Exhibit
10.32


 




 





	
   

  	
   

  	
  Execution
  Version

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Published CUSIP Number: 74349EAG9

  
	
   

  	
   

  	
  Term Loan CUSIP Number: 74349EAH7

  



 


SECOND 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,


 


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

  	
  25

  	
   

  
	
  1.03

  	
  Accounting Terms

  	
  26

  	
   

  
	
  1.04

  	
  Rounding

  	
  26

  	
   

  
	
  1.05

  	
  Times of Day

  	
  27

  	
   

  
	
  1.06

  	
  Currency Equivalents Generally

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
   

  
	
  THE COMMITMENTS AND CREDIT EXTENSIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.01

  	
  The Term Loans

  	
  27

  	
   

  
	
  2.02

  	
  Borrowing; Conversions and Continuations of
  Loans

  	
  27

  	
   

  
	
  2.03

  	
  Intentionally Omitted.

  	
  29

  	
   

  
	
  2.04

  	
  Intentionally Omitted

  	
  29

  	
   

  
	
  2.05

  	
  Prepayments

  	
  29

  	
   

  
	
  2.06

  	
  Reduction of Term Commitments

  	
  32

  	
   

  
	
  2.07

  	
  Repayment of the Term Loans

  	
  32

  	
   

  
	
  2.08

  	
  Interest

  	
  32

  	
   

  
	
  2.09

  	
  Fees

  	
  33

  	
   

  
	
  2.10

  	
  Computation of Interest and Fees;
  Retroactive Adjustments of Applicable Rate

  	
  33

  	
   

  
	
  2.11

  	
  Evidence of Debt

  	
  34

  	
   

  
	
  2.12

  	
  Payments Generally; Administrative Agent’s
  Clawback

  	
  34

  	
   

  
	
  2.13

  	
  Sharing of Payments by Lenders

  	
  36

  	
   

  
	
  2.14

  	
  Obligations Joint and Several

  	
  37

  	
   

  
	
  2.15

  	
  PMG as Borrower Agent

  	
  39

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
   

  
	
  TAXES, YIELD PROTECTION AND ILLEGALITY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3.01

  	
  Taxes

  	
  39

  	
   

  
	
  3.02

  	
  Illegality

  	
  41

  	
   

  
	
  3.03

  	
  Inability to Determine Rates

  	
  42

  	
   

  
	
  3.04

  	
  Increased Costs; Reserves on Eurodollar
  Rate Loans

  	
  42

  	
   

  
	
  3.05

  	
  Compensation for Losses

  	
  43

  	
   

  
	
  3.06

  	
  Mitigation Obligations; Replacement of
  Lenders

  	
  44

  	
   

  
	
  3.07

  	
  Survival

  	
  44

  	
   

  
					



 


i





















 


	
  ARTICLE IV

  	
   

  	
   

  
	
  CONDITIONS PRECEDENT TO CLOSING

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.01

  	
  Conditions Precedent to Borrowing

  	
  44

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  5.01

  	
  Existence, Qualification and Power

  	
  52

  	
   

  
	
  5.02

  	
  Authorization; No Contravention

  	
  52

  	
   

  
	
  5.03

  	
  Governmental Authorization; Other Consents

  	
  53

  	
   

  
	
  5.04

  	
  Binding Effect

  	
  53

  	
   

  
	
  5.05

  	
  Financial Statements; No Material Adverse
  Effect

  	
  53

  	
   

  
	
  5.06

  	
  Litigation

  	
  54

  	
   

  
	
  5.07

  	
  No Default

  	
  54

  	
   

  
	
  5.08

  	
  Ownership of Property; Liens; Investments

  	
  54

  	
   

  
	
  5.09

  	
  Environmental Compliance

  	
  55

  	
   

  
	
  5.10

  	
  Insurance

  	
  56

  	
   

  
	
  5.11

  	
  Taxes

  	
  56

  	
   

  
	
  5.12

  	
  ERISA Compliance

  	
  56

  	
   

  
	
  5.13

  	
  Subsidiaries; Equity Interests; Loan Parties

  	
  57

  	
   

  
	
  5.14

  	
  Margin Regulations; Investment Company Act

  	
  57

  	
   

  
	
  5.15

  	
  Disclosure

  	
  58

  	
   

  
	
  5.16

  	
  Compliance with Laws

  	
  58

  	
   

  
	
  5.17

  	
  Intellectual Property; Licenses, Etc.

  	
  58

  	
   

  
	
  5.18

  	
  Solvency

  	
  59

  	
   

  
	
  5.19

  	
  Casualty, Etc.

  	
  59

  	
   

  
	
  5.20

  	
  Health Care Matters.

  	
  59

  	
   

  
	
  5.21

  	
  Labor Matters.

  	
  61

  	
   

  
	
  5.22

  	
  Collateral Documents.

  	
  61

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
   

  
	
  AFFIRMATIVE COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  6.01

  	
  Financial Statements

  	
  61

  	
   

  
	
  6.02

  	
  Certificates; Other Information

  	
  62

  	
   

  
	
  6.03

  	
  Notices

  	
  66

  	
   

  
	
  6.04

  	
  Payment of Obligations

  	
  68

  	
   

  
	
  6.05

  	
  Preservation of Existence, Etc.

