment would be used or was given for any purpose other
than that described in the documents supporting such payment.


 


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(g)           Medicare/Medicaid.  There are no Medicare or
Medicaid termination proceedings underway with respect to any  of the Loan Parties, each entity meets the
Medicare conditions of participation and no employee or independent contractor
to any of the Loan Parties has been excluded from participating in Medicare or Medicaid
or any similar federal programs.


 


(h)           Compliance. 
Each Loan Party possesses and implements all requisite
policies and procedures to ensure that all aspects of Loan Parties’ operations,
their employees, and all healthcare providers under contract with any Loan
Party,  comply with all applicable
Health Care Laws.


 


5.21         Labor
Matters.   Except as set forth on Schedule
5.21, there are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any of its Subsidiaries as of the
Closing Date and neither the Borrower nor any Subsidiary has suffered any
strikes, walkouts, work stoppages or other material labor difficulty
within the last five years.


 


5.22         Collateral
Documents.   The provisions of the
Collateral Documents are effective to create in favor of the Administrative
Agent for the benefit of the Secured Parties a legal, valid and enforceable
first priority Lien (subject to Liens permitted by Section 7.01(a)-(i) and
(k)) on all right, title and interest of the respective Loan Parties in
the Collateral described therein.  Except
for filings completed prior to the Closing Date and as contemplated hereby and
by the Collateral Documents, no filing or other action will be necessary to
perfect or protect such Liens.


 


ARTICLE
VI

AFFIRMATIVE COVENANTS


 


So long as any Lender shall have any Commitment
hereunder, any Loan or other Obligation hereunder shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, each Borrower shall, and shall (except
in the case of the covenants set forth in Sections 6.01, 6.02, 6.03
and 6.11) cause each of its respective Subsidiaries to:


 


6.01         Financial
Statements.  Deliver to the
Administrative Agent and each Lender, in form and detail satisfactory to the
Administrative Agent and the Required Lenders:


 


(a)   as soon as available, but in any event within
120 days after the end of each fiscal year of Holdings (commencing with the fiscal year ended September 30, 2007),
a consolidated and consolidating balance sheet of Holdings and its Subsidiaries as at the end of such fiscal year,
and the related consolidated and consolidating statements of income or
operations, shareholders’ equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and prepared in accordance with GAAP, such
consolidated statements to be audited and accompanied by a report and opinion
of an independent certified public accountant of nationally recognized standing
reasonably acceptable to the Required Lenders, which report and opinion shall
be prepared in accordance with generally accepted auditing standards and shall
not be subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit, 


 


81

















 


and together with any letters
from such accountants to the board of directors or management of Holdings;


 


(b)   as soon as available, but in any event within
45 days after the end of each of the first three fiscal quarters of each fiscal
year of Holdings
(commencing with the fiscal quarter ended June 30, 2007), a
consolidated and consolidating balance sheet of Holdings and its Subsidiaries as at the end of such fiscal
quarter, and the related consolidated and consolidating statements of income or
operations, shareholders’ equity and cash flows for such fiscal quarter and for
the portion of Holdings’
fiscal year then ended, setting forth in each case in comparative form the
figures for the corresponding fiscal quarter of the previous fiscal year and
the corresponding portion of the previous fiscal year, all in reasonable
detail, such consolidated statements to be certified by the chief executive
officer, chief financial officer, treasurer or controller of Holdings as fairly presenting the
financial condition, results of operations, shareholders’ equity and cash flows
of Holdings and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes;


 


(c)   as soon as available, but in any event within
30 days after the end of each of the first 11 months of each fiscal year of Holdings (commencing with the fiscal month
ended June 30, 2007), a consolidated and consolidating balance sheet of Holdings and its
Subsidiaries as of the end of such month, and the related consolidated and
consolidating statements of income or operations, shareholders’ equity and cash
flows for such month and for the portion of Holdings’ fiscal year than ended setting forth in each case in
comparative form for the corresponding month of the previous fiscal year and
the corresponding portion of the previous fiscal year, all in reasonable detail
and duly certified by the chief executive officer, chief financial officer,
treasurer or controller of  Holdings; and


 


(d)   as soon as available, but in any event at
least 15 days before the beginning of each fiscal year of Holdings, an annual business plan
and budget of the Borrowers and their respective Subsidiaries on a consolidated
basis, including forecasts prepared by management of the Borrowers, in form
satisfactory to the Administrative Agent and the Required Lenders, of
consolidated balance sheets and statements of income or operations and cash
flows of Holdings and its
Subsidiaries on a monthly
basis for the immediately following fiscal year (including the fiscal year in
which the Maturity Date for the Term Facility occurs).


 


As to any information contained in materials furnished
pursuant to Section 6.02(d), the Borrowers shall not be separately
required to furnish such information under Section 6.01(a) or (b) above,
but the foregoing shall not be in derogation of the obligation of the Borrowers
to furnish the information and materials described in Sections 6.01(a) and
(b) above at the times specified therein.


 


6.02         Certificates;
Other Information.  Deliver to the
Administrative Agent and each Lender, in form and detail satisfactory to the
Administrative Agent and the Required Lenders:


 


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(a)   concurrently with the delivery of the
financial statements referred to in Section 6.01(a) (commencing with the delivery of the
financial statements for the fiscal year ended September 30, 2007),
a certificate of its independent certified public accountants certifying such
financial statements and stating that in making the examination necessary
therefor no knowledge was obtained of any Default under the financial covenants
set forth in Section 7.11 or, if any such Default shall exist,
stating the nature and status of such event;


 


(b)   concurrently with the delivery of the
financial statements referred to in Sections 6.01(a) and (b) (commencing
with the delivery of the financial statements for the fiscal quarter ended June 30,
2007), a duly completed Compliance Certificate signed by the chief executive
officer, chief financial officer, treasurer or controller of Holdings;


 


(c)   within thirty (30) days following the end of
each calendar month, a certificate substantially in the form attached hereto as
Exhibit F signed by the chief executive officer, chief financial
officer, treasurer or controller of Holdings certifying Holdings’ and its
Subsidiaries’ compliance with Section 7.11(c) and setting
forth detail in support of such certification.


 


(d)   promptly after any request by the
Administrative Agent or any Lender, copies of any detailed audit reports,
management letters or recommendations submitted to the board of directors (or
the audit committee of the board of directors) of any Loan Party by independent
accountants in connection with the accounts or books of any Loan Party or any
of its Subsidiaries, or any audit of any of them;


 


(e)   promptly after the same are available, copies
of each annual report, proxy or financial statement or other report or
communication sent to the stockholders of Holdings, and copies of all annual,
regular, periodic and special reports and registration statements which
Holdings may file or be required to file with the SEC under Section 13 or
15(d) of the Securities Exchange Act of 1934, or with any national
securities exchange, and in any case not otherwise required to be delivered to
the Administrative Agent pursuant hereto;


 


(f)    promptly after the furnishing thereof,
copies of any statement or report furnished to any holder of debt securities of
any Loan Party or of any of its Subsidiaries pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to the Lenders pursuant to Section 6.01 or any other
clause of this Section 6.02;


 


(g)   as soon as available, but in any event within
30 days after the end of each fiscal year of Holdings, a report summarizing the
insurance coverage (specifying type, amount and carrier) in effect for each
Loan Party and its Subsidiaries and containing such additional information as
the Administrative Agent, or any Lender through the Administrative Agent, may
reasonably specify;


 


(h)   promptly, and in any event within seven
Business Days after receipt thereof by any Loan Party or any Subsidiary
thereof, copies of each notice or other 


 


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correspondence received from
the SEC (or comparable agency in any applicable non-U.S. jurisdiction)
concerning any investigation or possible investigation or other inquiry by such
agency regarding financial or other operational results of any Loan Party or
any Subsidiary thereof;


 


(i)    not later than five Business Days after
receipt thereof by any Loan Party or any Subsidiary thereof, copies of all
notices, requests and other documents (including amendments, waivers and other
modifications) (i) alleging that a default or an event of default has
occurred, (ii) pertaining to any matter that is, or could be, in any
manner adverse to any Secured Party or (iii) pertaining to any matter that
is otherwise prohibited under the terms of any Loan Document, in each case so
received under or pursuant to any Related Document or instrument, indenture,
loan or credit or similar agreement and, from time to time upon request by the
Administrative Agent, such information and reports regarding the Related
Documents and such instruments, indentures and loan and credit and similar
agreements as the Administrative Agent may reasonably request;


 


(j)    promptly after the assertion or occurrence
thereof, notice of any action or proceeding against or of any noncompliance by
any Loan Party or any of its Subsidiaries with any Environmental Law or
Environmental Permit that could (i) reasonably be expected to have a
Material Adverse Effect or (ii) cause any property described in the
Mortgages to be subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law;


 


(k)   copies of all required operating, medical or
provider licenses, as they are renewed, but no less frequently than every year;


 


(l)    copies of the results of any licensing
survey or other inspection report noting any deficiency within five (5) Business
Days of its receipt by any Loan Party;


 


(m)  quarterly, on or prior to the thirtieth (30th)
day following the end of each fiscal quarter, the Borrowers shall provide the
Administrative Agent with a schedule listing the revenue for such quarter of
each existing Capitated Contract and the corresponding expiration date for each
such Capitated Contract.  In addition,
promptly, but in any case not later than three (3) Business Days after any
Loan Party obtains knowledge thereof, the Loan Parties shall advise the
Administrative Agent in writing of the termination or non-renewal of any Capitated
Contract, any adjustment in the per-patient price or rate of payment under any
Capitated Contract, or any adjustment, offset or deduction in respect of
Capitated Contract Rights for retroactive additions and/or deletions of
patients covered by Capitated Contracts during any consecutive 60-day period
the payments under which Capitated Contract constituted, alone or together with
payments under all other Capitated Contracts terminated or non-renewed or with
respect to which any adjustment in the per-patient price or rate of payment
under any Capitated Contract or any adjustment, offset or deduction in respect
of Capitated Contract rights for retroactive additions and/or deletions of
patients covered by Capitated Contracts was made during such 60-day period, in
excess of ten percent (10%) of the aggregate payments under all Capitated
Contracts during the immediately preceding twelve month period;


 


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(n)   monthly, on or prior to the
thirtieth (30th) day after the end of each calendar month, the Borrowers shall
provide a report of incurred but not reported items for such month, which
report shall include, but not be limited to, the claims lag analysis prepared
by Borrowers for PMG and each of its Subsidiaries.  Such reports shall be in form and substance
satisfactory to the Administrative Agent and shall be prepared using the
per-member-per-month (“PMPM”) method, and will include all
medical expenses


 


(o)   promptly upon
receipt thereof, copies of actuarial reports as of March 31 and September 30
of each year;


 


(p)   as soon as
available but not later than thirty (30) days after submission thereof to the
California Department of Managed Health Care or the corresponding agency of
another state and/or any other applicable or successor state agency or body,
each Loan Party will provide the Administrative Agent (a) written notice
of any application for, or the grant of, any Healthcare Service Plan License
and (b) all  reports and/or
financial statements required under any such Loan Party’s Healthcare Service
Plan License, if any; and


 


(q)   promptly, such additional
information regarding the business, financial, legal or corporate affairs of
any Loan Party or any Subsidiary thereof, or compliance with the terms of the
Loan Documents, as the Administrative Agent or any Lender may from time to time
reasonably request.


 


Documents required to be delivered pursuant to Section 6.01(a) or
(b) or Section 6.02(d) (to the extent any such
documents are included in materials otherwise filed with the SEC) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (i) on which either Borrower posts such documents,
or provides a link thereto on either Borrower’s website on the Internet at the
website address listed on Schedule 10.02; or (ii) on which such
documents are posted on either Borrower’s behalf on an Internet or intranet
website, if any, to which each Lender and the Administrative Agent have access
(whether a commercial, third-party website or whether sponsored by the
Administrative Agent); provided that: 
(i) the Borrowers shall deliver paper copies of such documents to
the Administrative Agent or any Lender that requests the Borrowers to deliver
such paper copies until a written request to cease delivering paper copies is
given by the Administrative Agent or such Lender and (ii) the Borrowers
shall notify the Administrative Agent and each Lender (by telecopier or
electronic mail) of the posting of any such documents and provide to the
Administrative Agent by electronic mail electronic versions (i.e., soft
copies) of such documents. 
Notwithstanding anything contained herein, in every instance the
Borrowers shall be required to provide paper copies of the Compliance
Certificates required by Section 6.02(b) to the Administrative
Agent.  Except for such Compliance
Certificates, the Administrative Agent shall have no obligation to request the
delivery or to maintain copies of the documents referred to above, and in any
event shall have no responsibility to monitor compliance by the Borrowers with
any such request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.


 


Each Borrower hereby acknowledges that (a) the
Administrative Agent and/or the Arranger will make available to the Lenders and
the L/C Issuer materials and/or information 


 


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provided by or on behalf
of the Borrowers hereunder (collectively, “Borrower Materials”) by
posting the Borrower Materials on IntraLinks or another similar electronic
system (the “Platform”) and (b) certain of the Lenders (each, a “Public
Lender”) may have personnel who do not wish to receive material non-public
information with respect to the Borrowers or their respective Affiliates, or
the respective securities of any of the foregoing, and who may be engaged in
investment and other market-related activities with respect to such Persons’
securities.  Each Borrower hereby agrees
that it will use commercially reasonable efforts to identify that portion of
the Borrower Materials that may be distributed to the Public Lenders and that (w) all
such Borrower Materials shall be clearly and conspicuously marked “PUBLIC”
which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently
on the first page thereof; (x) by marking Borrower Materials “PUBLIC,”
the Borrowers shall be deemed to have authorized the Administrative Agent, the
Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials as
not containing any material non-public information (although it may be
sensitive and proprietary) with respect to the Borrowers or their securities
for purposes of United States Federal and state securities laws (provided,
however, that to the extent such Borrower Materials constitute
Information, they shall be treated as set forth in Section 10.07); (y) all
Borrower Materials marked “PUBLIC” are permitted to be made available through a
portion of the Platform designated “Public Investor;” and (z) the
Administrative Agent and the Arranger shall be entitled to treat any Borrower
Materials that are not marked “PUBLIC” as being suitable only for posting on a
portion of the Platform not designated “Public Investor.”


