EX-10.80






Exhibit 10.80




FOURTH AMENDED AND RESTATED 

REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT




     THIS FOURTH AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (the
“Agreement”) dated as of April 30, 2009, is entered into among UNITED STATES PHARMACEUTICAL GROUP,
L.L.C. d/b/a NATIONSHEALTH, a Delaware limited liability company (“USPG”), NATIONSHEALTH HOLDINGS,
L.L.C., a Florida limited liability company (“NHH”), NATIONSHEALTH, INC., a Delaware corporation
(“NationsHealth”), DIABETES CARE & EDUCATION, INC., a South Carolina corporation (“DCE”), and
NATIONAL PHARMACEUTICALS AND MEDICAL PRODUCTS (USA), LLC, a Florida limited liability company
(“National Pharmaceuticals” and sometimes individually, collectively and jointly and severally with
USPG, NHH, NationsHealth and DCE, “Borrower”) and CAPITALSOURCE FINANCE LLC, a Delaware limited
liability company, in its capacity as agent for Lender (as herein defined) (in such capacity, the
“Agent”).



     WHEREAS, pursuant to a certain Revolving Credit and Security Agreement dated as of April 30,
2004 by and among USPG, NHH and CapitalSource Finance LLC (together with its successors and
assigns, “Lender”) (the “Original Credit Agreement”), Lender made available to USPG and NHH a
revolving credit facility (the “Revolving Facility”) in a maximum principal amount at any time
outstanding of up to Ten Million Dollars ($10,000,000) (the “Facility Cap”); and



     WHEREAS, USPG, NHH and Lender amended and restated the Original Credit Agreement pursuant to a
certain Amended and Restated Revolving Credit and Security Agreement by and among USPG, NHH and
Lender dated as of June 29, 2004 (the “First Restated Credit Agreement”) and a certain Second
Amended and Restated Revolving Credit and Security Agreement by and among USPG, NHH and Lender
dated March 21, 2006 (the “Second Restated Credit Agreement”); and



     WHEREAS, USPG, NHH, NationsHealth and Lender amended and restated the Second Restated Credit
Agreement to continue the Revolving Facility and to make available to Borrower a multi-draw term
loan (the “Term Loan”) in a maximum principal amount of Seven Million Dollars ($7,000,000) pursuant
to a certain Third Amended and Restated Revolving Credit, Term Loan and Security Agreement by and
among USPG, NHH, NationsHealth and Lender dated as of April 11, 2007 (as amended and in effect from
time to time, the “Third Restated Credit Agreement”); and



     WHEREAS, DCE was joined as a party to and as borrower under the Third Restated Credit
Agreement pursuant to a certain Joinder Agreement and Second Amendment to Third Amended and
Restated Revolving Credit, Term Loan and Security Agreement by and among USPG, NHH, NationsHealth,
DCE and Lender dated September 4, 2007; and



     WHEREAS, National Pharmaceuticals was joined as a party to and borrower under the Third
Restated Credit Agreement pursuant to a certain Consent, Waiver, Joinder and Eighth Amendment to
Third Amended and Restated Revolving Credit, Term Loan and Security Agreement by and among USPG,
NHH, NationsHealth, DCE, National Pharmaceuticals and Lender dated April 30, 2009; and



 









 





     WHEREAS, Lender designated Agent as its agent for taking certain actions on its behalf
pursuant to Section 12.12 of the Third Restated Credit Agreement; and



     WHEREAS, Borrower has requested that Lender amend and restate the Third Restated Credit
Agreement to continue the Revolving Facility and the Term Loan in connection with (A) the
consummation of the transactions contemplated by that certain Agreement and Plan of Merger dated as
of April 30, 2009 by and among ComVest NationsHealth Holdings, LLC (“ComVest”), NationsHealth
Acquisition Corporation (“NAC”) and NationsHealth (the “Merger Agreement”) or (B), in the event of
the termination of the Merger Agreement and the failure of Borrower to repay the Bridge Loan (as
defined herein), the consummation of the Voluntary Series A Conversion (as defined herein); and



     WHEREAS, Agent on behalf of Lender is willing to amend and restate the terms and conditions of
the Third Restated Credit Agreement to continue the Revolving Facility and the Term Loan at the
Closing Date upon the terms and subject to the conditions set forth herein;



     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged, Borrower and Agent on
behalf of Lender hereby agree that the Third Restated Credit Agreement shall be amended and
restated at the Closing Date as follows:



I. DEFINITIONS




     1.1 General Terms



     For purposes of this Agreement, in addition to the definitions above and elsewhere in this
Agreement, the terms listed in Appendix A, Annex I.A. and Annex I.B. hereto
shall have the meanings given such terms in Appendix A, Annex I.A. and Annex
I.B., which are incorporated herein and made a part hereof. All capitalized terms used which
are not specifically defined herein shall have meanings provided in Article 9 of the UCC in effect
on the date hereof to the extent the same are used or defined therein. Unless otherwise specified
herein or in Appendix A, Annex I.A. or Annex I.B., any agreement, contract
or instrument referred to herein or in Appendix A, Annex I.A. or Annex
I.B., shall mean such agreement, contract or instrument as modified, amended, restated or
supplemented from time to time. Unless otherwise specified, as used in the Loan Documents or in
any certificate, report, instrument or other document made or delivered pursuant to any of the Loan
Documents, all accounting terms not defined in Appendix A, Annex I.A., Annex
I.B. or elsewhere in this Agreement shall have the meanings given to such terms in and shall be
interpreted in accordance with GAAP.



II. ADVANCES, PAYMENT AND INTEREST




     2.1 The Revolving Facility



     (a) Subject to the provisions of this Agreement, Lender shall continue the Existing Advances
and make Advances to Borrower under the Revolving Facility from time to time during the Term,
provided that, notwithstanding any other provision of this Agreement, the aggregate amount
of all Advances at any one time outstanding under the Revolving Facility shall not exceed the
lesser of (a) the Facility Cap, or (b) the Availability. The Revolving Facility is a revolving
credit facility, which may be drawn, repaid and redrawn, from time to time as permitted under this
Agreement. Any determination as to whether there is Availability for Advances shall be made by
Lender in its sole discretion and, absent demonstrable error, is final and binding upon Borrower.
Unless otherwise permitted by Lender, each
Advance shall be in an amount of at least $1,000. Subject to the provisions of this
Agreement, Borrower may request Advances under the Revolving Facility up to and including the
value, in U.S. Dollars, of the sum of:



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	 	(i)	 	Eighty-Five percent (85%) of the Borrowing Base for Eligible Billed
Receivables;
	 
	 	(ii)	 	Sixty percent (60%) of the Borrowing Base for Eligible Nondeductible Unbilled
Receivables;
	 
	 	(iii)	 	Sixty percent (60%) of the Borrowing Base for Eligible Deductible Unbilled
Receivables; and
	 
	 	(iv)	 	the Inventory Availability; provided, however, that the
Inventory Availability shall at no time exceed the lesser of (i) twenty-five percent
(25%) of the Availability or (ii) the Inventory Cap in effect from time to time;
	 
	 	(v)	 	minus, the Availability Reserve and, if applicable, any other amounts
adjusted or reserved pursuant to this Agreement (such calculated amount being referred
to herein as the “Availability").