  	
  68

  	
   

  
	
  6.06

  	
  Maintenance of Properties

  	
  68

  	
   

  
	
  6.07

  	
  Maintenance of Insurance

  	
  68

  	
   

  
	
  6.08

  	
  Compliance with Laws

  	
  69

  	
   

  
	
  6.09

  	
  Books and Records

  	
  69

  	
   

  
	
  6.10

  	
  Inspection Rights

  	
  69

  	
   

  
	
  6.11

  	
  Use of Proceeds

  	
  70

  	
   

  
	
  6.12

  	
  Covenant to Guarantee Obligations and Give
  Security

  	
  70

  	
   

  
	
  6.13

  	
  Compliance with Environmental Laws

  	
  73

  	
   

  
					



 


ii





















 


	
  6.14

  	
  Preparation of Environmental/Seismic
  Reports

  	
  73

  	
   

  
	
  6.15

  	
  Further Assurances

  	
  74

  	
   

  
	
  6.16

  	
  Compliance with Terms of Leaseholds

  	
  74

  	
   

  
	
  6.17

  	
  Interest Rate Hedging

  	
  74

  	
   

  
	
  6.18

  	
  Material Contracts

  	
  74

  	
   

  
	
  6.19

  	
  Post-Closing Covenants.

  	
  75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
   

  
	
  NEGATIVE COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  7.01

  	
  Liens

  	
  75

  	
   

  
	
  7.02

  	
  Indebtedness

  	
  76

  	
   

  
	
  7.03

  	
  Investments

  	
  78

  	
   

  
	
  7.04

  	
  Fundamental Changes

  	
  80

  	
   

  
	
  7.05

  	
  Dispositions

  	
  81

  	
   

  
	
  7.06

  	
  Restricted Payments

  	
  81

  	
   

  
	
  7.07

  	
  Change in Nature of Business; Limitations
  on Excluded Subsidiaries

  	
  82

  	
   

  
	
  7.08

  	
  Transactions with Affiliates

  	
  82

  	
   

  
	
  7.09

  	
  Burdensome Agreements

  	
  83

  	
   

  
	
  7.10

  	
  Use of Proceeds

  	
  83

  	
   

  
	
  7.11

  	
  Financial Covenants

  	
  83

  	
   

  
	
  7.12

  	
  Capital Expenditures

  	
  84

  	
   

  
	
  7.13

  	
  Amendments of Organization Documents

  	
  84

  	
   

  
	
  7.14

  	
  Accounting Changes

  	
  84

  	
   

  
	
  7.15

  	
  Prepayments, Etc. of Indebtedness

  	
  84

  	
   

  
	
  7.16

  	
  Amendment, Etc. of Related Documents and
  Indebtedness

  	
  84

  	
   

  
	
  7.17

  	
  Designation of Senior Debt

  	
  85

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
   

  
	
  EVENTS OF DEFAULT AND REMEDIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  8.01

  	
  Events of Default

  	
  85

  	
   

  
	
  8.02

  	
  Remedies upon Event of Default

  	
  88

  	
   

  
	
  8.03

  	
  Application of Funds

  	
  89

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
   

  
	
  ADMINISTRATIVE AGENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  9.01

  	
  Appointment and Authority

  	
  90

  	
   

  
	
  9.02

  	
  Rights as a Lender

  	
  90

  	
   

  
	
  9.03

  	
  Exculpatory Provisions

  	
  90

  	
   

  
	
  9.04

  	
  Reliance by Administrative Agent

  	
  92

  	
   

  
	
  9.05

  	
  Delegation of Duties

  	
  92

  	
   

  
	
  9.06

  	
  Resignation of Administrative Agent

  	
  92

  	
   

  
	
  9.07

  	
  Non-Reliance on Administrative Agent and
  Other Lenders

  	
  93

  	
   

  
	
  9.08

  	
  Intercreditor Agreement

  	
  93

  	
   

  
	
  9.09

  	
  No Other Duties, Etc.

  	
  93

  	
   

  
					



 


iii





















 


	
  9.10

  	
  Administrative Agent May File Proofs
  of Claim

  	
  94

  	
   

  
	
  9.11

  	
  Collateral and Guaranty Matters

  	
  94

  	
   

  



 


	
  ARTICLE X

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  10.01

  	
  Amendments, Etc.

  	
  95

  	
   

  
	
  10.02

  	
  Notices; Effectiveness; Electronic
  Communications

  	
  96

  	
   

  
	
  10.03

  	
  No Waiver; Cumulative Remedies

  	
  98

  	
   

  
	
  10.04

  	
  Expenses; Indemnity; Damage Waiver

  	
  98

  	
   

  
	
  10.05

  	
  Payments Set Aside

  	
  100

  	
   

  
	
  10.06

  	
  Successors and Assigns

  	
  100

  	
   

  
	
  10.07

  	
  Treatment of Certain Information;
  Confidentiality

  	
  104

  	
   

  
	
  10.08

  	
  Right of Setoff.