 


6.03         Notices.  Promptly
notify the Administrative Agent and each Lender:


 


(a)   of the occurrence of any
Default;


 


(b)   any notice (other than a “Committed
Loan Notice” (as defined under the Second Lien Credit Agreement)) delivered to
any Loan Party, or sent by or on behalf of any Loan Party, with respect to the
Second Lien Loan Documents (including a copy of each such notice);


 


(c)   of any matter that has
resulted or could reasonably be expected to result in a Material Adverse
Effect, including (i) breach or non-performance of, or any default under,
a Contractual Obligation of either Borrower or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between either
Borrower or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting either Borrower or any Subsidiary, including pursuant to any
applicable Environmental Laws;


 


(d)   of the occurrence of any ERISA
Event;


 


(e)   of any material change in
accounting policies or financial reporting practices by any Loan Party or any
Subsidiary thereof, including any
determination by Holdings or the Borrowers referred to in Section 2.10(b);


 


(f)    of the (i) occurrence
of any Disposition of property or assets for which the Borrowers are required
to make a mandatory prepayment pursuant to Section 2.05(b)(ii), (ii) incurrence
or issuance of any Indebtedness for which the Borrower is required to 


 


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make a mandatory prepayment pursuant to Section 2.05(b)(iii) and
(iii) receipt of any Extraordinary Receipt for which either Borrower is
required to make a mandatory prepayment pursuant to Section 2.05(b)(iv);


 


(g)   of any announcement by Moody’s
or S&P of any change or possible change in a Debt Rating;


 


(h)   of any investigation or
audit, or pending or threatened proceedings relating to any violation or
potential violation by any Loan Party, any Subsidiary of a Loan Party, or any health
care facility to which a Loan Party or any Subsidiary of a Loan Party provides
services, of any Health Care Laws (including, without limitation, any
investigation or audit or proceeding involving violation of any of the Medicare
and/or Medicaid fraud and abuse provisions);


 


(i)    copies of any written
recommendation from any Governmental Authority or other regulatory body that
any Loan Party or any Subsidiary of a Loan Party, or any Obligor to which any
Loan Party or any Subsidiary of a Loan Party provides services should have its
licensure, provider or supplier number, or accreditation suspended, revoked, or
limited in any way, or have its  eligibility to participate in
TRICARE, Medicare or Medicaid or to accept assignments or rights to
reimbursement under TRICARE, Medicaid or Medicare regulations suspended,
revoked, or limited in any way;


 


(j)    notice of any claim to
recover any alleged material overpayments, including by way of Offset, with
respect to any receivables including, without limitation, payments received
from TRICARE, Medicare, Medicaid or from any private insurance carrier;


 


(k)   notice of termination of
eligibility of any Loan Party, any Subsidiary of any Loan Party, or any health
care facility to which any Loan Party provides services to participate in any
reimbursement program of any private insurance carrier, managed care or similar
organization, or other Obligor applicable to it;


 


(l)    notice of any material reduction in the level
of reimbursement expected to be received with respect to any accounts
receivables;


 


(m)  notice of any
reimbursement payment contract or process that results or is reasonably
expected to result in any material claim against a Loan Party or any Subsidiary
of such Loan Party (including on account of overpayments, settlement payments,
appeals, repayment plan requests);


 


(n)   copies of any material
report or communication from any Governmental Authority in connection with any
inspection of any facility of a Loan Party or any Subsidiary of such Loan
Party;


 


(o)   notice of any material fee
dispute; and


 


(p)   any complaint, order,
citation or notice of violation with respect to, or if any Loan Party becomes
aware of, (i) the existence or alleged existence of which any Loan Party
becomes aware, of a violation of any applicable Environmental Law, (ii) any



 


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release of any Hazardous Material into the
environment in an amount or a concentration for which reporting, investigation,
or remediation is required under any applicable Environmental Law, (iii) the
commencement of any cleanup pursuant to or in accordance with any applicable
Environmental Law of any Hazardous Materials, (iv) any pending legislative
or threatened proceeding for the termination, suspension or non-renewal of any permit
required under any applicable Environmental Law, and (v) any Real Property
that is or will be subject to a Lien imposed pursuant to any Environmental Law,
which in each of cases (i) through (v) above, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.


 


Each notice pursuant to Section 6.03
(other than Section 6.03(e) or (f)) shall be
accompanied by a statement of a Responsible Officer of the Borrower Agent
setting forth details of the occurrence referred to therein and stating what
action the Borrowers have  taken and
propose to take with respect thereto. 
Each notice pursuant to Section 6.03(a) shall describe
with particularity any and all provisions of this Agreement and any other Loan
Document that have been breached.


 


6.04         Payment of Obligations. 
Pay and discharge as the same shall become due and payable, all its
obligations and liabilities, including (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or assets,
unless the same are being contested in good faith by appropriate proceedings
diligently conducted and adequate reserves in accordance with GAAP are being
maintained by the Borrowers or such Subsidiary; (b) all lawful claims
which, if unpaid, would by law become a Lien upon its property unless the same
are being contested in good faith by appropriate proceedings diligently
conducted and adequate reserves in accordance with GAAP are being maintained by
the Borrowers or such Subsidiary; and (c) all Indebtedness, as and when
due and payable, but subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness.


 


6.05         Preservation of Existence, Etc.  (a)  Preserve,
renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization except in a
transaction permitted by Section 7.04 or 7.05; provided,
however, that Holdings and its
Subsidiaries may consummate the Merger; (b) take all reasonable action
to maintain all rights, privileges, permits, licenses and franchises necessary
or desirable in the normal conduct of its business, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.


 


6.06         Maintenance of Properties.  (a) Maintain,
preserve and protect all of its material properties and equipment necessary in
the operation of its business in good working order and condition, ordinary
wear and tear excepted; (b) make all necessary repairs thereto and
renewals and replacements thereof except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the
operation and maintenance of its facilities.


 


6.07         Maintenance of Insurance. 
Maintain with financially sound and reputable insurance companies not
Affiliates of either Borrower, insurance with respect to its properties 


 


88

















 


and business against loss
or damage of the kinds customarily insured against by Persons engaged in the
same or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons and providing for not less than 30 days’
prior notice to the Administrative Agent of termination, lapse or cancellation
of such insurance.


 


6.08         Compliance with Laws.


 


(a)           Comply in all respects with the requirements of all Laws
(including all Health Care Laws, Seismic Compliance Laws (giving effect to any
extensions or exemptions then in existence), all applicable Medicare and
Medicaid rules and regulations, and to the extent applicable, the
California Department of Managed Care financial solvency regulations) and all
orders, writs, injunctions and decrees applicable to it or to its business or
property, except in such instances in which (i) such requirement of Law or
order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted; or (ii) the failure to
comply therewith could not reasonably be expected to have a Material Adverse
Effect.


 


(b)           Regularly review and revise the policies and procedures of
the Loan Parties to ensure continuing compliance by all Loan Parties, their
employees and all healthcare providers under contract with any Loan Party with
all applicable Health Care Laws and maintain appropriate programs and
procedures for communicating such policies and procedures to all employees of
any Loan Party and healthcare providers under contract with any Loan Party and
for making sure that all employees of any Loan Party are able to report
violations of any Health Care Laws and have such reports adequately addressed
and corrected as soon as practicable.


 


(c)           As soon as practically feasible, but in no event later than
six (6) months from the Closing Date, Loan Parties engaged in the hospital
line of business shall adopt a compliance program which satisfies the
Compliance Program Guidance for Hospitals issued by the U.S. Department of
Health and Human Services Office of Inspector General, and within six months of
the closing date or within six months of the issuance of applicable OIG
Compliance Program Guidance, whichever is later, the Loan Parties, Subsidiaries
and Affiliates engaged in other lines of business shall adopt a compliance
program which satisfies all Compliance Program Guidance that applies to such
business line(s), including without limitation any Program Guidance that may be
developed for management companies or independent physician associations in the
future by the Office of Inspector General.


 


6.09         Books and Records.  (a) Maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of such Borrower or such Subsidiary,
as the case may be; and (b) maintain
such books of record and account in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
the Borrower or such Subsidiary, as the case may be.


 


6.10         Inspection Rights. 
Permit representatives and independent contractors of the Administrative
Agent and each Lender to visit and inspect any of its properties, to examine
its corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss its affairs, finances and accounts with its
directors, officers, and independent public accountants, all at the expense of the Borrowers and at
such reasonable times during 


 


89

















 


normal business hours and
as often as may be reasonably desired, upon reasonable advance notice to the
Borrowers; provided, however, that when an Event of Default
exists, the Administrative Agent or any Lender (or any of their respective representatives
or independent contractors) may do any of the foregoing at the expense of the
Borrowers at any time during normal business hours and without advance notice.


 


6.11         Use of Proceeds. 
Use the proceeds of the Credit Extensions to (i) finance the Transactions
(together with the proceeds of the Second Lien Term Loan) and (ii) for
general corporate purposes, in each case, not in contravention of any Law or of
any Loan Document.


 


6.12         Covenant to Guarantee Obligations and
Give Security.


 


(a)           Upon the formation or acquisition of any new direct or
indirect Subsidiary by any Loan Party, then the Borrowers shall, at the
Borrowers’ expense:


 


(i)            within 15 days after
such formation or acquisition, cause such Subsidiary, and cause each direct and
indirect parent of such Subsidiary (if it has not already done so), to duly
execute and deliver to the Administrative Agent a guaranty, guaranty
supplement, or joinder in form and substance satisfactory to the Administrative
Agent, guaranteeing the other Loan Parties’ obligations under the Loan
Documents,


 


(ii)           within 10 days after such
formation or acquisition, furnish to the Administrative Agent a description of
the real and personal properties of such Subsidiary, in detail satisfactory to
the Administrative Agent,


 


(iii)          within 30 days after such
formation or acquisition, cause such Subsidiary and each direct and indirect
parent of such Subsidiary (if it has not already done so) to duly execute and
deliver to the Administrative Agent deeds of trust, trust deeds, deeds to
secure debt, mortgages, joinders, and other security and pledge agreements, as
specified by and in form and substance satisfactory to the Administrative Agent
(including delivery of all pledged Equity Interests in and of such Subsidiary
to the Administrative Agent, and other instruments of the type specified in Section 4.01(a)(v)),
securing payment of all the Obligations of such Subsidiary or such parent, as
the case may be, under the Loan Documents and constituting first priority Liens
on all such real and personal properties,


 


(iv)          within 45 days after such
formation or acquisition, cause such Subsidiary and each direct and indirect
parent of such Subsidiary (if it has not already done so) to take whatever
action (including the recording of mortgages, the filing of Uniform Commercial
Code financing statements, the giving of notices and the endorsement of notices
on title documents) may be necessary or advisable in the opinion of the
Administrative Agent to vest in the Administrative Agent (or in any representative
of the Administrative Agent designated by it) valid and subsisting first
priority Liens on the properties purported to be subject to the deeds of trust,
trust deeds, deeds to secure debt, mortgages and security and pledge agreements
delivered pursuant to this Section 6.12, enforceable against all
third parties in accordance with their terms,


 


(v)           within 60 days after such
formation or acquisition, deliver to the Administrative Agent, upon the request
of the Administrative Agent in its sole discretion, 


 


90

















 


a signed copy of a favorable opinion,
addressed to the Administrative Agent and the other Secured Parties, of counsel
for the Loan Parties acceptable to the Administrative Agent as to the matters contained
in clauses (i), (iii) and (iv) above, and as to such other
matters as the Administrative Agent may reasonably request, and


 


(vi)          as promptly as practicable
after such formation or acquisition, deliver, upon the request of the
Administrative Agent in its sole discretion, to the Administrative Agent with
respect to each parcel of real property owned or held by the entity that is the
subject of such formation or acquisition title reports, surveys and
engineering, soils and other reports, property condition assessments and
environmental assessment reports, each in scope, form and substance
satisfactory to the Administrative Agent, provided, however, that to the
extent that any Loan Party or any of its Subsidiaries shall have otherwise
received any of the foregoing items with respect to such real property, such
items shall, promptly after the receipt thereof, be delivered to the
Administrative Agent.