Notwithstanding any provision of this Agreement or any definition contained in Appendix A attached
hereto to the contrary, in no event shall any Accounts or Inventory of National Pharmaceuticals be
included in the calculation of the Borrowing Base or the Availability under this Agreement.
Advances under the Revolving Facility automatically shall be made for the payment of interest on
the Advances and the Term Loan and other Obligations on the date when due to the extent available
and as provided for herein. The proceeds of Advances under the Revolving Facility shall be used by
Borrower (i) as a provider of health care services, (ii) as a wholesaler, retailer and provider of
medical supplies and services, (iii) for the generation of receivables/inventory, (iv) for the
refinancing of existing indebtedness, (v) for payments to Lender hereunder, and (vii) for any other
lawful purpose permitted under this Agreement.



     (b) Lender has established the above-referenced advance rate for Availability and, in its
sole credit judgment, may further adjust the Availability and such advance rates by applying
percentages (known as “liquidity factors”) to Eligible Receivables by payor class based upon
Borrower’s actual recent collection history for each such payor class (i.e., Medicare, Medicaid,
commercial insurance, etc.) and to Eligible Inventory in a manner consistent with Lender’s
underwriting practices and procedures, including without limitation Lender’s review and analysis
of, among other things, Borrower’s historical returns, rebates, discounts, credits and allowances
(collectively, the “Dilution Items”). Such liquidity factors and the advance rate for
Availability may be adjusted by Lender throughout the Term as warranted by Lender’s underwriting
practices and procedures in its sole credit judgment. Also, Lender shall have the right to
establish from time to time, in its sole credit judgment, reserves against the Borrowing Base,
which reserves shall have the effect of reducing the amounts otherwise eligible to be disbursed to
Borrower under the Revolving Facility pursuant to this Agreement.



     2.2 Revolving Facility Maturity Date



     All amounts outstanding under the Revolving Facility and other Obligations relating to
Advances shall be due and payable in full, if not earlier in accordance with this Agreement, on the
earlier of (i) the occurrence and continuance of an Event of Default if required pursuant hereto or
Lender’s demand upon
the occurrence and continuance of an Event of Default, and (ii) the last day of the Term (such
earlier date being the “Revolving Facility Maturity Date”). The Revolving Facility shall be
subject to extension for up to one year at the option of Lender, in its sole and absolute
discretion, upon written notice to Borrower at any time prior to the then applicable Revolving
Facility Maturity Date.



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     2.3 Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate



     So long as no Default or Event of Default shall have occurred and be continuing, Borrower may
give Lender irrevocable written notice requesting an Advance under the Revolving Facility by
delivering to Lender not later than 11:00 a.m. (Eastern Standard Time) at least one (1) but not
more than four (4) Business Days before the proposed borrowing date of such requested Advance (the
“Borrowing Date”), a completed Borrowing Certificate and relevant supporting documentation
satisfactory to Lender, which shall (i) specify the proposed Borrowing Date of such Advance which
shall be a Business Day, (ii) specify the principal amount of such requested Advance, (iii) certify
the matters contained in Section 4.2, and (iv) specify the amount of any Medicare or
Medicaid recoupments and/or recoupments of any third-party payor being sought, requested or
claimed, or, to Borrower’s knowledge, threatened against Borrower or Borrower’s Affiliates. Each
time a request for an Advance is made, and, in any event and regardless of whether an Advance is
being requested, on Tuesday of each week during the Term (and so long as a Default or Event of
Default exists, more frequently if Lender shall so request) until the Obligations are indefeasibly
paid in cash in full and this Agreement is terminated, Borrower shall deliver to Lender a Borrowing
Certificate accompanied by a separate detailed aging and categorizing of Borrower’s accounts
receivable and accounts payable and such other supporting documentation with respect to the figures
and information in the Borrowing Certificate as Lender shall reasonably request from a credit or
security perspective or otherwise. On each Borrowing Date, Borrower irrevocably authorizes Lender
to disburse the proceeds of the requested Advance to the appropriate Borrower’s account(s) as set
forth on Schedule 2.4, in all cases for credit to the appropriate Borrower (or to such
other account as to which the appropriate Borrower shall instruct Lender) via Federal funds wire
transfer no later than 4:00 p.m. (Eastern Standard Time). Notwithstanding any provision of this
Agreement to the contrary, if the average outstanding balance under the Revolving Facility during
any calendar month is less than Two Million Five Hundred Thousand Dollars ($2,500,000) (the
“Minimum Balance”), Borrower acknowledges and agrees that Lender shall be entitled to calculate
interest and fees hereunder, including, without limitation, the calculations set forth in
Sections 2.4, 3.1 and 3.5, as if the average outstanding balance for such calendar month
was Two Million Five Hundred Thousand Dollars ($2,500,000). Notwithstanding the requirement of
Borrower delivering a Borrowing Certificate in connection with each requested Advance, Borrower may
give Lender irrevocable written notice requesting an Advance under the Revolving Facility in an
amount necessary to make the total outstanding Advances at such time equal Two Million Five Hundred
Thousand Dollars ($2,500,000), and so long as (i) no Default or Event of Default shall have
occurred and be continuing, and (ii) Lender has a Borrowing Certificate that is not more than four
(4) Business Days before the proposed borrowing date of such requested Advance, subject to
Availability, Lender shall disburse the proceeds of such requested Advance.