  	
  105

  	
   

  
	
  10.09

  	
  Interest Rate Limitation

  	
  105

  	
   

  
	
  10.10

  	
  Counterparts; Integration; Effectiveness

  	
  105

  	
   

  
	
  10.11

  	
  Survival of Representations and Warranties

  	
  106

  	
   

  
	
  10.12

  	
  Severability

  	
  106

  	
   

  
	
  10.13

  	
  Replacement of Lenders

  	
  106

  	
   

  
	
  10.14

  	
  Governing Law; Jurisdiction; Etc.

  	
  107

  	
   

  
	
  10.15

  	
  Waiver of Jury Trial

  	
  108

  	
   

  
	
  10.16

  	
  California Judicial Reference.

  	
  108

  	
   

  
	
  10.17

  	
  No Advisory or Fiduciary Responsibility

  	
  108

  	
   

  
	
  10.18

  	
  USA PATRIOT Act Notice

  	
  109

  	
   

  
	
  10.19

  	
  Intercreditor Agreement

  	
  109

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNATURES

  	
  S-1

  	
   

  



 


iv





















 


SCHEDULES


 




	
  1.01

  	
   

  	
  Certain EBITDA
  Add-Backs

  
	
  2.01

  	
   

  	
  Term 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

  	
   

  	
  Term Note

  
	
  C

  	
   

  	
  Compliance
  Certificate

  
	
  D

  	
   

  	
  Assignment and
  Assumption

  
	
  E

  	
   

  	
  Calculation of
  Consolidated Membership

  






 


v





















 


SECOND LIEN CREDIT AGREEMENT


 


This SECOND 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.


 


PRELIMINARY STATEMENTS:


 


The Borrowers have requested that the Lenders provide
a term loan facility and the Lenders have indicated their willingness to lend
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.


 


“Agreement”
means this Second 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 Percentage”
means, with respect to any Lender at any time, the percentage (carried out to
the ninth decimal place) represented by (a) on or prior to the Closing Date, such Lender’s Term Commitment at
such time and (ii) thereafter, the principal amount of such Lender’s Term Loans at such time.  The initial Applicable Percentage of each
Lender 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) 7.00% per annum for Base Rate Loans and 8.25% per annum for
Eurodollar Rate Loans.


 


“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 D 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.


 


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


 


2





















 


“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 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 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
Lenders pursuant to Section 2.01.


 


“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 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):


 


3


















 


(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.


 


“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


 


4

















 


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


 


(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 


 


5

















 


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.


 


“Committed Loan
Notice” means a notice of (a) the Borrowings to be made on the
Closing Date, (b) a conversion of Term Loans from one Type to the other,
or (d) a 


 


6

















 


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 C.


 


“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 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 


 


7

















 


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.


 


“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, 


 


8

















 


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 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, and (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.


 


“Defaulting Lender”
means any Lender that (a) has failed to fund any portion of the Term 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)).


 


“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 


 


9

















 


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 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 


 


10

















 


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 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 the First Lien Term Loans
pursuant to the terms of Section 2.07 of the First Lien Credit
Agreement, (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 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
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.


 


11

















 


“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, 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 Lenders outstanding at such time.


 


“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.


 


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


 


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


 


“First Lien Event of
Default” means any “Event of Default” as defined in the First Lien Credit
Agreement.


 


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


 


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


 


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


 


12

















 


“First Lien Revolving
Credit Commitment” means the “Revolving Credit Commitment” as defined in
the First Lien Credit Agreement.


 


“First Lien Revolving
Loans” means the “Revolving Loans” as defined in the First Lien Credit
Agreement.


 


“First Lien Term Loans”
means the “Term Loans” as defined in the First Lien Credit Agreement.


 


 “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.


 


“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 


 


13

















 


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 (Second 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 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.


 


14














 


“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 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.


 


15

















 


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 First 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 Term Loan and the Maturity Date; 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, the last Business Day of each March, June, September and December and the Maturity
Date.


 


“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 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.


 


“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 


 


16

















 


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.


 


“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.


 


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


 


“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.


 


“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 Documents”
means, collectively, (a) this Agreement, (b) the Notes, (c) the
Guaranty, (d) the Collateral Documents, (e) the Fee Letter, (f) each
Secured Hedge Agreement, (g) each Secured Cash Management Agreement, and (h) 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 


 


17

















 


under any Loan Document or any First 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 February 8, 2015; provided, however, that, in each
case, if such date is not a Business Day, the Maturity Date shall be the next
preceding Business Day.


 


“Maximum First Lien
Indebtedness” has the meaning set forth in the Intercreditor Agreement.


 


“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).


 


18

















 


“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 First 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; 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 promissory note made by the Borrowers in favor of a Lender, evidencing
the Term Loans made by such Lender, substantially in the form of Exhibit B.


 


“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 Term Loan, 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 


 


19

















 


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.


 


“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 


 


20

















 


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.


 


“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.


 


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


 


21

















 


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.


 


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


 


“Second Priority Lien”
means, with respect to any Lien purported to be created in any Collateral
pursuant to any Collateral Document, that such Lien is the only Lien to which
such Collateral is subject, other than any Permitted Lien, and is second in
priority to the Liens granted by the Loan Parties under the First Lien Loan
Documents.