 


(b)           Upon the acquisition of any property by any Loan Party, if
such property, in the judgment of the Administrative Agent, shall not already
be subject to a perfected first priority security interest (subject to Liens
permitted pursuant to Section 7.01(i)) in favor of the
Administrative Agent for the benefit of the Secured Parties, then the Borrowers
shall, at the Borrowers’ expense:


 


(i)            within 10 days after such
acquisition, furnish to the Administrative Agent a description of the property
so acquired in detail satisfactory to the Administrative Agent,


 


(ii)           within 30 days after such
acquisition, cause the applicable Loan Party to duly execute and deliver to the
Administrative Agent deeds of trust, trust deeds, deeds to secure debt,
mortgages, joinders, and other security and pledge agreements, as specified by
and in form and substance satisfactory to the Administrative Agent, securing
payment of all the Obligations of the applicable Loan Party under the Loan
Documents and constituting first priority Liens on all such properties,


 


(iii)          within 45 days after such
acquisition, cause the applicable Loan Party to take whatever action (including
the recording of mortgages, the filing of Uniform Commercial Code financing
statements, the giving of notices and the endorsement of notices on title
documents) may be necessary or advisable in the opinion of the Administrative
Agent to vest in the Administrative Agent (or in any representative of the
Administrative Agent designated by it) valid and subsisting first priority
Liens on such property, enforceable against all third parties,


 


(iv)          within 60 days after such
acquisition, deliver to the Administrative Agent, upon the request of the
Administrative Agent in its sole discretion, a signed copy of a favorable
opinion, addressed to the Administrative Agent and the other Secured Parties,
of counsel for the Loan Parties acceptable to the Administrative Agent as to
the matters contained in clauses (ii) and (iii) above and as to
such other matters as the Administrative Agent may reasonably request, and


 


91

















 


(v)           as promptly as practicable
after any acquisition of a real property, deliver, upon the request of the
Administrative Agent in its sole discretion, to the Administrative Agent with
respect to such real property title reports, surveys and engineering, soils and
other reports, property condition assessments, and environmental assessment
reports, each in scope, form and substance satisfactory to the Administrative
Agent, provided, however, that to the extent that any Loan Party
or any of its Subsidiaries shall have otherwise received any of the foregoing
items with respect to such real property, such items shall, promptly after the
receipt thereof, be delivered to the Administrative Agent,


 


(b)   Upon the request of the
Administrative Agent following the occurrence and during the continuance of a
Default, the Borrowers shall, at the Borrowers’ expense:


 


(i)            within 10 days after such
request, furnish to the Administrative Agent a description of the real and
personal properties of the Loan Parties and their respective Subsidiaries in detail
satisfactory to the Administrative Agent,


 


(ii)           within 30 days after such
request, duly execute and deliver, and cause each Loan
Party (if it has not already done so) to duly execute and deliver, to the
Administrative Agent deeds of trust, trust deeds, deeds to secure debt,
mortgages, leasehold mortgages, leasehold deeds of trust, and other security
and pledge agreements, as specified by and in form and substance satisfactory
to the Administrative Agent (including delivery of all pledged Equity Interests
and pledged debt in and of such Subsidiary, and other instruments of the type
specified in Section 4.01(a)(v)), securing payment of all the
Obligations of the applicable Loan
Party under the Loan Documents and constituting first priority Liens on all
such properties,


 


(iii)          within 45 days after such
request, take, and cause each Loan
Party to take, whatever action (including the recording of mortgages, the
filing of Uniform Commercial Code financing statements, the giving of notices
and the endorsement of notices on title documents) may be necessary or
advisable in the opinion of the Administrative Agent to vest in the
Administrative Agent (or in any representative of the Administrative Agent
designated by it) valid and subsisting first priority Liens on the properties
purported to be subject to the deeds of trust, trust deeds, deeds to secure
debt, mortgages, leasehold mortgages, leasehold deeds of trust, and security
and pledge agreements delivered pursuant to this Section 6.12,
enforceable against all third parties in accordance with their terms,


 


(iv)          within 60 days after such
request, deliver to the Administrative Agent, upon the request of the
Administrative Agent in its sole discretion, a signed copy of a favorable
opinion, addressed to the Administrative Agent and the other Secured Parties,
of counsel for the Loan Parties acceptable to the Administrative Agent as to
the matters contained in clauses (ii) and (iii) above, and as to
such other matters as the Administrative Agent may reasonably request, and


 


(v)           as promptly as practicable
after such request, deliver, upon the request of the Administrative Agent in
its sole discretion, to the Administrative Agent with respect to each parcel of
real property owned or held by either Borrowers or their respective 


 


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Subsidiaries, title reports, surveys and
engineering, soils and other reports, property condition assessments, and
environmental assessment reports, each in scope, form and substance
satisfactory to the Administrative Agent, provided, however, that to the
extent that any Loan Party or any of its Subsidiaries shall have otherwise
received any of the foregoing items with respect to such real property, such
items shall, promptly after the receipt thereof, be delivered to the
Administrative Agent.


 


(c)           At any time upon request of the Administrative Agent,
promptly execute and deliver any and all further instruments and documents and
take all such other action as the Administrative Agent may deem necessary or
desirable in obtaining the full benefits of, or (as applicable) in perfecting
and preserving the Liens of, such guaranties, deeds of trust, trust deeds,
deeds to secure debt, mortgages, leasehold mortgages, leasehold deeds of trust,
and other security and pledge agreements.


 


6.13         Compliance with Environmental Laws. 
Comply, and cause all lessees and other Persons operating or occupying
its properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew all
Environmental Permits necessary for its operations and properties; and conduct
any investigation, study, sampling and testing, and undertake any cleanup,
removal, remedial or other action necessary to remove and clean up all Hazardous
Materials from any of its properties, in accordance with the requirements of
all Environmental Laws; provided, however, that neither Borrower
nor any of their respective Subsidiaries shall be required to undertake any
such cleanup, removal, remedial or other action to the extent that its
obligation to do so is being contested in good faith and by proper proceedings
and appropriate reserves are being maintained with respect to such
circumstances in accordance with GAAP.


 


6.14         Preparation of Environmental/Seismic
Reports.


 


(a)           At the request of the Required Lenders from time to time,
provide to the Lenders within 60 days after such request, at the expense
of the Borrowers, an environmental site assessment report for any of its
properties described in such request, prepared by an environmental consulting
firm acceptable to the Administrative Agent, indicating the presence or absence
of Hazardous Materials and the estimated cost of any compliance, removal or
remedial action in connection with any Hazardous Materials on such properties;
without limiting the generality of the foregoing, if the Administrative Agent
determines at any time that a material risk exists that any such report will
not be provided within the time referred to above, the Administrative Agent may
retain an environmental consulting firm to prepare such report at the expense
of the Borrowers, and each Borrower hereby grants and agrees to cause any
Subsidiary that owns any property described in such request to grant at the
time of such request to the Administrative Agent, the Lenders, such firm and
any agents or representatives thereof an irrevocable non-exclusive license,
subject to the rights of tenants, to enter onto their respective properties to
undertake such an assessment.


 


(b)           Within 30 days following its request therefor, the Borrowers
shall deliver to the Administrative Agent a written evaluation and report with
a current cost estimate to bring the real properties described in the Mortgages
into compliance with Seismic Compliance Laws.


 


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6.15         Further Assurances. 
Promptly upon request by the Administrative Agent, or any Lender through
the Administrative Agent, (a) correct any material defect or error that
may be discovered in any Loan Document or in the execution, acknowledgment,
filing or recordation thereof and (b) do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register any and all such
further acts, deeds, certificates, assurances and other instruments as the
Administrative Agent, or any Lender through the Administrative Agent, may
reasonably require from time to time in order to (i) carry out more
effectively the purposes of the Loan Documents, (ii) to the fullest extent
permitted by applicable law, subject any Loan Party’s or any of its
Subsidiaries’ properties, assets, rights or interests to the Liens now or
hereafter intended to be covered by any of the Collateral Documents, (iii) perfect
and maintain the validity, effectiveness and priority of any of the Collateral
Documents and any of the Liens intended to be created thereunder and (iv) assure,
convey, grant, assign, transfer, preserve, protect and confirm more effectively
unto the Secured Parties the rights granted or now or hereafter intended to be
granted to the Secured Parties under any Loan Document or under any other
instrument executed in connection with any Loan Document to which any Loan
Party or any of its Subsidiaries is or is to be a party, and cause each of its
Subsidiaries to do so.


 


6.16         Compliance with Terms of Leaseholds. 
Make all payments and otherwise perform all obligations in respect of
all leases of real property to which either Borrower or any of their respective
Subsidiaries is a party, keep such leases in full force and effect and not
allow such leases to lapse or be terminated or any rights to renew such leases
to be forfeited or cancelled, notify the Administrative Agent of any default by
any party with respect to such leases and cooperate with the Administrative
Agent in all respects to cure any such default, and cause each of its
Subsidiaries to do so, except, in any case, where the failure to do so, either
individually or in the aggregate, could not be reasonably likely to have a
Material Adverse Effect.


 


6.17         Interest Rate Hedging. 
Within sixty (60) days of the Closing Date, the Borrowers shall enter
into and maintain for at least two  years
following the Closing Date, interest rate Swap Contracts with Persons
acceptable to the Administrative Agent, covering a notional amount of not less
than fifty percent (50%)  of the aggregate Term Loan and Second Lien
Term Loan and otherwise with terms and 
conditions reasonably satisfactory to the Administrative Agent.


 


6.18         Material Contracts.  Perform and observe
all the terms and provisions of each Material Contract to be performed or
observed by it, maintain each such Material Contract in full force and effect,
enforce each such Material Contract in accordance with its terms, take all such
action to such end as may be from time to time requested by the Administrative
Agent and, upon request of the Administrative Agent, make to each other party
to each such Material Contract such demands and requests for information and
reports or for action as any Loan Party or any of its Subsidiaries is entitled
to make under such Material Contract, and cause each of its Subsidiaries to do
so.


 


6.19         Post-Closing
Covenants.


 


(a)   Within 30 days following the
Closing Date (provided that the Administrative Agent may extend such deadline
in its sole discretion), the Borrowers shall deliver to the 


 


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Administrative Agent evidence satisfactory to
the Administrative Agent in its sole discretion that each Loan Party that
participates in Medicare or Medicaid has properly filed CMS Form 855 with
CMS.


 


(b)   Within 30 days following the
Closing Date (provided that the Administrative Agent may extend such deadline
in its sole discretion), the Borrowers shall deliver to the Administrative
Agent evidence satisfactory to the Administrative Agent in its sole discretion
that (i) each lien set forth on Schedule 5.08(b) noted for
termination has been terminated and (ii) Alta Healthcare Building
Corporation, a California corporation, has been dissolved by the California
Secretary of State.


 


(c)   As soon as possible
following the Closing Date, but in any event no later than September 15,
2007, the Borrowers shall have filed, or shall have caused its appropriate
Subsidiary to file, tax returns for Alta Heathcare Systems, Inc., and its
Subsidiaries for such entities’ 2003 tax year.


 


(d)   Within 15 days following the
Closing Date (provided that the Administrative Agent may extend such deadline
in its sole discretion), the Borrowers shall deliver, or shall cause their
appropriate Subsidiaries to deliver to the Administrative Agent, in each case,
in form and substance satisfactory to the Administrative Agent, deposit account
control agreements and/or collection account agreements (as applicable) for all
accounts held with Wells Fargo Bank, National Association (or any Affiliate
thereof).


 


ARTICLE VII

NEGATIVE COVENANTS


 


So long as any Lender shall have any Commitment
hereunder, any Loan or other Obligation hereunder shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, neither Borrower
shall, nor shall either Borrower permit any Subsidiary to, directly or
indirectly:


 


7.01         Liens.  Create,
incur, assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, or sign or file or suffer to
exist under the Uniform Commercial Code of any jurisdiction a financing
statement that names either Borrower or any of their respective Subsidiaries as
debtor, or assign any accounts or other right to receive income, other than the
following:


 


(a)   Liens pursuant to any Loan
Document;


 


(b)   Liens existing on the date
hereof and listed on Schedule 5.08(b) and any renewals or
extensions thereof, provided that (i) the property covered thereby
is not changed, (ii) the amount secured or benefited thereby is not
increased except as contemplated by Section 7.02(d), (iii) the
direct or any contingent obligor with respect thereto is not changed, and (iv) any
renewal or extension of the obligations secured or benefited thereby is permitted
by Section 7.02(d);


 


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(c)   Liens for taxes not yet due or which are
being contested in good faith and by appropriate proceedings diligently
conducted, if adequate reserves with respect thereto are maintained on the
books of the applicable Person in accordance with GAAP;


 


(d)   carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s or other like Liens arising in the ordinary course
of business which are not overdue for a period of more than 30 days or which
are being contested in good faith and by appropriate proceedings diligently
conducted, if adequate reserves with respect thereto are maintained on the
books of the applicable Person;


 


(e)   pledges or deposits in the ordinary course of
business in connection with workers’ compensation, unemployment insurance and
other social security legislation, other than any Lien imposed by ERISA;


 


(f)    deposits to secure the performance of bids,
trade contracts and leases (other than Indebtedness), statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;


 


(g)   easements, rights-of-way, restrictions and
other similar encumbrances affecting real property which, in the aggregate, are
not substantial in amount, and which do not in any case materially detract from
the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the applicable Person;


 


(h)   Liens securing judgments for the payment of
money not constituting an Event of Default under Section 8.01(h);


 


(i)    Liens securing Indebtedness permitted under Section 7.02(f);
provided that (i) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness and (ii) the
Indebtedness secured thereby does not exceed the cost or fair market value,
whichever is lower, of the property being acquired on the date of acquisition;


 


(j)    other Liens securing Indebtedness permitted under Section 7.02
outstanding in an aggregate principal amount not to exceed $2,000,000, provided
that no such Lien shall extend to or cover any Collateral;


 


(k)   Liens in favor
of any lender to Brotman Medical Center, Inc. on the shares held by
Prospect Hospital Advisory Services, Inc. in Brotman Medical Center, Inc.;
and


 


(l)    Liens
securing Indebtedness permitted under Section 7.02(i).


 


7.02         Indebtedness.  Create, incur, assume or suffer to exist any
Indebtedness, except:


 


(a)   obligations (contingent or
otherwise) existing or arising under any Swap Contract, provided that (i) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
fluctuations in interest rates or foreign exchange rates and (ii) such
Swap Contract 


 


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does
not contain any provision exonerating the non-defaulting party from its
obligation to make payments on outstanding transactions to the defaulting
party;


 


(b)   Indebtedness of a Guarantor owed to a
Borrower or another Guarantor, or owed by a Borrower to a Guarantor or the
other Borrower, which Indebtedness shall be on terms (including subordination
terms) acceptable to the Administrative Agent;


 


(c)   Indebtedness under the Loan Documents;


 


(d)   Indebtedness outstanding on the date hereof and
listed on Schedule 7.02 and any refinancings, refundings, renewals
or extensions thereof; provided that the amount of such Indebtedness is
not increased at the time of such refinancing, refunding, renewal or extension
except by an amount equal to a reasonable premium or other reasonable amount
paid, and fees and expenses reasonably incurred, in connection with such
refinancing and by an amount equal to any existing commitments unutilized
thereunder and the direct or any contingent obligor with respect thereto is not
changed, as a result of or in connection with such refinancing, refunding,
renewal or extension; and provided, still  further, that the terms
relating to principal amount, amortization, maturity, collateral (if any) and
subordination (if any), and other material terms taken as a whole, of any such
refinancing, refunding, renewing or extending Indebtedness, and of any
agreement entered into and of any instrument issued in connection therewith,
are no less favorable in any material respect to the Loan Parties or the
Lenders than the terms of any agreement or instrument governing the
Indebtedness being refinanced, refunded, renewed or extended and the interest
rate applicable to any such refinancing, refunding, renewing or extending
Indebtedness does not exceed the then applicable market interest rate;


 


(e)   Guarantees of either Borrower or any Subsidiary thereof in respect
of Indebtedness otherwise permitted hereunder of any Loan Party;


 


(f)    Indebtedness in respect of Capitalized
Leases, Synthetic Lease Obligations and purchase money obligations for fixed or
capital assets within the limitations set forth in Section 7.01(i);
provided, however, that the aggregate amount of all such
Indebtedness at any one time outstanding shall not exceed $2,000,000;


 


(g)   Indebtedness of any Person that becomes a Subsidiary of either Borrower
after the date hereof in accordance with the terms of Section 7.03(h),
which Indebtedness is existing at the time such Person becomes a Subsidiary of
such Borrower (other than Indebtedness incurred solely in contemplation of such
Person’s becoming a Subsidiary of such Borrower);


 


(h)   letters of credit required under any
Capitated Contract in favor of an HMO and any renewals thereof required by such
HMO under the terms of the Capitated Contract; and


 


(i)    Indebtedness of the Borrowers and Guarantors
under the Second Lien Loan Documents in an aggregate principal amount not to
exceed at any time of $50,000,000 less the amount of any permanent
repayments or prepayments thereof.