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     2.4 Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox



     Each Borrower shall maintain one or more lockbox accounts (individually and collectively, the
“Lockbox Account”) with one or more banks acceptable to Lender (each, a “Lockbox Bank”), and shall
execute with each Lockbox Bank one or more agreements acceptable to Lender (individually and
collectively, the “Lockbox Agreement”), and such other agreements related thereto as Lender may
require. Each Borrower shall ensure that all collections of their respective Accounts and all
other cash
payments received by any Borrower, including CIGNA Receipts, are paid and delivered directly
from Account Debtors and other Persons into the appropriate Lockbox Account. The Lockbox
Agreements shall provide that the Lockbox Banks will transfer on the same Business Day all funds
paid into the Lockbox Accounts into a depository account or accounts maintained by Lender or an
Affiliate of Lender at such bank as Lender may communicate to Borrower and the applicable Lockbox
Bank from time to time in accordance with the Lockbox Agreement (the “Concentration Account”),
except, with respect only to Accounts payable by Medicaid/Medicare Account Debtors, as instructed
by the applicable Borrower to whom such Accounts are payable as permitted pursuant to the
applicable Lockbox Agreement. Notwithstanding and without limiting any other provision of any Loan
Document, Lender shall apply, on a daily basis, all funds transferred into the Concentration
Account pursuant to the Lockbox Agreement and this Section 2.4 in such order and manner as
determined by Lender. To the extent that any Accounts are collected by any Borrower or any other
cash payments received by any Borrower are not sent directly to the appropriate Lockbox Account but
are received by any Borrower or any of their Affiliates, such collections and proceeds shall be
held in trust for the benefit of Lender and immediately remitted (and in any event within two (2)
Business Days), in the form received, to the appropriate Lockbox Account for immediate transfer to
the Concentration Account. Borrower acknowledges and agrees that compliance with the terms of this
Section 2.4 is an essential term of this Agreement, and that, in addition to and
notwithstanding any other rights Lender may have hereunder, under any other Loan Document, under
applicable law or at equity, upon each and every failure by any Borrower or any of their Affiliates
to comply with any such terms Lender shall be entitled to assess a non-compliance fee which shall
operate to increase the Applicable Rate by two percent (2.0%) per annum during any period of
non-compliance, whether or not a Default or an Event of Default occurs or is declared, provided
that nothing shall prevent Lender from considering any failure to comply with the terms of this
Section 2.4 to be a Default or an Event of Default. All funds transferred to the
Concentration Account for application to the Obligations under the Revolving Facility shall be
applied to reduce the Obligations under the Revolving Facility, but, for purposes of calculating
interest hereunder shall be subject to a five (5) Business Day clearance period. If as the result
of collections of Accounts and/or any other cash payments received by any Borrower pursuant to this
Section 2.4 a credit balance exists with respect to the Concentration Account, such credit
balance shall not accrue interest in favor of a Borrower, but shall be available to Borrower upon
Borrower’s written request. If applicable, at any time prior to the execution of all or any of the
Lockbox Agreements and operation of all or any of the Lockbox Accounts, each Borrower and their
Affiliates shall direct all collections or proceeds it receives on Accounts or from other
Collateral to the accounts(s) and in the manner specified by Lender in its sole discretion.



     2.5 The Term Loan



     Borrower acknowledges and agrees that Lender extended the Term Loan to Borrower pursuant to
the Third Restated Credit Agreement. Borrower acknowledges and agrees that the outstanding
principal amount of the Term Loan as of April 30, 2009 is Three Million Forty Three Thousand Five
Hundred Forty Six and 3/100 Dollars ($3,043,546.03). Lender hereby agrees to continue the Term
Loan in accordance with the terms and conditions of this Agreement. Borrower acknowledges that it
has no further right to request loans or advances under the Term Loan and that no portion of the
Term Loan may be re-borrowed.



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     2.6 Repayment of Term Loan; Maturity



     Payment of the outstanding principal balance of the Term Loan (in addition to the interest
payments in Section 3.2) and all other amounts (other than interest) outstanding under the
Term Loan shall be made as follows:



     (a) Commencing on the first day of the first calendar month following the Closing Date, and
continuing on the first day of each calendar month thereafter, the then outstanding principal
balance of the Term Loan shall be payable in consecutive monthly installments of $234,118.93 plus
accrued and unpaid interest thereon, and, if not sooner paid, a final installment, together with
accrued and unpaid interest thereon and all other amounts due and owing under this Agreement with
respect to the Term Loan, shall be due and payable on April 30, 2010.



     (b) All Term Loan Obligations shall be due and payable in full, if not earlier in accordance
with this Agreement, on the earlier of (i) the occurrence and continuance of an Event of Default if
required pursuant hereto or Lender’s demand upon the occurrence and continuance of an Event of
Default, (ii) a Revolver Termination and (iii) April 30, 2010, the earlier of the foregoing (i),
(ii) or (iii) being the “Term Loan Maturity Date”.



     2.7 Promise to Pay; Manner of Payment



     Borrower absolutely and unconditionally promises to pay principal, interest and all other
amounts payable hereunder, or under any other Loan Document, without any right of rescission and
without any deduction whatsoever, including any deduction for any setoff, counterclaim or
recoupment, and notwithstanding any damage to, defects in or destruction of the Collateral or any
other event, including obsolescence of any property or improvements. All payments made by Borrower
(other than payments automatically paid through Advances under the Revolving Facility as provided
herein), shall be made only by wire transfer on the date when due, without offset or counterclaim,
in U.S. Dollars, in immediately available funds to such account as may be indicated in writing by
Lender to Borrower from time to time. Any such payment received after 2:00 p.m. (Eastern Standard
Time) on the date when due shall be deemed received on the following Business Day. Whenever any
payment hereunder shall be stated to be due or shall become due and payable on a day other than a
Business Day, the due date thereof shall be extended to, and such payment shall be made on, the
next succeeding Business Day, and such extension of time in such case shall be included in the
computation of payment of any interest (at the interest rate then in effect during such extension)
and/or fees, as the case may be.



     2.8 Repayment of Excess Advances



     Any balance of Advances under the Revolving Facility outstanding at any time in excess of the
lesser of the Facility Cap or the Availability shall be immediately due and payable by Borrower
without the necessity of any demand, at the Payment Office, whether or not a Default or Event of
Default has occurred or is continuing and shall be paid in the manner specified in Section
2.7.



     2.9 Payments by Lender



     Should any amount required to be paid under any Loan Document be unpaid, such amount may be
paid by Lender, which payment shall be deemed a request for an Advance under the Revolving Facility
as of the date such payment is due, and Borrower irrevocably authorizes disbursement of any such
funds to Lender by way of direct payment of the relevant amount, interest or Obligations. No
payment or prepayment of any amount by Lender or any other Person shall entitle any Person to be
subrogated to the rights of Lender under any Loan Document unless and until the Obligations have
been fully performed and paid irrevocably in cash and this Agreement has been terminated. Any sums
expended by Lender as a result of any Borrower’s or any Guarantor’s failure to pay, perform or
comply with any Loan Document or any of the Obligations may be charged to Borrower’s account as an
Advance under the Revolving Facility and added to the Obligations.



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     2.10 Evidence of Loans



     (a) Lender shall maintain, in accordance with its usual practice, electronic or written
records evidencing the Indebtedness and Obligations to Lender resulting from each Loan made by
Lender from time to time, including without limitation, the amounts of principal and interest
payable and paid to Lender from time to time under this Agreement.