 


“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.


 


“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 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.


 


“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 


 


22

















 


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 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).


 


“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 


 


23

















 


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 Commitment”
means, as to each Lender, its obligation to make Term Loans to the Borrowers
pursuant to Section 2.01 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 Lender
becomes a party hereto, as applicable, as such amount may be adjusted from time
to time in accordance with this Agreement.


 


“Term Loan” means,
collectively, the advances made by the Lenders under the Facility.


 


“Terner Pledge”
means that certain Second 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 $3,750,000.


 


“Total Outstandings”
means, as of any date, the aggregate outstanding principal amount of the Term
Loans after giving effect to any prepayments or repayments of Term Loans
occurring on such date.


 


“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 First 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) 


 


24

















 


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.


 


“Type”
means, with respect to a Term 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.


 


“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 


 


25

















 


“property” shall be
construed to have the same meaning and effect and to refer to any and 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).


 


26














 


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).


 


1.06         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
Term Loans.  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 Lender’s Term
Commitment.  The  Borrowing shall consist of Term Loans made
simultaneously by the Lenders in accordance with their respective Term
Commitments.  Amounts borrowed under this
Section 2.01 and repaid or prepaid may not be reborrowed.


 


2.02         Borrowing;
Conversions and Continuations of Loans.


 


(a)  Term Loans may be Base Rate Loans or
Eurodollar Rate Loans as further provided herein.  The Borrowing on the Closing Date, each
conversion of Term 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 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)


 


27

















 


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 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.  Each 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 conversion of Term Loans from
one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the
requested date of the conversion or continuation, as the case may be (which
shall be a Business Day), (iii) the principal amount of Term Loans to be
converted or continued, (iv) the Type of Term Loans to be borrowed or to
which existing Term 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 Term 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 shall be 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.


 


(b)           Following
receipt of a Committed Loan Notice, the Administrative Agent shall promptly
notify each Lender of the amount of its Applicable Percentage of the Term
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 the Term Loans to be made on
the Closing Date, each Lender shall make the amount of its Term 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 Closing
Date.   Upon satisfaction of the
applicable conditions set forth in 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 accordance with
instructions provided to (and reasonably acceptable to) the Administrative
Agent by the Borrower Agent.


 


(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 Term Loans may be 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.


 


28

















 


(e)           After
giving effect to all 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.


 


2.03         Intentionally
Omitted.


 


2.04         Intentionally
Omitted.


 


2.05         Prepayments.


 


(a) 
Optional.


 


(i)            Generally.   Subject to (A) the prior payment in full
of the First Lien Obligations, (B) Section 2.05(a)(ii) and (C) 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 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 Term Loans to be prepaid and,
if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such
Term Loans.  The Administrative Agent
will promptly notify each 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).  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
outstanding principal balance of the Term Loans, and each such prepayment shall
be paid to the Lenders in accordance with their respective Applicable
Percentages.


 


(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 second 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 second
anniversary of the Closing Date (excluding accrued interest) (assuming that the
interest rate applicable to all such interest is the swap 


 


29

















 


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 second 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 second 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 (1) the third anniversary
of the Closing Date, but on or after the second anniversary of the Closing
Date, shall be subject to an additional premium equal to the amount of such
prepayment multiplied by 3%, with respect to each such prepayment made prior to
the third anniversary of the Closing Date, (2) the fourth anniversary of
the Closing Date but on or after the third anniversary of the Closing Date
shall be subject to an additional premium equal to the amount of such
prepayment multiplied by 2%; and (3) the fifth anniversary of the Closing
Date but on or after the fourth anniversary of the Closing Date shall be
subject to an additional premium equal to the amount of such prepayment
multiplied by 1%.  On or after the fifth  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.


 


(b)  Mandatory.  Subject to the provisions of the
Intercreditor Agreement and subject to the prior payment in full of (1) the
First Lien Term Loan and (2) the First Lien Revolving Loans (but not
including the permanent reduction of the First Lien Revolving Credit
Commitment), in each case as provided in Section 2.05 of the First
Lien Credit Agreement (or the waiver of such payment in accordance with Section 10.01
of the First Lien Credit Agreement), the Borrowers shall prepay the Term Loans
pursuant to, and in accordance with, clauses (i) through (iv) below.  For the avoidance of doubt, it is understood
and agreed that, notwithstanding anything to the contrary set forth in this
Agreement, the Borrowers shall not be required or permitted to prepay the Term
Loans hereunder as a result of any incurrence of Indebtedness, any Asset Disposition,
any Extraordinary Receipt or any Excess Cash Flow if the First Lien Term Loan
or the First Lien Revolving Loans (but not the First Lien Revolving Credit
Commitment) remain outstanding.


 


(i)            Subject to the first two sentences
of this subsection (b), 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 Term 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)           Subject to the first two sentences of this subsection (b),
if any Borrower
or any of its Subsidiaries Disposes of any property (other than any Disposition
of any 


 


30

















 


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 Term 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 Term Loans as set forth in this Section 2.05(b)(ii).