 


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7.03         Investments.  Make or hold any Investments, except:


 


(a)   Investments held by either Borrower or any of
their respective Subsidiaries in the form of Cash Equivalents;


 


(b)   (i) Investments by either Borrower or
any of their respective Subsidiaries in their respective Subsidiaries (other
than an Excluded Subsidiary) outstanding on the date hereof and (ii) additional
Investments by either Borrower or their respective Subsidiaries in Loan Parties
(other than Holdings and the Excluded Subsidiary);


 


(c)   Investments consisting of extensions of
credit in the nature of accounts receivable or notes receivable arising from
the grant of trade credit in the ordinary course of business, and Investments
received in satisfaction or partial satisfaction thereof from financially
troubled account debtors to the extent reasonably necessary in order to prevent
or limit loss;


 


(d)   Guarantees permitted by Section 7.02;


 


(e)   Investments existing on the date hereof
(other than those referred to in Section 7.03(b)(i)) and set forth
on Schedule 5.08(e);


 


(f)    Investments by the Borrowers in Swap
Contracts permitted under Section 7.02(a);


 


(g)   the purchase or other acquisition of all of
the Equity Interests in, or all or substantially all of the property of, any
Person that, upon the consummation thereof, will be wholly-owned directly by
either of the Borrowers or one or more of their wholly-owned Subsidiaries
(including as a result of a merger or consolidation); provided that,
with respect to each purchase or other acquisition made pursuant to this Section 7.03(g):


 


(i)            any such newly-created or acquired
Subsidiary shall comply with the requirements of Section 6.12;


 


(ii)           the lines of business of the Person
to be (or the property of which is to be) so purchased or otherwise acquired
shall be substantially the same lines of business as one or more of the
principal businesses of either of the Borrowers or their respective
Subsidiaries in the ordinary course;


 


(iii)          such purchase or other acquisition
shall not include or result in any contingent liabilities that could reasonably
be expected to be material to the business, financial condition, operations or
prospects of the Borrowers and their Subsidiaries, taken as a whole (as
determined in good faith by the board of directors (or the persons performing
similar functions) of such Borrower or such Subsidiary if the board of
directors is otherwise approving such transaction and, in each other case, by a
Responsible Officer);


 


(iv)          the total cash and noncash
consideration (including all indemnities, earnouts and other contingent payment
obligations to, and the aggregate amounts


 


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paid or to be paid under noncompete,
consulting and other affiliated agreements with, the sellers thereof, all
write-downs of property and reserves for liabilities with respect thereto and
all assumptions of debt, liabilities and other obligations in connection
therewith but excluding all Equity Interests permitted to be issued under the
terms of this Agreement issued or transferred to the sellers thereof) paid by
or on behalf of the respective Borrower and its Subsidiaries for any such
purchase or other acquisition, when aggregated with the total cash and noncash
consideration paid by or on behalf of the Borrowers and their Subsidiaries for
all other purchases and other acquisitions made by the Borrowers and their
Subsidiaries pursuant to this Section 7.03(g) during the term
of this Agreement, shall not exceed $5,000,000;


 


(v)           (A) immediately before and
immediately after giving pro forma effect to any such purchase or other
acquisition, no Default shall have occurred and be continuing and (B) immediately
after giving effect to such purchase or other acquisition, Holdings and its Subsidiaries shall
be in pro forma compliance with all of the covenants set forth in Section 7.11,
such compliance to be determined on the basis of the financial information most
recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or
(b) as though such purchase or other acquisition had been
consummated as of the first day of the fiscal period covered thereby; and


 


(vi)          the Borrowers shall have delivered to
the Administrative Agent and each Lender, at least five Business Days prior to
the date on which any such purchase or other acquisition is to be consummated,
a certificate of a Responsible Officer, in form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders, certifying
that all of the requirements set forth in this subsection (h) have been
satisfied or will be satisfied on or prior to the consummation of such purchase
or other acquisition;


 


(h)   Investments by the Borrowers and their
Subsidiaries (other than the Excluded Subsidiary) not otherwise permitted under
this Section 7.03 in an aggregate amount not to exceed $2,000,000; provided that, with
respect to each Investment made pursuant to this Section 7.03(h):


 


(i)            such Investment shall not include or
result in any contingent liabilities that could reasonably be expected to be
material to the business, financial condition, operations or prospects of the
Borrowers and their Subsidiaries, taken as a whole (as determined in good faith
by the board of directors (or persons performing similar functions) of such
Borrower or such Subsidiary if the board of directors is otherwise approving
such transaction and, in each other case, by a Responsible Officer);


 


(ii)           such Investment shall be in property
that is part of, or in lines of business that are, substantially the same lines
of business as one or more of the principal businesses of the Borrowers and
their Subsidiaries in the ordinary course;


 


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(iii)          any determination of the amount of
such Investment shall include all cash and noncash consideration (including the
fair market value of all Equity Interests issued or transferred to the sellers
thereof, all indemnities, earnouts and other contingent payment obligations to,
and the aggregate amounts paid or to be paid under noncompete, consulting and
other affiliated agreements with, the sellers thereof, all write-downs of
property and reserves for liabilities with respect thereto and all assumptions
of debt, liabilities and other obligations in connection therewith) paid by or
on behalf of the respective Borrower in connection with such Investment; and


 


(iv)          (A) immediately before and
immediately after giving pro forma effect to any such purchase or other
acquisition, no Default shall have occurred and be continuing and (B) immediately
after giving effect to such purchase or other acquisition, Holdings and its Subsidiaries shall
be in pro forma compliance with all of the covenants set forth in Section 7.11,
such compliance to be determined on the basis of the financial information most
recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or
(b) as though such Investment had been consummated as of the first
day of the fiscal period covered thereby; and


 


(i)    other Investments not exceeding $2,000,000 in the aggregate in any
fiscal year of Holdings.


 


7.04         Fundamental
Changes.  Merge, dissolve, liquidate,
consolidate with or into another Person, or Dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except that, so long as no Default exists or would result therefrom:


 


(a)   other than where prohibited under applicable
Law (including Health Care Law), any Subsidiary (other than an Excluded
Subsidiary) may merge with (i) any Borrower, provided that the
respective Borrower shall be the continuing or surviving Person, or (ii) any
one or more other Subsidiaries, provided that (A) when any Loan Party (other than Holdings) is
merging with another Subsidiary, such Loan
Party shall be the continuing or surviving Person and (B) the PMG
Loan Parties may not merge with Holdings or any other Subsidiary outside the
PMG Loan Party group;


 


(b)   to the extent permitted under all applicable
Law, any Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise) to either Borrower or to another Loan
Party;


 


(c)   Holdings and its Subsidiaries may consummate
the Merger;


 


(d)   in connection with any
acquisition permitted under Section 7.03, any Subsidiary of either
Borrower (other than an Excluded Subsidiary) may merge into or consolidate with
any other Person or permit any other Person to merge into or consolidate with
it; provided that (i) the Person surviving such merger shall be a
wholly-owned 


 


100

















 


Subsidiary
of either Borrower and (ii) in the case of any such merger to which any
Loan Party (other than a Borrower) is a party, such Loan Party is the surviving
Person; and


 


(e)   so long as no Default has occurred and is
continuing or would result therefrom,  any Subsidiary of a Borrower  (other than PMG or an Excluded Subsidiary)  may merge into or consolidate with any other Person
or permit any other Person to merge into or consolidate with it; provided,
however, that in each case, immediately after giving effect thereto in
the case of any such merger to which any Loan Party is a party, such Loan Party
is the surviving corporation.


 


7.05         Dispositions.  Make any Disposition or enter into any
agreement to make any Disposition, except:


 


(a)   Dispositions of obsolete, surplus or worn out
property, whether now owned or hereafter acquired, in the ordinary course of
business;


 


(b)   Dispositions of inventory in the ordinary
course of business;


 


(c)   Dispositions of equipment to the extent that (i) such
property is exchanged for credit against the purchase price of similar
replacement property or (ii) the proceeds of such Disposition are
reasonably promptly applied to the purchase price of such replacement property;


 


(d)   Dispositions of property by any Subsidiary to
either Borrower or to a wholly-owned Subsidiary (other than an Excluded
Subsidiary); provided that if the transferor of such property is a
Guarantor, the transferee thereof must either be a Borrower or a Guarantor;


 


(e)   Dispositions permitted by Section 7.04;  and


 


(f)    Dispositions (other than of
real property) by the Borrowers and any of their Subsidiaries not otherwise
permitted under this Section 7.05; provided that (i) at
the time of such Disposition, no Default shall exist or would result from such
Disposition, (ii) the aggregate book value of all property Disposed of in
reliance on this clause (f) in any fiscal year shall not exceed $2,000,000
and (iii) the purchase price for such asset shall be paid to such Borrower
or such Subsidiary solely in cash.


 


provided, however, that any
Disposition pursuant to Section 7.05(a) through Section 7.05(f) shall be for fair
market value.


 


7.06         Restricted
Payments.  Declare or make, directly
or indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, or issue or sell any Equity Interests or accept any
capital contributions, except that, so long as no Default shall have occurred
and be continuing at the time of any action described below or would result
therefrom:


 


(a)   each Subsidiary (other than a Borrower) may
make Restricted Payments to (i) the Borrowers and (ii) any
Subsidiaries of either Borrower that are Guarantors;


 


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(b)   each Borrower and each Subsidiary may declare
and make dividend payments or other distributions payable solely in the common
stock or other common Equity Interests of such Person;


 


(c)   PMG may make payments to
Holdings in an amount not to exceed an amount necessary to permit Holdings to
pay (i) reasonable and customary corporate and operating expenses
(including reasonable out-of-pocket expenses for legal, administrative and
accounting services provided by third parties, and compensation, benefits and
other amounts payable to officers and employees in connection with their
employment in the ordinary course of business and to board of director
observers and (ii) franchise fees or similar taxes and fees required to
maintain its corporate existence;


 


(d)   Restricted
Payments by any Loan Party or its Subsidiary to any other Loan Party in an
amount necessary to fund federal and state income taxes attributable to the
taxable income of such Loan Party for the sole purpose of funding such tax
payments;


 


(e)   Holdings may issue and sell its common Equity
Interests;


 


(f)    Holdings may issue preferred Equity
Interests; provided, that such preferred equity may not
(i) require the payment of any dividends (other than dividends payable
solely in shares of Holdings’ common stock or additional Holdings’ preferred
stock meeting the requirements of this Section 7.06(f)), (ii) mature
or be mandatorily redeemable or subject to mandatory repurchase or redemption
or repurchase, in each case in whole or in part and whether upon the occurrence
of any event, pursuant to a sinking fund obligation on a fixed date or
otherwise (including as the result of a failure to maintain or achieve any
financial performance standards) or (c) be convertible or exchangeable,
automatically or at the option of any holder thereof, into any Indebtedness or
other assets, other than Holdings’ common stock or additional Holdings’
preferred stock meeting the requirements of this Section 7.06(f)).


 


7.07         Change
in Nature of Business: Limitations on Excluded Subsidiary.  (a) Engage in any material line of
business substantially different from those lines of business conducted by the
Borrowers and their respective Subsidiaries on the date hereof or any business
substantially related or incidental thereto.


 


(b)           With
respect to the Excluded Subsidiary, enter into any business, operations or
activities other than dissolving such Excluded Subsidiary in accordance with Section 6.19.


 


7.08         Transactions
with Affiliates.  Enter into any
transaction of any kind with any Affiliate of either Borrower, whether or not
in the ordinary course of business, other than on fair and reasonable terms
substantially as favorable to such Borrower or such Subsidiary as would be obtainable
by such Borrower or such Subsidiary at the time in a comparable arm’s length
transaction with a Person other than an Affiliate; provided that the
foregoing restriction shall not apply to transactions between or among the Loan
Parties.


 


7.09         Burdensome
Agreements.  Except where required
under applicable Laws, enter into or permit to exist any Contractual Obligation
(other than this Agreement, any other 


 


102

















 


Loan Document or any
Second Lien Loan Document) that (a) limits the ability (i) of any
Subsidiary to make Restricted Payments to the Borrowers or any Guarantor or to
otherwise transfer property to or invest in the Borrowers or any Guarantor,
except for any agreement in effect (A) on the date hereof and set forth on
Schedule 7.09 or (B) at the time any Subsidiary becomes a
Subsidiary of either Borrower, so long as such agreement was not entered into
solely in contemplation of such Person becoming a Subsidiary of such Borrower, (ii) of
any Subsidiary to Guarantee the Indebtedness of the Borrowers or (iii) of
either Borrower or any Subsidiary to create, incur, assume or suffer to exist
Liens on property of such Person; provided, however, that this
clause (iii) shall not prohibit any negative pledge incurred or provided
in favor of any holder of Indebtedness permitted under Section 7.02(f) solely
to the extent any such negative pledge relates to the property financed by or
the subject of such Indebtedness; or (b) requires the grant of a Lien to
secure an obligation of such Person if a Lien is granted to secure another
obligation of such Person.


 


7.10         Use
of Proceeds.  Use the proceeds of any
Credit Extension, whether directly or indirectly, and whether immediately,
incidentally or ultimately, to purchase or carry margin stock (within the
meaning of Regulation U of the FRB) or to extend credit to others for the
purpose of purchasing or carrying margin stock or to refund indebtedness
originally incurred for such purpose.