     (b) The entries made in the electronic or written records maintained pursuant to subsection
(a) of this Section 2.10 (the “Register”) shall be prima facie evidence, absent manifest
error, of the existence and amounts of the Obligations and Indebtedness therein recorded;
provided however, that the failure of Lender to maintain such records or any error
therein shall not in any manner affect the joint and several obligations of Credit Parties to repay
the Loans or Obligations in accordance with their terms.



     (c) Lender will account to Borrower monthly with a statement of Advances under the Revolving
Facility, and any charges and payments made pursuant to this Agreement, and in the absence of
manifest error, such accounting rendered by Lender shall be deemed final, binding and conclusive
unless Lender is notified by Borrower in writing to the contrary within fifteen calendar days of
Receipt of such accounting, which notice shall be deemed an objection only to items specifically
objected to therein.



     (d) Borrower agrees that:



          (i) upon written notice by Lender to Borrower that a Note or other evidence of Indebtedness is
requested by Lender to evidence the Loans and other Obligations owing or payable to, or to be made
by, Lender, Borrower shall promptly (and in any event within three (3) Business Days of any such
request) execute and deliver to Lender an appropriate Note or Notes in form and substance
reasonably acceptable to Lender and Borrower;



          (ii) all references to Notes in the Loan Documents shall mean Notes, if any, to the extent
issued (and not returned to Borrower for cancellation) hereunder, as the same may be amended,
modified, divided, supplemented, extended or restated from time to time; and



          (iii) upon Lender’s written request, and in any event within three (3) Business Days of any
such request, Borrower shall execute and deliver to Lender new Notes and divide the Notes in
exchange for then existing Notes in such smaller amounts or denominations as Lender shall specify
in its sole and absolute discretion; provided, that the aggregate principal amount of such
new Notes shall not exceed the aggregate principal amount of the Notes outstanding at the time such
request is made; and provided, further, that such Notes that are to be replaced shall then be
deemed no longer outstanding hereunder and replaced by such new Notes and returned to Borrower
within a reasonable period of time after Lender’s receipt of the replacement Notes.



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     2.11 Grant of Security Interest; Collateral



     (a) To secure the payment and performance in full of the Obligations, each Borrower hereby
grants to Lender a continuing security interest in and Lien upon, and pledges to Lender, all of its
right, title and interest in and to the following (collectively and each individually, the
“Collateral”), which security interest is intended to be a first priority security interest:



          (i) all of such Borrower’s tangible personal property, including without limitation all
present and future Inventory and Equipment (including items of equipment which are or become
Fixtures), now owned or hereafter acquired or arising;



          (ii) all of such Borrower’s intangible personal property, including without limitation all
present and future Accounts, contract rights, Permits, General Intangibles, Chattel Paper,
Documents, Instruments, Deposit Accounts, Investment Property, Letter-of-Credit Rights, Supporting
Obligations, rights to the payment of money or other forms of consideration of any kind, tax
refunds, insurance proceeds, now owned or hereafter acquired, and all intangible and tangible
personal property relating to or arising out of any of the foregoing;



          (iii) all of such Borrower’s present and future Government Contracts and rights thereunder and
the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such
Borrower; provided, however, that Lender shall not have a security interest in any
rights under any Government Contract of such Borrower or in the related Government Account where
the taking of such security interest is a violation of an express prohibition contained in the
Government Contract (for purposes of this limitation, the fact that a Government Contract is
subject to, or otherwise refers to, Title 31, § 203 or Title 41, § 15 of the United States Code
shall not be deemed an express prohibition against assignment thereof) or is prohibited by
applicable law, unless in any case consent is otherwise validly obtained; and



          (iv) any and all additions and accessions to any of the foregoing, and any and all
replacements, products and proceeds (including insurance proceeds) of any of the foregoing.



     (b) Notwithstanding the foregoing provisions of this Section 2.11, such grant of a
security interest shall not extend to, and the term “Collateral” shall not include, any General
Intangibles, now or hereafter held or owned by Borrower to the extent that (i) such General
Intangibles are not assignable or capable of being encumbered as a matter of law or under the terms
of any license or other agreement applicable thereto (but solely to the extent that any such
restriction shall be enforceable under applicable law) without the consent of the licensor thereof
or other applicable party thereto, and (ii) such consent has not been obtained; provided,
however, that the foregoing grant of a security interest shall extend to, and the term
“Collateral” shall include, each of the following: (a) any General Intangible which is in the
nature of an Account or a right to the payment of money or a proceed of, or otherwise related to
the enforcement or collection of, any Account or right to the payment of money, or goods which are
the subject of any Account or right to the payment of money, (b) any and all proceeds of any
General Intangible that is otherwise excluded to the extent that the assignment, pledge or
encumbrance of such proceeds is not so restricted, and (c) upon obtaining the consent of any such
licensor or other applicable party with respect to any such otherwise excluded General Intangible,
such General Intangible as well as any and all proceeds thereof that might theretofore have been
excluded from such grant of a security interest and from the term “Collateral.”



     (c) Upon the execution and delivery of this Agreement, and upon the proper filing of the
necessary financing statements, recordation of the Collateral Patent, Trademark and Copyright
Assignment in the United States Patent and Trademark Office and/or the United States Copyright
Office
without any further action, Lender will have a good, valid and perfected first priority Lien
and security interest in the Collateral, subject to no transfer or other restrictions or Liens of
any kind in favor of any other Person except for Permitted Liens. No financing statement relating
to any of the Collateral is on file in any public office except those (i) on behalf of Lender, (ii)
in connection with Permitted Liens and/or (iii) those being terminated.



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     2.12 Collateral Administration



     (a) All Collateral (except Deposit Accounts) will at all times be kept by Borrower at the
locations set forth on Schedule 5.18B hereto and shall not, without thirty (30) calendar
days prior written notice to Lender, be moved therefrom unless Lender has entered into the
necessary documents to perfect and enforce its security interest therein at such new location, and
in any case shall not be moved outside the continental United States.



     (b) Borrower shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit such records to Lender on such periodic bases as Lender may
request. In addition, if Accounts of Borrower in an aggregate face amount in excess of $30,000
become ineligible because they fall within one of the specified categories of ineligibility set
forth in the definition of Eligible Receivables, Borrower shall notify Lender of such occurrence on
the first Business Day following such occurrence and the Borrowing Base shall thereupon be adjusted
to reflect such occurrence. Following the occurrence and during the continuance of an Event of
Default, if requested by Lender, Borrower shall execute and deliver to Lender formal written
assignments (or, in the case of Medicaid/Medicare Account Debtors, documents necessary to comply
with the Federal Assignment of Claims Act) of all of its Accounts weekly or daily as Lender may
request, including all Accounts created since the date of the last assignment, together with copies
of claims, invoices and/or other information related thereto. To the extent that collections from
such assigned accounts exceed the amount of the Obligations, such excess amount shall not accrue
interest in favor of Borrower, but shall be available to Borrower upon Borrower’s written request.