 


(iii)          Subject to the first two sentences of this subsection (b),
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 Term 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)          Subject to the first two sentences of this subsection (b),
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 Term 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, 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 Term Loans as set forth in this Section 2.05(b)(iv).


 


(v)           Each prepayment of Term Loans
pursuant to the foregoing provisions of this Section 2.05(b) shall
be applied to the outstanding principal balance of the Term Loans; provided
that each 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 Lenders under this Agreement who have initially
accepted such prepayment (such re-


 


31

















 


offer to be made to each such
Lender based on the percentage which such Lender’s Term Loans represents of the
aggregate Term Loans of all such Lenders who have initially accepted such
prepayment).  In the event of such a
re-offer, the relevant 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 Loans pursuant to
such re-offer but was so declined shall be returned to the Borrowers.  Any 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.


 


2.06         
Reduction of Term Commitments.  The
Term Commitments shall be automatically and permanently reduced to zero on the
date of the Borrowing.


 


2.07         Repayment
of the Term Loans.  The Borrowers,
jointly and severally, shall repay to the Lenders the aggregate outstanding
principal amount of the Term Loans on the Maturity Date (or on such earlier
date on which the Term Loans become due and payable pursuant to Article VIII).


 


2.08         Interest.


 


(a)           Subject
to the provisions of Section 2.08(b), (i) each Eurodollar Rate
Loan 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; and (ii) each Base Rate
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.


 


(b)           (i) 
If any amount of principal of any Term 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 Term 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.


 


32

















 


(c)           Interest
on each Term 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  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 First Lien Credit Agreement). 
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 Term Loan for the day on which the Term Loan is made, and
shall not accrue on a Term Loan, or any portion thereof, for the day on which
the Term Loan or such portion is paid, provided that any Term 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 or any
Lender), 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
paragraph shall not limit the rights of the Administrative Agent or any Lender,
as the case may be, under Section 2.08(b) or under Article VIII.  The Borrowers’ obligations under this
paragraph shall survive the repayment of all Obligations hereunder.


 


2.11         Evidence
of Debt.  The Term Loans 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 Term Loans made by the Lenders to the Borrowers and the
interest and payments 


 


33

















 


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 Term 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 Term Loans and payments with respect
thereto.


 


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 Lenders 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 (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.


 


(b)           Presumptions
by Administrative Agent.


 


(i)            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 


 


34

















 


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 Term 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.


 


(ii)           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
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 Lenders the amount due.  In such
event, if the Borrowers have not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender, 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.


 


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 Term 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 Term Loans 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 to make payments pursuant to  Section 10.04(c) are
several and not joint.  The failure of
any Lender to make any Term Loan on the Closing Date 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 Term Loan 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 Term Loan in any
particular place or manner or to constitute a 


 


35

















 


representation by
any Lender that it has obtained or will obtain the funds for any Term 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, 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 then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal 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 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 due and payable to all Lenders hereunder
and under the other Loan Documents at such time) of payments on account of the
Obligations 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
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 owing (but not due and payable) to all Lenders hereunder and under
the other Loan Documents at such time) of payment on account of the Obligations
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 Term 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 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 are
purchased and all or any portion of the payment giving rise thereto is recovered,
such participations 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 Term Loans, 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 


 


36

















 


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 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



 


37

















 


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 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).


 


38














 


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 the 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 or any Lender, 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.


 


(c)           Indemnification by the Borrowers.  The Borrowers shall, jointly and severally, indemnify the Administrative Agent and each Lender, 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 or such Lender, 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 (with a copy
to the Administrative Agent), or by the Administrative Agent on its own behalf
or on behalf of a Lender, 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 


 


39

















 


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,


 


(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 or any Lender
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to


 


40

















 


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 or such Lender, 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 or such Lender, 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 or such
Lender if the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority. 
This subsection shall not be construed to require the Administrative
Agent or any Lender 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.


 


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 Term 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.


 


41

















 


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));


 


(ii)           subject any Lender to any
tax of any kind whatsoever with respect to this Agreement or any Eurodollar
Rate Loan made by it, or change the basis of taxation of payments to such
Lender 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


 


(iii)          impose on any Lender or the
London interbank market any other condition, cost or expense affecting this
Agreement or Eurodollar Rate Loans made by such Lender;


 


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 Eurodollar Rate Loan), or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or any other amount)
then, upon request of such Lender, the Borrowers will pay to such Lender such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered.


 


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


 


(c)           Certificates for Reimbursement.  A certificate of a
Lender setting forth the amount or amounts necessary to compensate such Lender
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 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 to
demand compensation pursuant to the foregoing provisions of this Section shall
not constitute a waiver of such Lender’s right to demand such compensation, provided
that the Borrowers shall not be required to compensate a Lender pursuant to the
foregoing provisions of this Section for any


 


42

















 


increased
costs incurred or reductions suffered more than nine months prior to the date
that such Lender notifies the Borrower Agent of the Change in Law giving rise
to such increased costs or reductions and of such Lender’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 Term 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 Term
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.