 


7.11         Financial
Covenants.


 


(a)   Consolidated Leverage
Ratio.  Permit the Consolidated
Leverage Ratio at any time during any period of four fiscal quarters of
Holdings set forth below to be greater than the ratio set forth below opposite
such period:


 


	
  Four
  Fiscal Quarters Ending

  	
   

  	
  Maximum Consolidated Leverage

  Ratio

  
	
  Closing Date
  through March 31, 2008

  	
   

  	
  3.75:1.00

  
	
  April 1,
  2008 through December 31, 2008

  	
   

  	
  3.25:1.00

  
	
  January 1,
  2009 and each fiscal quarter ending thereafter

  	
   

  	
  2.75:1.00

  



 


(b)           Consolidated
Fixed Charge Coverage Ratio.  Permit
the Consolidated Fixed Charge Coverage Ratio as of the end of any fiscal
quarter of Holdings to be less than 1.25 to 1.00.


 


(c)           Consolidated
Membership.  (i) Permit the
aggregate Membership of the Loan Parties, as of the end of any calendar month
to be less than 95% of such aggregate Membership as of the end of the previous
calendar month or permit the aggregate Membership of the Loan Parties, for any
fiscal quarter to be less than 95% of the aggregate Membership from the prior
Fiscal Quarter unless any such decline shall have resulted from the Borrowers’
termination of an existing contract and the Borrowers (a) shall have
provided the Administrative Agent with notice of such termination of such
contract contemporaneously with the delivery of such notice to the counterparty
and (b) shall have delivered to Administrative Agent, prior to giving the
notice of termination, projections satisfactory to the Required Lenders
confirming that 


 


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the Borrowers will remain in compliance with
this Agreement and that such termination will not impair the Borrowers’ ability
to repay its Obligations hereunder; or (ii) permit the aggregate monthly
revenues for the Loan Parties, in any calendar month to be less than 95% of the
average aggregate monthly revenues for the consecutive three-month period
ending as of such month, or permit the aggregate revenue for any Fiscal Quarter
of the Loan Parties, to be less than 95% of the aggregate revenue for the
preceding Fiscal Quarter.


 


7.12         Capital
Expenditures.  Make or become legally
obligated to make any Capital Expenditure, except for Capital Expenditures in
the ordinary course of business not exceeding $7,000,000 (the “Maximum
Capital Expenditure”), in the aggregate for the Borrowers and their
respective Subsidiaries during each fiscal year; provided, however,
that so long as no Default has occurred and is continuing or would result from
such expenditure, any portion of the Maximum Capital Expenditure, if not
expended in the fiscal year for which it is permitted, may be carried over for
expenditure in the next following fiscal year; and provided, further,
if any such amount is so carried over, it will be deemed used in the applicable
subsequent fiscal year before the Maximum Capital Expenditure allocated for
such fiscal year.


 


7.13         Amendments
of Organization Documents.  Amend any
of its Organization Documents in any manner adverse to the Administrative Agent
or the Lenders.


 


7.14         Accounting Changes.  Make any change in (a) accounting
policies or reporting practices, except as required by GAAP, or (b) fiscal
year.


 


7.15         Prepayments,
Etc. of Indebtedness; Payments and Prepayments of the Second Lien Term Loan.  (a)Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner, or
make any payment in violation of any subordination terms of, any Indebtedness,
except (i) the prepayment of the Credit Extensions in accordance with the
terms of this Agreement and (ii) regularly scheduled or required
repayments or redemptions of Indebtedness set forth in Schedule 7.02 in
accordance with any applicable Subordination Agreement and refinancings and
refundings of such Indebtedness in compliance with Section 7.02(d);
and (b) make any payment, prepayment, redemption or repurchase of
principal in respect of any Indebtedness incurred pursuant to the Second Lien
Loan Documents or any refinancing thereof; provided that, subject to the
terms of the Intercreditor Agreement, the Borrower may make any mandatory
prepayment in respect of the Second Lien Term Loan (A) to the extent that
such mandatory prepayment is permitted by the terms of Section 2.05(b) or
(B) to the extent that the Required Lenders waive the corresponding
mandatory prepayment required under Section 2.05(b).


 


7.16         Amendment,
Etc. of Related Documents and Indebtedness. 
(a)  Cancel or terminate any Related Document or consent to or
accept any cancellation or termination thereof, (b) amend, modify or
change in any manner any term or condition of any Related Document or give any
consent, waiver or approval thereunder, (c) waive any default under or any
breach of any term or condition of any Related Document, (d) take any
other action in connection with any Related Document that would impair the
value of the interest or rights of any Loan Party thereunder or that would
impair the rights or interests of the Administrative Agent or any Lender,  (e) amend, modify or change in any
manner any term or condition of any Indebtedness set forth in Schedule 7.02,
except for any refinancing, refunding, renewal or extension thereof permitted


 


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by Section 7.02(d),
or (f) amend, modify, supplement or otherwise change, or consent to any
amendment, modification, supplement or change to, any Second Lien Loan
Document, except pursuant to the terms of the Intercreditor Agreement.


 


7.17         Designation
of Senior Debt.  Designate any
Indebtedness (other than the Indebtedness under the Loan Documents) of either
Borrower or any of their respective Subsidiaries as “Designated Senior Debt”
(or any similar term) under any agreement.


 


ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES


 


8.01         Events
of Default.  Any of the following
shall constitute an Event of Default:


 


(a)   Non-Payment.  Either Borrower or any other Loan Party fails
to (i) pay when and as required to be paid herein, any amount of principal
of any Loan or any L/C Obligation or deposit any funds as Cash Collateral in
respect of L/C Obligations, or (ii) pay within three days after the same
becomes due, any interest on any Loan or on any L/C Obligation, or any fee due
hereunder, or (iii) pay within five days after the same becomes due, any
other amount payable hereunder or under any other Loan Document; or


 


(b)   Specific Covenants.  (i) Either Borrower fails to perform or observe (or fails
to cause any Subsidiary thereof to perform and observe) any term, covenant or
agreement contained in any of Section 6.01, 6.02, 6.03,
6.05, 6.08, 6.10, 6.11, 6.12, 6.14, 6.17,
6.19, or Article VII,
(ii) any of the Guarantors fails to perform or observe any term, covenant
or agreement contained in the Guaranty or (iii) any of the Loan Parties
fails to perform or observe any term, covenant or agreement contained in the
Collateral Agreement or the respective Mortgages to which it is a party;
or


 


(c)   Other Defaults.  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in Section 8.01(a) or
(b) above) contained in any Loan Document on its part to be
performed or observed and such failure continues for 30 days; or


 


(d)   Representations and Warranties.  Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of the Borrowers or
any other Loan Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith shall be incorrect or misleading
when made or deemed made; or


 


(e)   Cross-Default.


 


Any Loan Party
or any Subsidiary thereof (A) fails to make any payment when due after
giving effect to any applicable notice and cure periods (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) in respect
of any Indebtedness or Guarantee (other than Indebtedness hereunder and
Indebtedness under Swap Contracts) having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing
to all creditors under any combined or 


 


105

















 


syndicated
credit arrangement) of more than the Threshold Amount, (B) fails to
observe or perform any other agreement or condition relating to any such
Indebtedness or Guarantee or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event occurs after
giving effect to any applicable notice and cure period, the effect of which
default or other event is to cause, or to permit the holder or holders of such
Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded, or (C) incurs a loss or has a material breach or
other occurrence with respect to a Material Contract which would be likely to
result in a Material Adverse Effect;


 


there occurs
under any Swap Contract an Early Termination Date (as defined in such Swap
Contract) resulting from (A) any event of default under such Swap Contract
as to which a Loan Party or any Subsidiary thereof is the Defaulting Party (as
defined in such Swap Contract) or (B) any Termination Event (as so
defined) under such Swap Contract as to which a Loan Party or any Subsidiary
thereof is an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by such Loan Party or such Subsidiary as a result
thereof is greater than the Threshold Amount; or


 


any “Event of
Default” as defined in the Second Lien Credit Agreement shall have occurred, or


 


any (A) Collection
Account Agreement is terminated without the prior written consent of the
Administrative Agent or (B) any Loan Party shall give notice to the
depositary bank under any Collection Account Agreement amending, waiving,
rescinding, revoking or terminating the instructions previously given for the
disposition of funds deposited into the applicable deposit accounts without the
prior written consent of the Administrative Agent; or


 


(f)    Insolvency Proceedings, Etc.  Any Loan Party or any Subsidiary thereof
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or for all or
any material part of its property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed without
the application or consent of such Person and the appointment continues undischarged
or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law
relating to any such Person or to all or any material part of its property is
instituted without the consent of such Person and continues undismissed or
unstayed for 60 calendar days, or an order for relief is entered in any such
proceeding; or


 


(g)   Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Subsidiary
thereof becomes unable or admits in writing its inability or fails generally to
pay its debts 


 


106

















 


as they become due, or (ii) any
writ or warrant of attachment or execution or similar process is issued or
levied against all or any material part of the property of any such Person and
is not released, vacated or fully bonded within 30 days after its issue or
levy; or


 


(h)   Judgments.  There is entered against any Loan Party or
any Subsidiary thereof (i) one or more final judgments or orders for the
payment of money in an aggregate amount (as to all such judgments and orders)
exceeding the Threshold Amount (to the extent not covered by (A) independent
third-party insurance as to which the insurer (1) is rated at least “A” by A.M.
Best Company, (2) has been notified of the potential claim and (3) does
not dispute coverage or (B) indemnification proceeds actually received by
the applicable Loan Party pursuant to the Merger Agreement to the extent not
required to be reimbursed by any Loan Party), or (ii) any one or more
non-monetary final judgments that have, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in
either case, (A) enforcement proceedings are commenced by any creditor
upon such judgment or order, or (B) there is a period of 10 consecutive days during which a
stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or


 


(i)    ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of either Borrower under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate
amount in excess of the Threshold Amount, or (ii) either Borrower or any
ERISA Affiliate fails to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate
amount in excess of the Threshold Amount; or


 


(j)    Invalidity of Loan Documents.  Any provision of any Loan Document, at any
time after its execution and delivery and for any reason other than as
expressly permitted hereunder or thereunder or satisfaction in full of all the
Obligations, ceases to be in full force and effect; or any Loan Party or any
other Person contests in any manner the validity or enforceability of any
provision of any Loan Document; or any Loan Party denies that it has any or
further liability or obligation under any provision of any Loan Document, or purports
to revoke, terminate or rescind any provision of any Loan Document; or


 


(k)   Change of Control.  There occurs any Change of Control; or


 


(l)    Collateral Documents.  Any Collateral Document after delivery
thereof pursuant to Section 4.01 or 6.12 shall for any
reason (other than pursuant to the terms thereof) cease to create a valid and
perfected first priority Lien (subject to Liens permitted by Section 7.01)
on the Collateral purported to be covered thereby; or


 


(m)  Material Permits and Licenses.  The loss, suspension or revocation of, or
failure to renew, any license, accreditation or Permit now held or hereafter
acquired by any Loan Party or any Subsidiary thereof if such loss, suspension,
revocation or failure to 


 


107

















 


renew would have a Material
Adverse Effect; or the occurrence of any other Material Adverse Effect; or


 


(n)   Material Contracts.  Any Material Contract the loss of which could
reasonably be expected to have a Material Adverse Effect is terminated or fails
to be in full force and effect for any reason without being replaced by a
Material Contract reasonably satisfactory to the Administrative Agent at the
time of its termination or failure to be in full force and effect, or any
breach, a default or an event of default occurs under any Material Contract
which is not remedied within ten (10) days after its occurrence; or


 


(o)   Subordination.  (i)  The subordination provisions of the
documents evidencing or governing any subordinated Indebtedness (collectively,
the “Subordinated Provisions”) shall, in whole or in part, terminate,
cease to be effective or cease to be legally valid, binding and enforceable
against any holder of the applicable subordinated Indebtedness; or (ii) either Borrower or any other
Loan Party shall, directly or indirectly, disavow or contest in any manner (A) the
effectiveness, validity or enforceability of any of the Subordination
Provisions, (B) that the Subordination Provisions exist for the benefit of
the Administrative Agent, the Lenders and the L/C Issuer or (C) that all
payments of principal of or premium and interest on the applicable subordinated
Indebtedness, or realized from the liquidation of any property of any Loan
Party, shall be subject to any of the Subordination Provisions;


 


(p)   Financial Solvency Requirements. Any
Loan Party fails to comply with the California Department of Managed Care
financial solvency regulations, if applicable; or


 


(q)   Indictment.  The indictment or, as the Administrative
Agent may reasonably and in good faith determine, the threatened indictment by
any Governmental Authority of any Loan Party or any Subsidiary or Affiliate of
a Loan Party, in either case, as to which there is a reasonable probability of
an adverse determination under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against a Loan Party
or any Subsidiary or Affiliate of a Loan Party, pursuant to which statute or
proceeding the penalties or remedies sought or available include forfeiture of (i) any
material portion of the Collateral, or (ii) any other assets of a Loan
Party that are necessary or material to the conduct of its business.


 


8.02         Remedies
upon Event of Default.  If any Event
of Default occurs and is continuing, the Administrative Agent shall, at the
request of, or may, with the consent of, the Required Lenders, take any or all
of the following actions:


 


(a)   declare the commitment of each Lender to make
Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be
terminated, whereupon such commitments and obligation shall be terminated;


 


(b)   declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, 


 


108

















 


demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrowers;


 


(c)   require that the Borrowers Cash Collateralize
the L/C Obligations (in an amount equal to the then Outstanding Amount
thereof); and


 


(d)   exercise on behalf of itself, the Lenders and
the L/C Issuer all rights and remedies available to it, the Lenders and the L/C
Issuer under the Loan Documents;


 


provided, however, that upon
the occurrence of an actual or deemed entry of an order for relief with respect
to either Borrower under the Bankruptcy Code of the United States, the
obligation of each Lender to make Loans and any obligation of the L/C Issuer to
make L/C Credit Extensions shall automatically terminate, the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable, and the obligation of the Borrowers
to Cash Collateralize the L/C Obligations as aforesaid shall automatically
become effective, in each case without further act of the Administrative Agent
or any Lender.