     (c) Following an occurrence or during the continuance of an Event of Default, any of Lender’s
officers, employees, representatives or agents shall have the right, at any time during normal
business hours, in the name of Lender, any designee of Lender or Borrower, to verify the validity,
amount or any other matter relating to any Accounts or Inventory of Borrower. Borrower shall
cooperate fully with Lender in an effort to facilitate and promptly conclude such verification
process.



     (d) To expedite collection, Borrower shall endeavor in the first instance to make collection
of its Accounts for Lender. Lender shall have the right at all times after the occurrence and
during the continuance of an Event of Default to notify (i) Account Debtors owing Accounts to
Borrower other than Medicaid/Medicare Account Debtors that their Accounts have been assigned to
Lender and to collect such Accounts directly in its own name and to charge collection costs and
expenses, including reasonable attorney’s fees, to Borrower, and (ii) Medicaid/Medicare Account
Debtors that Borrower has waived any and all defenses and counterclaims it may have or could
interpose in any such action or procedure brought by Lender to obtain a court order recognizing the
collateral assignment or security interest and lien of Lender in and to any Account or other
Collateral and that Lender is seeking or may seek to obtain a court order recognizing the
collateral assignment or security interest and lien of Lender in and to all Accounts and other
Collateral payable by Medicaid/Medicare Account Debtors.



     (e) As and when determined by Lender in its sole discretion but not more often than four (4)
times per year prior to the occurrence and continuance of an Event of Default, Lender will perform
the searches described in clauses (i) and (ii) below against Borrower (the results of which are to
be
consistent with Borrower’s representations and warranties under this Agreement), all at
Borrower’s expense: (i) UCC searches with the Secretary of State of the jurisdiction of
organization of each Borrower and Guarantor and the Secretary of State and local filing offices of
each jurisdiction where each Borrower and/or any Guarantors maintain their respective executive
offices, a place of business or assets; (ii) lien searches with the United States Patent and
Trademark Office and the United States Copyright Office; and (iii) judgment, federal tax lien and
corporate and partnership tax lien searches, in each jurisdiction searched under clause (i) above.



9









 





     (f) Borrower (i) shall provide prompt written notice to its current bank to transfer all
items, collections and remittances to the Concentration Account, (ii) shall provide prompt written
notice to each Account Debtor (other than Medicaid/Medicare Account Debtors) that Lender has been
granted a lien and security interest in, upon and to all Accounts applicable to such Account Debtor
and shall direct each Account Debtor to make payments to the appropriate Lockbox Account, and
Borrower hereby authorizes Lender, upon any failure to send such notices and directions within ten
(10) calendar days after the date of this Agreement (or ten (10) calendar days after the Person
becomes an Account Debtor), to send any and all similar notices and directions to such Account
Debtors, and (iii) shall do anything further that may be lawfully required by Lender to create and
perfect Lender’s lien on any collateral and effectuate the intentions of the Loan Documents. At
Lender’s request, Borrower shall immediately deliver or make arrangements to deliver to Lender all
items for which Lender must receive possession to obtain a perfected security interest and all
notes, certificates, and documents of title, Chattel Paper, warehouse receipts, Instruments, and
any other similar instruments constituting Collateral.



     2.13 Power of Attorney



     Lender is hereby irrevocably made, constituted and appointed the true and lawful attorney for
Borrower (without requiring Lender to act as such) with full power of substitution to do the
following: (i) endorse the name of any such Person upon any and all checks, drafts, money orders,
and other instruments for the payment of money that are payable to such Person and constitute
collections on its or their Accounts; (ii) execute in the name of such Person any financing
statements, schedules, assignments, instruments, documents, and statements that it is or they or
are obligated to give Lender under any of the Loan Documents; and (iii) do such other and further
acts and deeds in the name of such Person that Lender may deem necessary or desirable to enforce
any Account or other Collateral or to perfect Lender’s security interest or lien in any Collateral.
In addition, if any such Person breaches its obligation hereunder to direct payments of Accounts
or the proceeds of any other Collateral to the appropriate Lockbox Account, Lender, as the
irrevocably made, constituted and appointed true and lawful attorney for such Person pursuant to
this paragraph, may, by the signature or other act of any of Lender’s officers or authorized
signatories (without requiring any of them to do so), direct any federal, state or private payor or
fiscal intermediary to pay proceeds of Accounts or any other Collateral to the appropriate Lockbox
Account.



III. INTEREST, FEES AND OTHER CHARGES




     3.1 Interest on the Revolving Facility



     Commencing on the first day of the first calendar month following the Closing Date, and
continuing until the later of the expiration of the Term and the Payment in Full and full
performance of all of the Obligations and termination of this Agreement, interest on outstanding
Advances under the Revolving Facility shall be payable monthly in arrears on the first day of each
calendar month at an annual rate of Prime Rate plus 3.0% in accordance with the procedures provided
for in Section 2.7 and
Section 2.4, provided however, that, notwithstanding any provision of any
Loan Document, for the purpose of calculating interest at any time hereunder, the Prime Rate shall
be not less than 5.25%, in each case calculated on the basis of a 360-day year and for the actual
number of calendar days elapsed in each interest calculation period.



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     3.2 Interest on the Term Loan



     Commencing on the first day of the first calendar month following the Closing Date, and
continuing until the later of April 30, 2010 and the Payment in Full and full performance of all of
the Obligations and termination of this Agreement interest on the outstanding principal balance of
the Term Loan shall be payable monthly in arrears on the first day of each calendar month at an
annual rate of Prime Rate plus 6.0% in accordance with the procedures provided for in Section
2.7 and Section 2.4, provided however, that, notwithstanding any
provision of any Loan Document, for the purpose of calculating interest at any time hereunder, the
Prime Rate shall be not less than 5.25%, in each case calculated on the basis of a 360-day year and
for the actual number of calendar days elapsed in each interest calculation period. Advances under
the Revolving Facility shall be made automatically for the payment of Obligations under the Term
Loan on the date when due to the extent available and as provided for herein.



     3.3 Restatement Fee and Amended and Restated Equity Participation Fee



     (a) In consideration of Lender’s consent and agreement to the amendment and restatement of
the Third Restated Credit Agreement as provided in this Agreement, Borrower hereby agrees to pay a
non-refundable restatement fee in the amount of Six Hundred Thousand Dollars ($600,000) (the
“Restatement Fee”). The Restatement Fee shall be earned as of the Closing Date and be due and
payable in three (3) installments of Two Hundred Thousand Dollars ($200,000) on (i) the earlier of
the Merger Effective Date, the Voluntary Series A Conversion Effective Date and June 30, 2009, (ii)
June 30, 2010 and (iii) April 30, 2011; provided, however, that any unpaid installment of the
Restatement Fee shall be immediately due and payable upon the termination of this Agreement
(whether at maturity, by reason of acceleration, by notice of intention to prepay, by required
prepayment or otherwise).