 


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 Term Loan other than a Base Rate Loan
on a day other than the last day of the Interest Period for such Term 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 Term
Loan) to prepay, borrow, continue or convert any Term 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 Term 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 Term Loan by a matching deposit or other borrowing in the 


 


43

















 


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 Term
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.


 


3.07         Survival.  All of the
Borrowers’ obligations under this Article III shall survive the
repayment of all Obligations hereunder.


 


ARTICLE IV

CONDITIONS PRECEDENT TO CLOSING


 


4.01         Conditions Precedent to Borrowing. 
The obligation of each Lender to make its Term Loan 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;


 


44

















 


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


 


(v)           a second 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)          delivery to the First Lien Administrative
Agent of 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 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 Closing Date, 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


 


45

















 


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)          Second Priority 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:


 


(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
and subsisting Second Priority 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 and subsisting Second
Priority 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 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 


 


46

















 


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,


 


(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
and subsisting Second Priority 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;


 


47














 


(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;


 


(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


 


48

















 


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 Term 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;


 


(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 First Lien Administrative Agent, as
control agent, as loss payee on all certificates for property hazard insurance
maintained with respect to the assets and properties of the Loan Parties that
constitutes Collateral and naming the Administrative Agent as an additional
insured on all certificates for liability insurance;


 


(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 


 


49

















 


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 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.


 


(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


 


50

















 


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, 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 Facility 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)   (i)  The First Lien Loan Documents shall be in form and
substance satisfactory to the Administrative Agent and (ii) concurrent
with the closing of the Facility and the funding of the Term Loan, the
Borrowers shall have borrowed at least $95,000,000 pursuant to, and in
accordance with, the First Lien Credit Agreement.


 


51

















 


(h)   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.


 


(i)    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 Closing Date, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct as of such earlier date.


 


(j)    No Default shall exist.


 


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.


 


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 First Lien Loan Documents)


 


52

















 


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.


 


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 second 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.


 


53

















 


(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 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.


 


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(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
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, 


 


55

















 


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 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


 


56

















 


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 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.


 


57














 


(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, 


 


58

















 


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.


 


59

















 


(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.


 


60

















 


(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 Second Priority Lien
(subject to Liens permitted by Section 7.01(a)-(i) and (k)-(l))
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 Term Loan or other Obligation hereunder
shall remain unpaid or unsatisfied 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,


 


61

















 


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 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:


 


62

















 


(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 E 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


 


63

















 


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
materials and/or information provided by or on


 


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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 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 First Lien Credit Agreement)) delivered to any
Loan Party, or sent by or on behalf of any Loan Party, with respect to the
First 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


 


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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


 


69

















 


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
Term Loans to (i) finance the Transactions (together with the proceeds of
the First Lien Term Loan and First Lien Revolving Loans) 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, subject to the
Intercreditor Agreement, delivery of all pledged Equity Interests in and of
such Subsidiary to the First Lien 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 Second 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 Second 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,


 


70














 


(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, 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 Second Priority Lien (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 Second 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 Second 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 


 


71

















 


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 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,


 


(c)           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, subject to the
Intercreditor Agreement, delivery of all pledged Equity Interests and pledged
debt in and of such Subsidiary to the First Lien Administrative Agent, 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 Second 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 Second 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


 


72

















 


(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 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.


 


(d)           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.


 


73

















 


(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.


 


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 First 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.


 


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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 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 First Lien Administrative Agent may extend such deadline in
its sole discretion), the Borrowers shall deliver, or shall cause their
appropriate Subsidiaries to deliver to the First Lien Administrative Agent, in
each case, in form and substance satisfactory to the First Lien 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 Term Loan or other Obligation hereunder
shall remain unpaid or unsatisfied, 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 


 


75

















 


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);


 


(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 $2,500,000, 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:


 


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(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 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 $2,500,000;


 


(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


 


77

















 


(i)    Indebtedness of the Borrowers and Guarantors
under the First Lien Loan Documents in an aggregate principal amount not to
exceed at any time the Maximum First Lien Indebtedness.


 


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 


 


78

















 


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 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 $6,125,000;


 


(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 $2,500,000; 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);


 


79

















 


(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;


 


(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 $2,500,000 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;


 


80






 


 










 


(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
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 $2,500,000
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


 


81

















 


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;


 


(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


 


82

















 


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 Loan Document or any First 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 the
Term Loans, 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

  	
   

  	
  4.00:1.00

  
	
  April 1, 2008 through December 31, 2008

  	
   

  	
  3.50:1.00

  
	
  January 1, 2009 and each fiscal quarter ending
  thereafter

  	
   

  	
  3.00:1.00

  






 


(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 1.10 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 85% of such aggregate


 


83

















 


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 85% 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 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 85% 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 85% 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 $8,000,000 (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.  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 (a) the prepayment of the Term Loans in
accordance with the terms of this Agreement and (b) 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).


 


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


 


84

















 


by Section 7.02(d), or (f) amend, modify, supplement
or otherwise change, or consent to any amendment, modification, supplement or
change to, any First 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 Term Loan, or (ii) pay within three days after the same becomes due,
any interest on any Term Loan, 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.