 


8.03         Application
of Funds.  After the exercise of
remedies provided for in Section 8.02 (or after the Loans have
automatically become immediately due and payable and the L/C Obligations have
automatically been required to be Cash Collateralized as set forth in the
proviso to Section 8.02), any amounts received on account of the Obligations
shall be applied by the Administrative Agent in the following order:


 


First,
to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including fees, charges and disbursements of
counsel to the Administrative Agent and amounts payable under Article III)
payable to the Administrative Agent in its capacity as such;


 


Second, to payment of that portion of the
Obligations constituting fees, indemnities and other amounts (other than
principal, interest and Letter of Credit Fees) payable to the Lenders and
the L/C Issuer (including fees, charges and disbursements of counsel to the
respective Lenders and the L/C Issuer (including fees and time charges for
attorneys who may be employees of any Lender or the L/C Issuer) and amounts payable under Article III,
ratably among them in proportion to the respective amounts described in this
clause Second payable to them;


 


Third, to payment of that portion of the
Obligations constituting accrued and unpaid Letter of Credit Fees and interest
on the Loans, L/C Borrowings and other Obligations, ratably among the Lenders
and the L/C Issuer in proportion to the respective amounts described in this
clause Third payable to them;


 


Fourth, to payment of that portion of the Obligations
constituting unpaid principal of the Loans, L/C Borrowings and amounts owing
under Secured Hedge Agreements and Secured Cash Management Agreements, ratably
among the Lenders, the L/C Issuer, the Hedge Banks and the Cash Management
Banks in proportion to the respective amounts described in this clause Fourth
held by them;


 


109














 


Fifth, to the
Administrative Agent for the account of the L/C Issuer, to Cash Collateralize
that portion of L/C Obligations comprised of the aggregate undrawn amount of
Letters of Credit; and


 


Last, the balance,
if any, after all of the Obligations have been indefeasibly paid in full, to
the Borrowers or as otherwise required by Law.


 


Subject to Section 2.03(c), amounts used
to Cash Collateralize the aggregate undrawn amount of Letters of Credit
pursuant to clause Fifth above shall be applied to satisfy drawings
under such Letters of Credit as they occur. 
If any amount remains on deposit as Cash Collateral after all Letters of
Credit have either been fully drawn or expired, such remaining amount shall be
applied to the other Obligations, if any, in the order set forth above.


 


ARTICLE IX

ADMINISTRATIVE AGENT


 


9.01         Appointment
and Authority.


 


(a)           Each
of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America
to act on its behalf as the Administrative Agent hereunder and under the other
Loan Documents and authorizes the Administrative Agent to take such actions on
its behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof or thereof, together with such actions and powers as
are reasonably incidental thereto.  The
provisions of this Article are solely for the benefit of the
Administrative Agent, the Lenders and the L/C Issuer, and neither Borrower nor
any other Loan Party shall have rights as a third party beneficiary of any of
such provisions.


 


(b)           The Administrative Agent shall also
act as the “collateral agent”
and/or “control agent” under the Loan Documents, and each of the Lenders (in
its capacities as a Lender, Swing Line Lender (if applicable), potential Hedge
Bank and potential Cash Management Bank) and the L/C Issuer hereby irrevocably
appoints and authorizes the Administrative Agent to act as the agent of such
Lender and the L/C Issuer for purposes of acquiring, holding and enforcing any
and all Liens on Collateral granted by any of the Loan Parties to secure any of
the Obligations, together with such powers and discretion as are reasonably
incidental thereto.  In this connection,
the Administrative Agent, as “collateral agent” and/or “control agent” and any
co-agents, sub-agents and attorneys-in-fact appointed by the Administrative
Agent pursuant to Section 9.05 for purposes of holding or enforcing
any Lien on the Collateral (or any portion thereof) granted under the
Collateral Documents, or for exercising any rights and remedies thereunder at
the direction of the Administrative Agent), shall be entitled to the benefits
of all provisions of this Article IX and Article X
(including Section 10.04(c), as though such co-agents, sub-agents
and attorneys-in-fact were the “collateral agent” or “control agent” under the
Loan Documents) as if set forth in full herein with respect thereto.


 


9.02         Rights
as a Lender.  The Person serving as
the Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not the Administrative Agent and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated or unless the context otherwise requires, 


 


110

















 


include the Person
serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with either
Borrower or any Subsidiary or other Affiliate thereof as if such Person were
not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.


 


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


 


(a)   shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default has occurred and is continuing;


 


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


 


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


 


The Administrative Agent shall not be liable for any
action taken or not taken by it (i) with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary, or as the Administrative Agent shall believe in good faith
shall be necessary, under the circumstances as provided in Sections 10.01
and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct.  The Administrative
Agent shall be deemed not to have knowledge of any Default unless and until
notice describing such Default is given to the Administrative Agent by the
Borrower Agent, a Lender or the L/C Issuer.


 


The Administrative Agent shall not be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty
or representation made in or in connection with this Agreement or any other
Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document, or the creation, perfection or
priority of any Lien purported to be created by the Collateral Documents, (v) the
value or the sufficiency of any Collateral, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere herein, 


 


111

















 


other than to confirm
receipt of items expressly required to be delivered to the Administrative
Agent.


 


9.04         Reliance
by Administrative Agent.  The
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed
by it to be genuine and to have been signed, sent or otherwise authenticated by
the proper Person.  The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon.  In
determining compliance with any condition hereunder to the making of a Loan, or
the issuance of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or the L/C Issuer, the Administrative Agent may
presume that such condition is satisfactory to such Lender or the L/C Issuer
unless the Administrative Agent shall have received notice to the contrary from
such Lender or the L/C Issuer prior to the making of such Loan or the issuance
of such Letter of Credit.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrowers), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.


 


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


 


9.06         Resignation
of Administrative Agent.  The
Administrative Agent may at any time give notice of its resignation to the
Lenders, the L/C Issuer and the Borrower Agent. 
Upon receipt of any such notice of resignation, the Required Lenders
shall have the right, in consultation with the Borrower Agent, to appoint a
successor, which shall be a bank with an office in the United States, or an
Affiliate of any such bank with an office in the United States.  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of the
Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting
the qualifications set forth above; provided that if the Administrative
Agent shall notify the Borrower Agent and the Lenders that no qualifying Person
has accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (a) the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder and under
the other Loan Documents (except that
in the case of any collateral security held by the Administrative Agent on
behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the
retiring Administrative Agent shall continue to hold such collateral security
until such time as a successor Administrative Agent is appointed) and (b) all
payments, communications and determinations 


 


112

















 


provided to be made by,
to or through the Administrative Agent shall instead be made by or to each
Lender and the L/C Issuer directly, until such time as the Required Lenders
appoint a successor Administrative Agent as provided for above in this
Section.  Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Administrative Agent, and the retiring
Administrative Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section). 
The fees payable by the Borrowers to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrowers and such successor. 
After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article and Section 10.04
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.


 


Any resignation by Bank of America as Administrative
Agent pursuant to this Section shall also constitute its resignation as
L/C Issuer and Swing Line Lender.  Upon
the acceptance of a successor’s appointment as Administrative Agent hereunder, (i) such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring L/C Issuer and Swing Line Lender, (ii) the
retiring L/C Issuer and Swing Line Lender shall be discharged from all of their
respective duties and obligations hereunder or under the other Loan Documents,
and (iii) the successor L/C Issuer shall issue letters of credit in
substitution for the Letters of Credit, if any, outstanding at the time of such
succession or make other arrangements satisfactory to the retiring L/C Issuer
to effectively assume the obligations of the retiring L/C Issuer with respect
to such Letters of Credit.


 


9.07         Non-Reliance
on Administrative Agent and Other Lenders. 
Each Lender and the L/C Issuer acknowledges that it has, independently
and without reliance upon the Administrative Agent or any other Lender or any
of their Related Parties 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 and the L/C
Issuer also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender or any of their Related Parties
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder.


 


9.08         Intercreditor Agreement.    Each of the Lenders hereby acknowledges that
it has received and reviewed the Intercreditor Agreement and agrees to be bound
by the terms thereof.  Each Lender (and
each person that becomes a Lender hereunder pursuant to Section 10.06)
hereby (i) acknowledges that Bank of America is acting under the
Intercreditor Agreement in multiple capacities as the Administrative Agent, the
Second Lien Administrative Agent and the Control Agent (as defined in the
Intercreditor Agreement) and (ii) waives any conflict of interest, now
contemplated or arising hereafter, in connection therewith and agrees not to
assert against Bank of America any claims, cause of action, damages or
liabilities of whatever kind or nature relating thereto.  Each Lender (and each Person that becomes a
Lender 


 


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hereunder pursuant
to Section 10.06) hereby authorizes and directs Bank of America to enter
into the Intercreditor Agreement on behalf of such Lender and agrees that Bank
of America, in its various capacities thereunder, may take such actions on its
behalf as is contemplated by the terms of the Intercreditor Agreement.


 


9.09         No
Other Duties, Etc.  Anything herein
to the contrary notwithstanding, none of the Syndication Agent, Bookrunners,
Arrangers or other titled entities listed on the cover page hereof shall
have any powers, duties or responsibilities under this Agreement or any of the
other Loan Documents, except in its capacity, as applicable, as the
Administrative Agent, a Lender or the L/C Issuer hereunder.


 


9.10         Administrative
Agent May File Proofs of Claim. 
In case of the pendency of any proceeding under any Debtor Relief Law or
any other judicial proceeding relative to any Loan Party, the Administrative
Agent (irrespective of whether the principal of any Loan or L/C Obligation
shall then be due and payable as herein expressed or by declaration or
otherwise and irrespective of whether the Administrative Agent shall have made
any demand on either Borrower) shall be entitled and empowered, by intervention
in such proceeding or otherwise


 


(a)   to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans, L/C Obligations and all
other Obligations that are owing and unpaid and to file such other documents as
may be necessary or advisable in order to have the claims of the Lenders, the
L/C Issuer and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders, the L/C
Issuer and the Administrative Agent and their respective agents and counsel and
all other amounts due the Lenders, the L/C Issuer and the Administrative Agent
under Sections 2.03(i) and (j), 2.09 and 10.04)
allowed in such judicial proceeding; and


 


(b)   to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;


 


and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Lender and the L/C Issuer to make such
payments to the Administrative Agent and, if the Administrative Agent shall
consent to the making of such payments directly to the Lenders and the L/C
Issuer, to pay to the Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Administrative Agent
and its agents and counsel, and any other amounts due the Administrative Agent
under Sections 2.09 and 10.04.


 


Nothing contained herein shall be deemed to authorize
the Administrative Agent to authorize or consent to or accept or adopt on
behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of any Lender
or the L/C Issuer to authorize the Administrative Agent to vote in respect of
the claim of any Lender or the L/C Issuer or in any such proceeding.


 


9.11         Collateral
and Guaranty Matters.  The Lenders
and the L/C Issuer irrevocably authorize the Administrative Agent at its option
and in its discretion,


 


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(a)   to release any Lien on any property granted to or held by the
Administrative Agent under any Loan Document (i) upon termination of the
Aggregate Commitments and payment in full of all Obligations (other than
contingent indemnification obligations) and the expiration or termination of
all Letters of Credit, (ii) that is sold or to be sold as part of or in
connection with any sale permitted hereunder or under any other Loan Document,
or (iii)  if approved, authorized or ratified in writing in accordance
with Section 10.01;


 


(b)   to release any Guarantor from its obligations under the Guaranty
if such Person ceases to be a Subsidiary as a result of a transaction permitted
hereunder; and


 


(c)   to subordinate any Lien on any property granted to or held by the
Administrative Agent under any Loan Document to the holder of any Lien on such
property that is permitted by Section 7.01(i).


 


Upon request by the Administrative Agent at any time,
the Required Lenders will confirm in writing the Administrative Agent’s
authority to release or subordinate its interest in particular types or items
of property, or to release any Guarantor from its obligations under the
Guaranty pursuant to this Section 9.11.  In each case as specified in this Section 9.11,
the Administrative Agent will, at the Borrowers’ expense, execute and deliver
to the applicable Loan Party such documents as such Loan Party may reasonably
request to evidence the release of such item of Collateral from the assignment
and security interest granted under the Collateral Documents or to subordinate
its interest in such item, or to release such Guarantor from its obligations
under the Guaranty, in each case in accordance with the terms of the Loan
Documents and this Section 9.11.