     (b) In consideration of the amendment and restatement of the Third Restated Credit Agreement,
Borrower hereby agrees to execute and deliver the Equity Participation Fee Agreement as of the
Closing Date and obligate itself to pay the fee set forth therein in accordance with the terms and
conditions of the Equity Participation Fee Agreement.



     3.4 Unused Line Fee



     Borrower shall pay to Lender monthly an unused line fee (the “Unused Line Fee”) in an amount
equal to 0.04167% (per month) of the difference derived by subtracting (i) the daily average amount
of the balances under the Revolving Facility outstanding during the preceding month, from (ii) the
Facility Cap. The Unused Line Fee shall be payable monthly in arrears on the first day of each
calendar month commencing on the first day of the first calendar month following the Closing Date
(which monthly payment shall include any accrued and unpaid Unused Line Fee existing under the
Third Restated Credit Agreement).



     3.5 Collateral Management Fee



     Borrower shall pay Lender as additional interest a monthly collateral management fee (the
“Collateral Management Fee”) equal to 0.0833% per month calculated on the basis of the daily
average amount of the balances under the Revolving Facility outstanding during the preceding month.
The Collateral Management Fee shall be payable monthly in arrears on the first day of each
successive calendar month commencing on the first day of the first calendar month following the
Closing Date (which monthly payment shall include any accrued and unpaid Collateral Management Fee
existing under the Third Restated Credit Agreement).



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     3.6 Computation of Fees; Lawful Limits



     All fees hereunder shall be computed on the basis of a year of 360 days and for the actual
number of days elapsed in each calculation period, as applicable. In no contingency or event
whatsoever, whether by reason of acceleration or otherwise, shall the interest and other charges
paid or agreed to be paid to Lender for the use, forbearance or detention of money hereunder exceed
the maximum rate permissible under applicable law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. If, due to any circumstance whatsoever, fulfillment
of any provision hereof, at the time performance of such provision shall be due, shall exceed any
such limit, then, the obligation to be so fulfilled shall be reduced to such lawful limit, and, if
Lender shall have received interest or any other charges of any kind which might be deemed to be
interest under applicable law in excess of the maximum lawful rate, then such excess shall be
applied first to any unpaid fees and charges hereunder, then to unpaid principal balance owed by
Borrower hereunder, and if the then remaining excess interest is greater than the previously unpaid
principal balance, Lender shall promptly refund such excess amount to Borrower and the provisions
hereof shall be deemed amended to provide for such permissible rate. The terms and provisions of
this Section 3.6 shall control to the extent any other provision of any Loan Document is
inconsistent herewith.



     3.7 Default Rate of Interest



     Upon the occurrence and during the continuation of an Event of Default, the Applicable Rate of
interest in effect at such time with respect to the Obligations shall be increased by 3.0% per
annum (the “Default Rate”).



IV. CONDITIONS PRECEDENT




     4.1 Conditions to Restatement and Advances on or after the Closing Date



     The obligations of Lender to amend and restate the Third Restated Credit Agreement as provided
in this Agreement, to consummate the transactions contemplated herein and to make Advances and
continue the Term Loan on or after the Closing Date are subject to the satisfaction, in the sole
judgment of Agent, of the following:



     (a) Borrower shall have delivered to Agent this Agreement and, if required by Agent,
amendments to, or confirmations of, any of the other Loan Documents, each duly executed by an
authorized officer of Borrower and the other parties thereto;



     (b) all in form and substance satisfactory to Agent in its sole discretion, Agent shall have
received (i) a report of Uniform Commercial Code financing statement, tax and judgment lien
searches performed with respect to Borrower and Guarantor, if any, in each jurisdiction determined
by Agent in its sole discretion, and such report shall show no Liens on the Collateral (other than
Permitted Liens), (ii) each document (including, without limitation, any Uniform Commercial Code
financing statement) required by any Loan Document or under law or requested by Agent to be filed,
registered or recorded to create or continue in favor of Agent, a perfected first priority security
interest upon the Collateral, and (iii) evidence of each such filing, registration or recordation
and of the payment by Borrower of any necessary fee, tax or expense relating thereto;



12









 





     (c) Agent shall have received (i) the Charter and Good Standing Documents, all in form and
substance acceptable to Agent, (ii) a certificate of the corporate secretary or assistant secretary
of each Borrower dated the Closing Date, as to the incumbency and signature of the Persons
executing this Agreement, in form and substance acceptable to Agent, and (iii) the written legal
opinion of counsel for Borrower in form and substance satisfactory to Agent and its counsel;



     (d) Agent shall have received a certificate of the chief financial officer (or, in the absence
of a chief financial officer, the chief executive officer) of each Borrower, in form and substance
satisfactory to Agent (each, a “Solvency Certificate”), certifying (i) the solvency of such Person
after giving effect to the transactions and the Indebtedness contemplated by the Loan Documents,
and (ii) as to such Person’s financial resources and ability to meet its obligations and
liabilities as they become due, to the effect that as of the Closing Date and after giving effect
to such transactions and Indebtedness: (A) the assets of such Person, at a Fair Valuation, exceed
the total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities)
of such Person, and (B) no unreasonably small capital base with which to engage in its anticipated
business exists with respect to such Person;



     (e) Agent shall have completed examinations, the results of which shall be satisfactory in
form and substance to Agent, of the Collateral, the financial statements and the books, records,
business, obligations, financial condition and operational state of Borrower and Guarantor, and
each such Person shall have demonstrated to Agent’s satisfaction that (i) its operations comply, in
all respects deemed material by Agent, in its sole judgment, with all applicable federal, state,
foreign and local laws, statutes and regulations, (ii) its operations are not the subject of any
governmental investigation, evaluation or any remedial action which could result in any expenditure
or liability deemed material by Agent, in its sole judgment, and (iii) it has no liability (whether
contingent or otherwise) that is deemed material by Agent, in its sole judgment;



     (f) all in form and substance satisfactory to Agent in its sole discretion, Agent shall have
received such consents, approvals and agreements, including, without limitation, any applicable
Landlord Waivers and Consents with respect to any and all leases set forth on Schedule 5.4,
from such third parties as Agent and its counsel shall determine are necessary or desirable with
respect to (i) the Loan Documents and/or the transactions contemplated thereby, and/or (ii) claims
against Borrower or Guarantor or the Collateral;