 


(i)         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 syndicated credit arrangement) of more than the Threshold Amount,


 


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(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; or


 


(ii)           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


 


(iii)          (A) any First Lien Event of
Default shall have occurred and remain continuing sixty (60) days after the
First Lien Administrative Agent has received notice thereof; or (B) a
First Lien Event of Default shall have occurred and remain continuing and the
First Lien Obligations are accelerated pursuant to Section 8.02(a) of
the First Lien Credit Agreement with respect to such First Lien Event of
Default; or


 


(iv)          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


 


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(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 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
Second Priority Lien (subject to Liens permitted by Section 7.01)
on the Collateral purported to be covered thereby; or


 


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(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 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 and the Lenders 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.  Subject to the terms of the Intercreditor
Agreement, 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 unpaid principal amount of all
outstanding Term 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,


 


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


 


(b)     exercise on behalf of itself and the
Lenders all rights and remedies available to it and the Lenders 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 unpaid principal amount of
all outstanding Term Loans and all interest and other amounts as aforesaid
shall automatically become due and payable 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 Term Loans have
automatically become immediately due and payable), 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 and interest) payable to the Lenders (including fees, charges and
disbursements of counsel to the respective Lenders (including fees and time
charges for attorneys who may be employees of any Lender) 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 interest on the Term Loans and other Obligations,
ratably among the Lenders 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 Term Loans and amounts owing
under Secured Hedge Agreements and Secured Cash Management Agreements, ratably
among the Lenders, the Hedge Banks and the Cash Management Banks in proportion
to the respective amounts described in this clause Fourth held by them;
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.


 


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ARTICLE
IX

ADMINISTRATIVE AGENT


 


9.01         Appointment
and Authority.


 


(a)           Each
of the Lenders 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 and
the Lenders, 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, potential
Hedge Bank and potential Cash Management Bank) hereby irrevocably appoints and
authorizes the Administrative Agent to act as the agent of such Lender 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,
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 


 


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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 or a Lender.


 


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


 


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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 Term
Loan that by its terms must be fulfilled to the satisfaction of a Lender, the
Administrative Agent may presume that such condition is satisfactory to such
Lender unless the Administrative Agent shall have received notice to the
contrary from such Lender prior to the making of such Term Loan.  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 facility 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 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, 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 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
provided to be made by, to or through the Administrative Agent shall instead be
made by or to each Lender 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 


 


92

















 


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.


 


9.07         Non-Reliance
on Administrative Agent and Other Lenders. 
Each Lender 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 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 First 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 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.  Notwithstanding the foregoing, at any time
during which the Administrative Agent hereunder is also the First Lien
Administrative Agent, upon the occurrence and during the continuance of an
Event of Default, Lenders holding 66 2/3rds percent of the aggregate
outstanding Loans (excluding, solely for purposes of this provision, the
Administrative Agent to the extent that it is also a Lender hereunder and any
Loans held by the Administrative Agent as a Lender hereunder) may, by
affirmative written consent, elect, in consultation with the Borrower Agent, to
remove the Administrative Agent under this Agreement and 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.


 


9.09         No
Other Duties, Etc.  Anything herein
to the contrary notwithstanding, none of the 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
or a Lender.


 


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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 Term Loan 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 Term
Loans 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 and the Administrative Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders
and the Administrative Agent and their respective agents and counsel and all
other amounts due the Lenders and the Administrative Agent under Sections
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 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, 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 any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations or the rights of any Lender to authorize the
Administrative Agent to vote in respect of the claim of any Lender or in any
such proceeding.


 


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


 


(a)   to release any Lien on any property granted
to or held by the Administrative Agent under any Loan Document (i) upon
payment in full of all Obligations (other than contingent indemnification
obligations), (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).


 


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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)), without the
written consent of each Lender;


 


(b)   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;


 


(c)   reduce the principal of, or the rate of
interest specified herein on, any Term Loan, 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 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 Term Loan or to
reduce any fee payable hereunder;


 


(d)   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
prepayment of Term Loans 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 the Facility without the written consent of the Required Lenders;


 


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(e)   change 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, without the written consent of each Lender or;


 


(f)    release all or substantially all of the
Collateral in any transaction or series of related transactions, without the
written consent of each Lender;


 


(g)   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


 


(h)   impose any greater restriction on the ability
of any Lender to assign any of its rights or obligations hereunder without the
written consent of the Required Lenders;


 


and provided, further, that (i) 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 (ii) 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.


 


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) or
the Administrative Agent, 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).


 


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(b)           Electronic
Communications.  Notices and other
communications to the Lenders 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 pursuant to Article II
if such Lender 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.


 


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 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 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 and the Administrative Agent 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 and the Administrative
Agent.  In addition, each Lender agrees
to notify 


 


97

















 


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 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 and Lenders.  The Administrative Agent and the
Lenders shall be entitled to rely and act upon any notices (including telephonic
Committed 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, 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 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 facility 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) and (ii)  all reasonable
out-of-pocket expenses incurred by the Administrative Agent or any Lender
(including the reasonable fees, charges and disbursements of any counsel for
the Administrative Agent or any Lender), and shall pay
all fees and time charges for attorneys who may be employees of the
Administrative Agent or any Lender, in connection with the 


 


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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 Term Loans made, including all such out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of such Term Loans.