 


ARTICLE X

MISCELLANEOUS


 


10.01       Amendments,
Etc.  No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent to any
departure by either Borrower or any other Loan Party therefrom, shall be
effective unless in writing signed by the Required Lenders and the Borrowers or
the applicable Loan Party, as the case may be, and acknowledged by the
Administrative Agent, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however, that no such amendment, waiver or consent shall:


 


(a)   waive any condition set forth in Section 4.01 (other
than Section 4.01(b)(i) or (c)), or, in the case of the
initial Credit Extension, Section 4.02, without the written consent
of each Lender;


 


(b)   without limiting the
generality of clause (a) above, waive any condition set forth in Section 4.02
as to any Credit Extension under the Revolving Credit  Facility without the written consent of the
Required Revolving Lenders;


 


(c)   extend or increase the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to Section 8.02) without the written
consent of such Lender;


 


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(d)   postpone any date fixed by this Agreement or any other Loan
Document for any payment  (excluding
mandatory prepayments) of principal, interest, fees or other amounts due
to the Lenders (or any of them) hereunder or under such other Loan Document
without the written consent of each Lender entitled to such payment;


 


(e)   reduce the principal of, or the rate of interest specified herein
on, any Loan or L/C Borrowing, or (subject to clause (ii) of the second proviso to this Section 10.01)
any fees or other amounts payable hereunder or under any other Loan Document
without the written consent of each Lender entitled to such amount; provided,
however, that only the consent of the Required Lenders shall be
necessary (i) to amend the definition of “Default
Rate” or to waive any obligation of the Borrowers to pay interest or Letter of
Credit Fees at the Default Rate or
(ii) to amend any financial covenant hereunder (or any defined term used
therein) even if the effect of such amendment would be to reduce the rate of
interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;


 


(f)    change (i) Section 8.03 in a manner that would
alter the pro rata sharing of payments required thereby without the written
consent of each Lender or (ii) the order of application of any reduction
in the Commitments or any prepayment of Loans among the Facilities from the
application thereof set forth in the applicable provisions of Section 2.05(b) or
2.06(c), respectively, in any manner that materially and adversely
affects the Lenders under a Facility without the written consent of (i) if
such Facility is the Term Facility, the Required Term Lenders and (ii) if
such Facility is the Revolving Credit Facility, the Required Revolving Lenders;


 


(g)   change (i) any provision of this Section 10.01 or
the definition of “Required Lenders” or any other provision hereof specifying
the number or percentage of Lenders required to amend, waive or otherwise
modify any rights hereunder or make any determination or grant any consent
hereunder (other than the definitions specified in clause (ii) of this Section 10.01(g)),
without the written consent of each Lender or (ii) the definition of “Required
Revolving Lenders,” or “Required Term Lenders,” without the written consent of
each Lender under the applicable Facility;


 


(h)   release all or substantially all of the Collateral in any
transaction or series of related transactions, without the written consent of
each Lender;


 


(i)    release all or substantially all of the value of the Guaranty,
without the written consent of each Lender, except to the extent the release of
any Subsidiary from the Guaranty is permitted pursuant to Section 9.11
(in which case such release may be made by the Administrative Agent acting
alone); or


 


(j)    impose any greater restriction on the ability of any Lender under
a Facility to assign any of its rights or obligations hereunder without the
written consent of (i) if such Facility is the Term Facility, the Required
Term Lenders and (ii) if such Facility is the Revolving Credit Facility,
the Required Revolving Lenders;


 


and provided, further, that (i) no
amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer
in addition to the Lenders required above, affect the rights or duties of 


 


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the L/C Issuer under this Agreement or any Issuer
Document relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent in addition to the Lenders required above, affect the rights or duties of
the Administrative Agent under this Agreement or any other Loan Document; and (iv) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed only
by the parties thereto.  Notwithstanding
anything to the contrary herein, no Defaulting Lender shall have any right to
approve or disapprove any amendment, waiver or consent hereunder, except that
the Commitment of such Lender may not be increased or extended without the
consent of such Lender.


 


10.02       Notices; Effectiveness; Electronic
Communications.


 


(a)  Notices Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopier as follows, and all notices and other communications expressly
permitted hereunder to be given by telephone shall be made to the applicable
telephone number, as follows:


 


(i)            if to the Borrower Agent (on behalf of the Borrowers),
the Administrative Agent, the L/C Issuer or the Swing Line Lender, to the
address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 10.02; and


 


(ii)           if to any other Lender, to the address, telecopier number,
electronic mail address or telephone number specified in its Administrative
Questionnaire.


 


Notices sent by hand or overnight courier service, or
mailed by certified or registered mail, shall be deemed to have been given when
received; notices sent by telecopier shall be deemed to have been given when
sent (except that, if not given during normal business hours for the recipient,
shall be deemed to have been given at the opening of business on the next
business day for the recipient).  Notices
delivered through electronic communications to the extent provided in
subsection (b) below shall be effective as provided in such subsection
(b).


 


(b)           Electronic Communications.  Notices and other communications to the
Lenders and the L/C Issuer hereunder may be delivered or furnished by
electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by the Administrative Agent, provided
that the foregoing shall not apply to notices to any Lender or the L/C Issuer
pursuant to Article II if such Lender or the L/C Issuer, as
applicable, has notified the Administrative Agent that it is incapable of
receiving notices under such Article by electronic communication.  The Administrative Agent or the Borrower
Agent may, in its discretion, agree to accept notices and other communications
to it hereunder by electronic communications pursuant to procedures approved by
it, provided that approval of such procedures may be limited to
particular notices or communications.


 


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Unless the Administrative 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 acknowledgement from the intended recipient
(such as by the “return receipt requested” function, as available, return
e-mail or other written acknowledgement), provided that if such notice
or other communication is not sent during the normal business hours of the
recipient, such notice or communication shall be deemed to have been sent at
the opening of business on the next business day for the recipient, 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.


 


(c)           The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.”  THE AGENT PARTIES (AS
DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER
MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR
ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR
OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER
MATERIALS OR THE PLATFORM.  In no event
shall the Administrative Agent or any of its Related Parties (collectively, the
“Agent Parties”) have any liability to either Borrower, any Lender, the
L/C Issuer or any other Person for losses, claims, damages, liabilities or
expenses of any kind (whether in tort, contract or otherwise) arising out of
either Borrower’s or the Administrative Agent’s transmission of Borrower
Materials through the Internet, except to the extent that such losses, claims,
damages, liabilities or expenses are determined by a court of competent
jurisdiction by a final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Agent Party; provided, however,
that in no event shall any Agent Party have any liability to either Borrower, any Lender, the L/C Issuer or any other Person for
indirect, special, incidental, consequential or punitive damages (as opposed to
direct or actual damages).


 


(d)           Change of Address, Etc.  Each of the Borrowers, the Administrative
Agent, the L/C Issuer and the Swing Line Lender may change its address,
telecopier or telephone number for notices and other communications hereunder
by notice to the other parties hereto. 
Each other Lender may change its address, telecopier or telephone number
for notices and other communications hereunder by notice to the Borrowers, the
Administrative Agent, the L/C Issuer and the Swing Line Lender.  In addition, each Lender agrees to notify the
Administrative Agent from time to time to ensure that the Administrative Agent
has on record (i) an effective address, contact name, telephone number,
telecopier number and electronic mail address to which notices and other
communications may be sent and (ii) accurate wire instructions for such
Lender.  Furthermore, each Public Lender
agrees to cause at least one individual at or on behalf of such Public Lender
to at all times have selected the “Private Side Information” or similar
designation on the content declaration screen of the Platform in order to
enable such Public Lender or its delegate, in accordance with such Public
Lender’s compliance procedures and applicable Law, including United States
Federal and state securities Laws, to make reference to Borrower Materials that
are not made available through the “Public Side Information” portion of the 


 


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Platform
and that may contain material non-public information with respect to the
Borrowers or their securities for purposes of United States Federal or state securities
laws.


 


(e)           Reliance by Administrative Agent,
L/C Issuer and Lenders.  The Administrative Agent, the L/C
Issuer and the Lenders shall be entitled to rely and act upon any notices
(including telephonic Committed Loan Notices and Swing Line Loan Notices)
purportedly given by or on behalf of either Borrower even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof.  Each Borrower (jointly and
severally) shall indemnify the Administrative Agent, the L/C Issuer, each
Lender and the Related Parties of each of them from all losses, costs, expenses
and liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of either Borrower.  All telephonic notices to and other
telephonic communications with the Administrative Agent may be recorded by the
Administrative Agent, and each of the parties hereto hereby consents to such
recording.


 


10.03       No
Waiver; Cumulative Remedies.  No
failure by any Lender, the L/C Issuer or the Administrative Agent to exercise,
and no delay by any such Person in exercising, any right, remedy, power or
privilege hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
herein provided, and provided under each other Loan Document, are cumulative
and not exclusive of any rights, remedies, powers and privileges provided by
law.


 


10.04       Expenses;
Indemnity; Damage Waiver.


 


(a)  Costs and Expenses.  The Borrowers, jointly and severally, shall
pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates (including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent), in connection with
the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the L/C Issuer in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all reasonable out-of-pocket expenses incurred by the
Administrative Agent, any Lender or the L/C Issuer (including the reasonable
fees, charges and disbursements of any counsel for the Administrative Agent,
any Lender or the L/C Issuer), and shall pay
all fees and time charges for attorneys who may be employees of the
Administrative Agent, any Lender or the L/C Issuer, in connection with the
enforcement or protection of its rights (A) in connection with this
Agreement and the other Loan Documents, including its rights under this
Section, or (B) in connection with Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.


 


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(b)           Indemnification by the Borrowers.  The Borrowers, jointly and severally, shall
indemnify the Administrative Agent (and any sub-agent thereof), each Lender and
the L/C Issuer, and each Related Party of any of the foregoing Persons (each
such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses (including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee), and shall indemnify and hold harmless each
Indemnitee from all fees and time charges and disbursements for attorneys who
may be employees of any Indemnitee, incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by the Borrowers or any other Loan
Party arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, or, in the
case of the Administrative Agent (and any sub-agent thereof) and its Related
Parties only, the administration of this Agreement and the other Loan
Documents, (ii) any Loan or Letter of Credit or the use or proposed use of
the proceeds therefrom (including any refusal by the L/C Issuer to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by either
Borrower or any of their respective Subsidiaries, or any Environmental
Liability related in any way to either Borrower or any of their respective
Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by
either Borrower or any other Loan Party or any of either Borrower’s or such Loan Party’s
directors, shareholders or creditors,
and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or (y) result from a claim brought by either Borrower or
any other Loan Party against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Loan Document, if such
Borrower or such Loan Party has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent jurisdiction.


 


(c)           Reimbursement by Lenders.  To the extent that either Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) or (b) of
this Section to be paid by it to the Administrative Agent (or any
sub-agent thereof), the L/C Issuer or any Related Party of any of the
foregoing, each Lender severally agrees to pay to the Administrative Agent (or
any such sub-agent), the L/C Issuer or such Related Party, as the case may be,
such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Administrative Agent (or any such sub-agent) or the
L/C Issuer in its capacity as such, or against any Related Party of any of the
foregoing acting for the Administrative Agent (or any such sub-agent) or L/C
Issuer in connection with such capacity. 
The obligations of the Lenders under this subsection (c) are
subject to the provisions of Section 2.12(d).


 


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(d)           Waiver of Consequential Damages,
Etc.  To the fullest extent permitted
by applicable law, neither Borrower shall assert, and each Borrower hereby
waives, any claim against any Indemnitee, 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 Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or Letter of
Credit or the use of the proceeds thereof. 
No Indemnitee referred to in subsection (b) above shall be liable
for any damages arising from the use by unintended recipients of any
information or other materials distributed to such unintended recipients by
such Indemnitee through telecommunications, electronic or other information
transmission systems in connection with this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby other than for
direct or actual damages resulting from the gross negligence or willful
misconduct of such Indemnitee as determined by a final and nonappealable
judgment of a court of competent jurisdiction.


 


(e)           Payments.  All amounts due under this Section shall
be payable not later than ten Business Days after demand therefor.


 


(f)            Survival.  The agreements in this Section shall
survive the resignation of the Administrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Aggregate
Commitments and the repayment, satisfaction or discharge of all the other
Obligations.


 


10.05       Payments
Set Aside.  To the extent that any
payment by or on behalf of either Borrower is made to the Administrative Agent,
the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or
any Lender exercises its right of setoff, and such payment or the proceeds of
such setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent, the L/C Issuer or such
Lender in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred, and (b) each Lender and the L/C Issuer severally agrees to
pay to the Administrative Agent upon demand its applicable share (without
duplication) of any amount so recovered from or repaid by the Administrative
Agent, plus interest thereon from the date of such demand to the date
such payment is made at a rate per annum equal to the Federal Funds Rate from
time to time in effect.  The obligations
of the Lenders and the L/C Issuer under clause (b) of the preceding
sentence shall survive the payment in full of the Obligations and the
termination of this Agreement.


 


10.06       Successors
and Assigns.


 


(a)  Successors and Assigns Generally.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that neither Borrower may assign or
otherwise transfer any of its respective rights or obligations hereunder
without the prior written consent of the Administrative Agent and each Lender
and no Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an assignee in accordance with the provisions of 


 


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Section 10.06(b), (ii) by way of participation in
accordance with the provisions of Section 10.06(d), or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of Section 10.06(f) (and
any other attempted assignment or transfer by any party hereto shall be null
and void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in subsection (d) of this Section and,
to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.


 


(b)           Assignments by Lenders.  Any Lender may at any time assign to one or more
assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment(s) and the Loans (including
for purposes of this Section 10.06(b), participations in L/C
Obligations and in Swing Line Loans) at the time owing to it); provided
that any such assignment shall be subject to the following conditions:


 


(i)            Minimum Amounts.


 


(A)          in the case of an assignment of the
entire remaining amount of the assigning Lender’s Commitment under any Facility
and the Loans at the time owing to it under such Facility or in the case of an
assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no
minimum amount need be assigned; and


 


(B)           in any
case not described in subsection (b)(i)(A) of this Section, the aggregate
amount of the Commitment (which for this purpose includes Loans outstanding
thereunder) or, if the Commitment is not then in effect, the principal
outstanding balance of the Loans of the assigning Lender subject to each such
assignment, determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Administrative Agent or, if “Trade
Date” is specified in the Assignment and Assumption, as of the Trade Date,
shall not be less than $5,000,000, in
the case of any assignment in respect of the Revolving Credit Facility,
or $1,000,000, in the case of any assignment in respect of the Term Facility,
unless each of the Administrative Agent and, so long as no Event of Default has
occurred and is continuing, the Borrower Agent otherwise consents (each such
consent not to be unreasonably withheld or delayed); provided, however,
that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met;


 


(ii)           Proportionate Amounts.  Each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender’s rights and obligations
under this Agreement with respect to the Loans or the Commitment assigned,
except that this clause (ii) shall not (A) apply to the Swing Line
Lender’s rights and obligations in 


 


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respect of Swing Line Loans
or (B) prohibit any Lender from assigning all or a portion of its rights
and obligations among separate Facilities on a non-pro rata basis;


 


(iii)          Required Consents.  No consent shall be required for any
assignment except to the extent required by subsection (b)(i)(B) of this Section and,
in addition:


 


(A)   the consent of the Borrower Agent (such
consent not to be unreasonably withheld or delayed) shall be required unless (1) an
Event of Default has occurred and is continuing at the time of such assignment
or (2) such assignment is to a Lender, an Affiliate of a Lender or an
Approved Fund;


 


(B)   the consent of the Administrative Agent (such
consent not to be unreasonably withheld or delayed) shall be required for
assignments in respect of (1) any Revolving Credit Commitment if such
assignment is to a Person that is not a Lender with a Revolving Credit
Commitment, an Affiliate of such Lender or an Approved Fund with respect to
such Lender or (2) any Term Loan to a Person that is not a Lender, an
Affiliate of a Lender or an Approved Fund;


 


(C)   the consent of the L/C Issuer (such consent
not to be unreasonably withheld or delayed) shall be required for any
assignment that increases the obligation of the assignee to participate in
exposure under one or more Letters of Credit (whether or not then outstanding);
and


 


(D)   the consent of the Swing Line Lender (such
consent not to be unreasonably withheld or delayed) shall be required for any
assignment in respect of the Revolving Credit Facility.