     (g) Borrower shall be in compliance with Section 6.5, and Agent shall have received
copies of all insurance policies or binders, original certificates of all insurance policies of
Borrower confirming that they are in effect and that the premiums due and owing with respect
thereto have been paid in full and naming Agent as loss payee or additional insured, as
appropriate;



     (h) Agent shall have received all fees, charges and expenses payable to Agent on or prior to
the Closing Date pursuant to the Loan Documents;



     (i) all corporate and other proceedings, documents, instruments and other legal matters in
connection with the transactions contemplated by the Loan Documents (including, but not limited to,
those relating to corporate and capital structures of Borrower) shall be satisfactory to Agent;



     (j) Borrower shall have executed and filed an updated IRS Form 8821 with the appropriate
office of the Internal Revenue Service;



     (k) Agent shall have received a counterpart of the ComVest Subordination Agreement, executed
by ComVest;



     (l) Agent shall have received a counterpart of the Management Fee Subordination Agreement
executed by ComVest Advisors, LLC;



     (m) Borrower shall have delivered to Agent true and correct copies of the Merger Agreement and
all other Merger Documents, together with all schedules and exhibits thereto;



     (n) Borrower shall have delivered to Agent true and correct copies of the Series A Preferred
Stock Purchase Agreement and all other Preferred Stock Documents, together with all schedules and
exhibits thereto;



     (o) Borrower shall have delivered to Agent true and correct copies of the Bridge Loan
Agreement and all other Bridge Loan Documents, together with all schedules and exhibits thereto;



13









 





     (p) Borrower shall have delivered to Agent and its legal counsel true and correct copies of
the MHR Subordinated Note and any related documents, agreements and instruments;



     (q) the MHR Noteholders, and MHR Capital Partners (500) LP, as collateral agent for the MHR
Noteholders shall have executed and delivered to Agent a confirmation and amendment with respect to
the MHR Subordination Agreement;



     (r) the Bridge Loan shall have closed in accordance with the terms and conditions of the
Bridge Loan Documents and Borrower shall have received the proceeds thereof;



     (s) Borrower shall have deposited the Bridge Loan Liquidity Amount in the Minimum Liquidity
Account; and



     (s) Agent shall have received such other documents, certificates, information or legal
opinions as Agent may reasonably request, all in form and substance reasonably satisfactory to
Agent.



     4.2 Conditions to Merger and Preferred Stock Investment



     The obligations of Lender to make Advances and continue the Term Loan on or after the Merger
Effective Date and the consummation of the Merger and the transactions contemplated by the
Preferred Stock Purchase Documents are subject to the satisfaction, in the sole judgment of Agent,
of the following:



     (a) Agent shall have received (i) the Charter and Good Standing Documents, all in form and
substance acceptable to Agent and (ii) a certificate of the corporate secretary or assistant
secretary of each Borrower dated the Merger Effective Date, as to the incumbency and signature of
the Persons executing this Agreement, in form and substance acceptable to Agent;



     (b) each of the representations and warranties made by Borrower in or pursuant to this
Agreement shall be accurate in all material respects (except for any representations and warranties
that are qualified by materiality or by Material Adverse Effect which shall be accurate in all
respects), before and after giving effect to the Merger and any such Advance, and no Default or
Event of Default shall have occurred or be continuing or would exist after giving effect to the
consummation of the Merger or the Preferred Stock Purchase and the other transactions contemplated
thereby;



     (c) Agent shall have received a certificate of the chief financial officer (or, in the absence
of a chief financial officer, the chief executive officer) of each Borrower, in form and substance
satisfactory to Agent (each, a “Solvency Certificate”), certifying (i) the solvency of such Person
after giving effect to the transactions and the Indebtedness contemplated by the Merger Documents
and the Preferred Stock Purchase Documents, and (ii) as to such Person’s financial resources and
ability to meet its obligations and liabilities as they become due, to the effect that as of the
Merger Effective Date and after giving effect to such transactions and Indebtedness: (A) the assets
of such Person, at a Fair Valuation, exceed the total liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of such Person, and (B) no unreasonably small
capital base with which to engage in its anticipated business exists with respect to such Person;



     (d) all corporate and other proceedings, documents, instruments and other legal matters in
connection with the consummation of the Merger and the Preferred Stock Purchase and the other
transactions contemplated thereby (including, but not limited to, those relating to corporate and
capital structures of Borrower) shall be satisfactory to Agent;



14









 





     (e) Agent shall have received a certificate of an authorized officer of each Borrower, in form
and substance satisfactory to Agent, certifying that (i) all conditions precedent to the
consummation of the Merger and the Preferred Stock Purchase have been satisfied or waived as
permitted under this Agreement and (ii) all conditions set forth in this Section 4.2 have
been satisfied or waived by Agent;



     (e) regarding the Merger,




     (i) the Merger Documents shall not have been amended, modified or waived in any manner
(except for amendments and supplements to the Company Disclosure Schedule or the Parent
Disclosure Schedule (as such terms are defined in the Merger Agreement), amendments pursuant
to Section 5.3(c) of the Merger Agreement and waivers of conditions precedent pursuant to
Article VI of the Merger Agreement) without the written consent of Agent; and




     (ii) Agent shall have received evidence that the Merger shall have been consummated in
accordance with the terms of the Merger Documents without any amendment, modification or
waiver (other than as permitted under Section 7.14);



     (f) The Bridge Loan shall have been converted to Series A Preferred Stock upon the
consummation of the Merger as contemplated by the Bridge Loan Agreement, the Merger Agreement and
the Preferred Stock Purchase Agreement and all liens and security interests securing the Bridge
Loan shall have been released and terminated;



     (g) The Remaining Investment Amount shall have been invested in accordance with the Merger
Agreement and the Preferred Stock Purchase Agreement; and




     (h) Borrower shall have delivered to Agent true and correct copies of any Merger Documents and
Preferred Stock Purchase Documents not previously delivered to Agent under Section 4.1.