 


(b)           Indemnification
by the Borrowers.  The Borrowers,
jointly and severally, shall indemnify the Administrative Agent (and any
sub-agent thereof), each Lender 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 Term Loan or the use or proposed use of the proceeds
therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by 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) or any Related
Party of any of the foregoing, each Lender severally agrees to pay to the
Administrative Agent (or any such sub-agent) 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) in its
capacity as such, or against any Related Party of any of the foregoing acting
for the Administrative Agent (or any such 


 


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sub-agent) in connection with such capacity.  The obligations of the Lenders under this
subsection (c) are subject to the provisions of Section 2.12(d).


 


(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 Term Loan 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 replacement of any
Lender, and the repayment, satisfaction or discharge of all 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
or any Lender, or the Administrative Agent 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 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 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 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


 


100

















 


rights or obligations
hereunder except (i) to an assignee in accordance with the provisions of 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 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 Term 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 amount of the Term Loans at the time owing
to it 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
principal outstanding balance of the Term 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 $1,000,000, 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 Term Loans or the Term Commitment
assigned;


 


(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 


 


101

















 


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; and


 


(B)   the consent of the Administrative Agent (such
consent not to be unreasonably withheld or delayed) shall be required for
assignments in respect of any Term Loan to a Person that is not a Lender, an
Affiliate of a Lender or an Approved Fund.


 


(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 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
Term Commitments of, and principal amounts of the Term Loans 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.


 


102














 


(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 the Term 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 and the
Lenders 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 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.


 


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10.07       Treatment
of Certain Information; Confidentiality. 
Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality of 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 or any Lender 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 or any Lender 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 and the Lenders
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 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 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, irrespective of whether or not such Lender 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
different from the branch or office holding such deposit or obligated on such
indebtedness.  The rights of each Lender
and its Affiliates under this Section are in addition to other rights and
remedies (including other rights of setoff) that such Lender or its Affiliates
may have.  Each Lender 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 or any of its 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 Term 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 Borrowing, and shall continue in full force and effect as long as any Term
Loan or any other Obligation hereunder shall remain unpaid.


 


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 Term Loans, 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.


 


106

















 


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 OR ANY
LENDER 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.


 


107

















 


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 


 


108

















 


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.


 


10.19       Intercreditor
Agreement.  Until the Discharge of
the First Lien Obligations (as defined in the Intercreditor Agreement),
notwithstanding anything herein to the contrary, the lien and security interest
granted to the Administrative Agent pursuant to any Loan Document and the
exercise of any right or remedy in respect of the Collateral by the
Administrative Agent hereunder or under any other Loan Document are subject to
the provisions of the Intercreditor Agreement. 
In the event of any conflict between the terms of the Intercreditor
Agreement, this Agreement and any other Loan Document, the terms of the
Intercreditor Agreement shall govern and control with respect to any right or
remedy.  Without limiting the generality
of the foregoing, and notwithstanding anything herein to the contrary, all
rights and remedies of the Administrative Agent (and the Secured Parties) shall
be subject to the terms of the Intercreditor Agreement.  Without limiting the generality of the
foregoing, and notwithstanding anything herein to the contrary, all rights and
remedies with respect to the Collateral of the Administrative Agent (and the
Secured Parties) shall be subject to the terms of the Intercreditor Agreement,
and until the Discharge of the First Lien Obligations (as defined in the Intercreditor
Agreement), (i) no Loan Party shall be required hereunder or under any
other Loan Document to take any action with respect to the Collateral that is
inconsistent with such Loan Parties’ obligations under the First Lien Loan
Documents and (ii) any obligation of any Loan Party hereunder or under any
other Loan Document with respect to the delivery or control of any Collateral,
the novation of any lien on any certificate of title, bill of lading or other
document, the giving of any notice to any bailee or other Person, the provision
of voting rights or the obtaining of any consent of any Person, shall be deemed
to be satisfied if the Loan Party complies with the requirements of the similar
provision of the applicable First Lien Loan Document.  Until the Discharge of the First Lien
Obligations (as defined in the Intercreditor Agreement), the Administrative
Agent may not require any Loan Party to take any action with respect to the
creation, perfection or priority of its security interest, whether pursuant to
the express terms hereof or of any other Loan Document or pursuant to the
further assurances provisions hereof or any other Loan Document, to the extent
the First Lien Administrative Agent under the First Lien Loan Documents shall
have required such Loan Party to take similar action, and delivery of any
Collateral to the First Lien Administrative Agent pursuant to the First Lien
Loan Documents shall satisfy any delivery requirement hereunder or under any
other Loan Document.


 


109

















 


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. Second Lien Credit Agreement]


 

















 


	
   

  	
  BANK OF AMERICA,
  N.A., as

  
	
   

  	
  Administrative
  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


[Prospect Medical Holdings, Inc. Second Lien Credit Agreement]


 

















 


	
   

  	
  BANK OF AMERICA,
  N.A., as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


 


[Prospect Medical Holdings, Inc. Second Lien Credit Agreement]