 


(iv)          Assignment and Assumption.  The parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee in the amount of $3,500; provided,
however, that the Administrative Agent may, in its sole discretion,
elect to waive such processing and recordation fee in the case of any
assignment.  The assignee, if it is not a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.


 


(v)           No Assignment to Either Borrower.  No such assignment shall be made to either of
the Borrowers or any of the Borrowers’ respective Affiliates or Subsidiaries.


 


(vi)          No Assignment to Natural Persons.  No such assignment shall be made to a natural
person.


 


Subject to acceptance and
recording thereof by the Administrative Agent pursuant to subsection (c) of
this Section, from and after the effective date specified in each Assignment
and Assumption, the assignee thereunder shall be a party to this Agreement and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party 


 


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hereto) but shall
continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05
and 10.04 with respect to facts and circumstances occurring prior to the
effective date of such assignment.  Upon
request, the Borrowers (at their expense) shall execute and deliver a Note to
the assignee Lender.  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does
not comply with this subsection shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with Section 10.06(d).


 


(c)           Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Administrative
Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans and L/C Obligations owing
to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in
the Register shall be conclusive, and the Borrowers, the Administrative Agent
and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrowers and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.


 


(d)           Participations.  Any Lender may at any time, without the
consent of, or notice to, the Borrowers or the Administrative Agent, sell
participations to any Person (other than a natural person or the Borrowers or
any of the Borrowers’ respective Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or
obligations under this Agreement (including all or a portion of its Commitment
and/or the Loans (including such Lender’s participations in L/C Obligations
and/or Swing Line Loans) owing to it); provided that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrowers, the
Administrative Agent, the Lenders and the L/C Issuer shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Agreement. 
Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
the first proviso to Section 10.01 that affects such
Participant.  Subject to subsection (e) of
this Section, each Borrower agrees that each Participant shall be entitled to
the benefits of Sections 3.01, 3.04 and 3.05  to the same extent as if it were a Lender and had acquired
its interest by assignment pursuant to Section 10.06(b).  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.08  as though it were a Lender, provided such
Participant agrees to be subject to Section 2.13 as though it were
a Lender.


 


(e)           Limitations upon Participant
Rights.  A Participant shall not be
entitled to receive any greater payment under Section 3.01 or 3.04  than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrower Agent’s
prior written consent.  A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the



 


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benefits
of Section 3.01 unless the Borrower Agent is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrowers, to comply with Section 3.01(e) as
though it were a Lender.


 


(f)            Certain Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve Bank;
provided 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.


 


(g)           Electronic Execution of
Assignments.  The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records
Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.


 


(h)           Resignation as L/C Issuer or Swing
Line Lender after Assignment. 
Notwithstanding anything to the contrary contained herein, if at any
time Bank of America assigns all of its Revolving Credit Commitment and
Revolving Credit Loans pursuant to Section 10.06(b), Bank of
America may, (i) upon 30 days’ notice to the Borrower Agent and the
Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the
Borrower Agent, resign as Swing Line Lender. 
In the event of any such resignation as L/C Issuer or Swing Line Lender,
the Borrowers shall be entitled to appoint from among the Lenders a successor
L/C Issuer or Swing Line Lender hereunder; provided, however,
that no failure by the Borrowers to appoint any such successor shall affect the
resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case
may be.  If Bank of America resigns as
L/C Issuer, it shall retain all the rights, powers, privileges and duties of
the L/C Issuer hereunder with respect to all Letters of Credit outstanding as
of the effective date of its resignation as L/C Issuer and all L/C Obligations
with respect thereto (including the right to require the Lenders to make Base
Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If Bank of America resigns as Swing Line
Lender, it shall retain all the rights of the Swing Line Lender provided for
hereunder with respect to Swing Line Loans made by it and outstanding as of the
effective date of such resignation, including the right to require the Lenders
to make Base Rate Loans or fund risk participations in outstanding Swing Line
Loans pursuant to Section 2.04(c). 
Upon the appointment of a successor L/C Issuer and/or Swing Line Lender,
(a) such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line
Lender, as the case may be, and (b) the successor L/C Issuer shall issue
letters of credit in substitution for the Letters of Credit, if any,
outstanding at the time of such succession or make other arrangements
satisfactory to Bank of America to effectively assume the obligations of Bank
of America with respect to such Letters of Credit.


 


10.07       Treatment
of Certain Information; Confidentiality. 
Each of the Administrative Agent, the Lenders and the L/C Issuer agrees
to maintain the confidentiality of 


 


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the Information (as
defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, advisors and representatives (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority
purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection
with the exercise of any remedies hereunder or under any other Loan Document or
any action or proceeding relating to this Agreement or any other Loan Document
or the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this or (ii) any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrowers and their obligations, (g) with the
consent of the Borrowers, (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, any Lender, the L/C Issuer or any of
their respective Affiliates on a nonconfidential basis from a source other than
the Borrowers or (i) subject to each such Person being informed of the
confidential nature of the Information and to their agreement to keep such
Information confidential on substantially the same terms as required by this
Section, to (A) an investor or prospective investor in securities issued
by an Approved Fund that also agrees that the Information shall be used solely
for the purpose of evaluating an investment in such securities issued by the
Approved Fund, (B) a trustee, collateral manager, servicer, backup
servicer, noteholder or secured party in securities issued by an Approved Fund
in connection with the administration, servicing and reporting on the assets
serving as collateral for securities issued by an Approved Fund, or (C) a
nationally recognized rating agency that requires access to information
regarding the Loan Parties, the Loans and Loan Documents in connection with
rating issued in respect of securities issued by an Approved Fund.


 


For purposes of this Section, “Information”
means all information received from any Loan Party or any Subsidiary thereof
relating to any Loan Party or any Subsidiary thereof or their respective
businesses, other than any such information that is available to the
Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis
prior to disclosure by any Loan Party or any Subsidiary thereof, provided
that, in the case of information received from a Loan Party or any such
Subsidiary after the date hereof, such information is clearly identified at the
time of delivery as confidential.  Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.


 


Each of the Administrative Agent, the Lenders and the
L/C Issuer acknowledges that (a) the Information may include material
non-public information concerning the Borrowers or a Subsidiary, as the case
may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material
non-public information in accordance with applicable Law, including United
States Federal and state securities Laws.


 


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10.08       Right
of Setoff.  If an Event of Default
shall have occurred and be continuing, each Lender, the L/C Issuer and each of
their respective Affiliates is hereby authorized at any time and from time to
time, after obtaining the prior written
consent of the Administrative Agent, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held
and other obligations (in whatever currency) at any time owing by such Lender,
the L/C Issuer or any such Affiliate to or for the credit or the account of
either Borrower  against any and all of
the obligations of such Borrower now or hereafter existing under this Agreement
or any other Loan Document to such Lender or the L/C Issuer, irrespective of
whether or not such Lender or the L/C Issuer shall have made any demand under
this Agreement or any other Loan Document and although such obligations of the
Borrowers may be contingent or
unmatured or are owed to a branch or office of such Lender or the L/C Issuer
different from the branch or office holding such deposit or obligated on such
indebtedness.  The rights of each Lender,
the L/C Issuer and their respective Affiliates under this Section are in
addition to other rights and remedies (including other rights of setoff) that
such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer agrees to
notify the Borrowers and the Administrative Agent promptly after any such
setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application.  Notwithstanding the provisions of this Section 10.08,
if at any time any Lender, the L/C Issuer or any of their respective Affiliates
maintains one or more deposit accounts for either Borrower or any other Loan
Party into which Medicare and/or Medicaid receivables are deposited, such
Person shall waive the right of setoff set forth herein.


 


10.09       Interest
Rate Limitation.  Notwithstanding
anything to the contrary contained in any Loan Document, the interest paid or
agreed to be paid under the Loan Documents shall not exceed the maximum rate of
non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender
shall receive interest in an amount that exceeds the Maximum Rate, the excess
interest shall be applied to the principal of the Loans or, if it exceeds such
unpaid principal, refunded to the Borrowers. 
In determining whether the interest contracted for, charged, or received
by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the contemplated term of the Obligations hereunder.


 


10.10       Counterparts;
Integration; Effectiveness.  This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy
shall be effective as delivery of a manually executed counterpart of this
Agreement.


 


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10.11       Survival
of Representations and Warranties. 
All representations and warranties made hereunder and in any other Loan
Document or other document delivered pursuant hereto or thereto or in
connection herewith or therewith shall survive the execution and delivery
hereof and thereof.  Such representations
and warranties have been or will be relied upon by the Administrative Agent and
each Lender, regardless of any investigation made by the Administrative Agent
or any Lender or on their behalf and notwithstanding that the Administrative
Agent or any Lender may have had notice or knowledge of any Default at the time
of any Credit Extension, and shall continue in full force and effect as long as
any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied
or any Letter of Credit shall remain outstanding.


 


10.12       Severability.  If any provision of this Agreement or the
other Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions.  The
invalidity of a provision in a particular jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.


 


10.13       Replacement
of Lenders.  If any Lender requests
compensation under Section 3.04, or if the Borrowers are required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting
Lender, then the Borrowers may, at their sole expense and effort, upon notice
to such Lender and the Administrative Agent by the Borrower Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in, and consents required by, Section 10.06),
all of its interests, rights and obligations under this Agreement and the
related Loan Documents to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment), provided
that:


 


(a)   the Borrowers shall have paid to the Administrative Agent the
assignment fee specified in Section 10.06(b);


 


(b)   such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and L/C Advances, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder and under the other
Loan Documents (including any amounts under Section 3.05) from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrowers (in the case of all other amounts);


 


(c)   in the case of any such assignment resulting from a claim for
compensation under Section 3.04 or payments required to be made
pursuant to Section 3.01, such assignment will result in a
reduction in such compensation or payments thereafter; and


 


(d)   such assignment does not conflict with applicable Laws.


 


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


 


10.14       Governing
Law; Jurisdiction; Etc.  (a)  GOVERNING
LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


 


(b)           SUBMISSION TO JURISDICTION.  EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK SITTING IN
BOROUGH OF MANHATTAN AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, IN SUCH FEDERAL COURT.  EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER
LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER
OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST EITHER BORROWER
OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.


 


(c)           WAIVER OF VENUE.  EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS
SECTION.  EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.


 


(d)           SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW.


 


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10.15       Waiver
of Jury Trial.  EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.


 


10.16       California
Judicial Reference.


 


If any action or proceeding is filed in a court of the
State of California by or against any party hereto in connection with any of
the transactions contemplated by this Agreement or any other Loan Document, (a) the
court shall, and is hereby directed to, make a general reference pursuant to
California Code of Civil Procedure Section 638 to a referee (who shall be
a single active or retired judge) to hear and determine all of the issues in
such action or proceeding (whether of fact or of law) and to report a statement
of decision, provided that at the option of any party to such proceeding, any
such issues pertaining to a “provisional remedy” as defined in California Code
of Civil Procedure Section 1281.8 shall be heard and determined by the
court, and (b) without limiting the generality of Section 10.04, the
Borrowers shall be solely responsible to pay all fees and expenses of any
referee appointed in such action or proceeding.


 


10.17       No Advisory or Fiduciary
Responsibility.  In connection with all aspects of each
transaction contemplated hereby (including in connection with any amendment,
waiver or other modification hereof or of any other Loan Document), each
Borrower acknowledges and agrees, and
acknowledges its Affiliates’ understanding, that: (i) (A) the
arranging and other services regarding this Agreement provided by the
Administrative Agent and the
Arranger are arm’s-length commercial transactions between each Borrower and their respective Affiliates, on the
one hand, and the Administrative Agent and
the Arranger, on the other hand, (B) each of the Borrowers has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate, and (C) each
of the Borrowers is capable of evaluating, and understands and accepts, the
terms, risks and conditions of the transactions contemplated hereby and by the
other Loan Documents; (ii) (A) the Administrative Agent and the Arranger each is and has been
acting solely as a principal and, except as expressly agreed in writing by the
relevant parties, has not been, is not, and will not be acting as an advisor,
agent or fiduciary for either Borrowers or any of their respective Affiliates, or any other Person and (B) neither
the Administrative Agent nor the
Arranger has any obligation to either Borrower or any of their respective Affiliates with
respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the other Loan Documents; and (iii) the
Administrative Agent and the
Arranger and their respective Affiliates may be engaged in a broad range of
transactions that involve interests that differ from those of the Borrowers and
their respective Affiliates, and
neither the 


 


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Administrative
Agent nor the Arranger has any
obligation to disclose any of such interests to either Borrower or any of their
respective Affiliates.  To the fullest
extent permitted by law, each of the
Borrowers hereby waives and releases any claims that it may have against the
Administrative Agent and the
Arranger with respect to any breach or alleged breach of agency or fiduciary
duty in connection with any aspect of any transaction contemplated hereby.


 


10.18       USA
PATRIOT Act Notice.  Each Lender that
is subject to the Act (as hereinafter defined) and the Administrative Agent
(for itself and not on behalf of any Lender) hereby notifies the Borrowers that
pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Act”), it is
required to obtain, verify and record information that identifies each Loan
Party, which information includes the name and address of each Loan Party and
other information that will allow such Lender or the Administrative Agent, as
applicable, to identify each Loan Party in accordance with the Act.


 


131

















 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.


 


	
   

  	
  PROSPECT MEDICAL HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							



 


 


[Prospect Medical
Holdings, Inc. First Lien Credit Agreement]


 

















 


	
   

  	
  BANK OF AMERICA,
  N.A., as

  
	
   

  	
  Administrative
  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


[Prospect Medical
Holdings, Inc. First Lien Credit Agreement]


 

















 


	
   

  	
  BANK OF AMERICA,
  N.A., as a Lender, L/C

  
	
   

  	
  Issuer and Swing
  Line Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


[Prospect Medical
Holdings, Inc. First Lien Credit Agreement]