     4.3 Conditions to Voluntary Series A Conversion



     The obligations of Lender to make Advances and continue the Term Loan on or after the
Voluntary Series A Conversion Effective Date and the consummation of the Voluntary Series A
Conversion are subject to the satisfaction, in the sole judgment of Agent, of the following:



     (a) The Agent shall have received at least five (5) Business Days prior written notice of the
intention of ComVest to exercise the Voluntary Series A Conversion;



     (b) The Bridge Loan shall be converted to Series A Preferred Stock as contemplated by the
Bridge Loan Agreement, the Merger Agreement and the Preferred Stock Purchase Agreement and all
liens and security interests securing the Bridge Loan shall be released and terminated;



     (c) The Agent shall have received a certificate from a duly authorized officer of ComVest
certifying that all conditions precedent to the exercise by ComVest of the Voluntary Series A
Conversion under the Merger Agreement, the ComVest/MHR Subordination Agreement and any related side
letters shall have been satisfied or waived and the exercise of the Voluntary Series A Conversion
shall otherwise be in accordance with the terms and conditions thereof;



     (d) There shall be no Company Parent Dispute which has not been finally resolved and no
action, suit, proceeding or investigation pending that questions or could prevent the right of
ComVest to consummate the consummate the Voluntary Series A Conversion;



15









 





     (e) The amount of any unpaid Transaction Fees due to ComVest, the Termination Fee or any
Parent Damages (as the foregoing are defined in the Merger Agreement) shall be converted into
unsecured Permitted Subordinated Indebtedness and be repaid only pursuant to the terms and
conditions of the ComVest Subordination Agreement;



     (f) ComVest shall have made the Voluntary Series A Conversion Equity Investment and Borrower
shall have received the proceeds thereof; and



     (h) ComVest shall deliver to Agent true and correct copies of any documents, agreements and
instruments executed and delivered in connection with the Voluntary Series A Conversion.



     4.4 Conditions to Each Advance



     The obligations of Lender to make any Advance are subject to the satisfaction, in the
Permitted Discretion of Agent, of the following additional conditions precedent:



     (a) Borrower shall have delivered to Agent a Borrowing Certificate for the Advance executed by
an authorized officer of Borrower, which shall constitute a representation and warranty by Borrower
as of the Borrowing Date of such Advance that the conditions contained in this Section 4.2
have been satisfied; provided, however, that any determination as to whether the
conditions contained in this Section 4.2 and the other conditions set forth in this
Agreement to Lender’s obligation to make Advances have been satisfied shall be made by Agent in its
Permitted Discretion;



     (b) each of the representations and warranties made by Borrower in or pursuant to this
Agreement shall be accurate, before and after giving effect to such Advance, and no Default or
Event of Default shall have occurred or be continuing or would exist after giving effect to the
Advance under the Revolving Facility on such date;



     (c) immediately after giving effect to the requested Advance, the aggregate outstanding
principal amount of Advances under the Revolving Facility shall not exceed either the Availability
or the Facility Cap;



     (d) except as disclosed in the historical financial statements, there shall be no liabilities
or obligations with respect to Borrower of any nature whatsoever which, either individually or in
the aggregate, would reasonably be likely to have a Material Adverse Effect; and



     (e) Agent shall have received all fees, charges and expenses payable to Lender on or prior to
such date pursuant to the Loan Documents.



V. REPRESENTATIONS AND WARRANTIES




     Borrower, jointly and severally, represents and warrants as of the date hereof, on the Closing
Date and each Borrowing Date as follows:



     5.1 Organization and Authority



     Each Borrower is a corporation or limited liability company duly organized, validly existing
and in good standing under the laws of its state of formation. Borrower (i) has all requisite
corporate or limited liability company power and authority to own its properties and assets and to
carry on its business as now being conducted and as contemplated in the Loan Documents, (ii) is
duly qualified to do business in every jurisdiction in which failure so to qualify would reasonably
be expected to have a Material Adverse Effect, and (iii) has all requisite corporate or limited
liability company power and authority (A) to execute, deliver and perform the Loan Documents to
which it is a party, (B) to borrow hereunder, (C) to consummate the transactions contemplated under
the Loan Documents, and (D) to grant the Liens with regard to the Collateral pursuant to the
Security Documents to which it is a party. No Borrower is an “investment company” registered or
required to be registered under the Investment Company Act of 1940, as amended, or is controlled by
such an “investment company.”



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     5.2 Loan Documents



     The execution, delivery and performance by Borrower of the Loan Documents to which it is a
party, and the consummation of the transactions contemplated thereby, (i) have been duly authorized
by all requisite action of each such Person and have been duly executed and delivered by or on
behalf of each such Person; (ii) do not violate any provisions of (A) applicable law, statute,
rule, regulation, ordinance or tariff, (B) any order of any Governmental Authority binding on any
such Person or any of their respective properties, or (C) the certificate of incorporation or
bylaws (or any other equivalent governing agreement or document) of any such Person, or any
agreement between any such Person and its respective stockholders, members, partners or equity
owners or among any such stockholders, members, partners or equity owners; (iii) are not in
conflict with, and do not result in a breach or default of or constitute an event of default, or an
event, fact, condition or circumstance which, with notice or passage of time, or both, would
constitute or result in a conflict, breach, default or event of default under, any indenture,
agreement or other instrument to which any such Person is a party, or by which the
properties or assets of such Person are bound; (iv) except as set forth therein or Permitted Liens,
will not result in the creation or imposition of any Lien of any nature upon any of the properties
or assets of any such Person, and (v) except as set forth on Schedule 5.2, do not require
the consent, approval or authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person. When executed and delivered, each of the Loan
Documents to which Borrower is a party will constitute the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the
enforceability of creditors’ rights generally and to the effect of general principles of equity
which may limit the availability of equitable remedies (whether in a proceeding at law or in
equity).



     5.3 Subsidiaries, Capitalization and Ownership Interests



     Except as listed on Schedule 5.3, Borrower has no Subsidiaries. NationsHealth Supply,
L.L.C. is presently inactive but has not been dissolved. Schedule 5.3 states the
authorized and issued capitalization of Borrower, the number and class of equity securities and/or
ownership, voting or partnership interests issued and outstanding of Borrower and the record and
beneficial owners thereof (including options, warrants and other rights to acquire any of the
foregoing) (provided however, beneficial ownership information for NationsHealth is not required to
be included in Schedule 5.3). The ownership or partnership interests of each Borrower that is a
limited partnership or a limited liability company are not certificated, the documents relating to
such interests do not expressly state that the interests are governed by Article 8 of the Uniform
Commercial Code, and the interests are not held in a securities account. The outstanding equity
securities and/or ownership, voting or partnership interests of Borrower have been duly authorized
and validly issued and are fully paid and nonassessable, and each Person listed on Schedule
5.3 owns beneficially and of record all the equity securities and/or ownership, voting or
partnership interests it is listed as owning free and clear of any Liens other than Liens created
by the Security Documents. Schedule 5.3 also lists the directors, members, managers and/or
partners of Borrower. Except as listed on Schedule 5.3, Borrower does not own an interest
in, participate in or engage in any joint venture, partnership or similar arrangements with any
Person.



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     5.4 Properties



     Borrower (i) is the sole owner and has good, valid and marketable title to, or a valid
leasehold interest in, all of its properties and assets, including the Collateral, whether personal
or real, subject to no transfer restrictions or Liens of any kind except for Permitted Liens, and
(ii) is in compliance in all material respects with each lease to which it is a party or otherwise
bound. Schedule 5.4 lists all real properties (and their locations) owned or leased by or
to, and all other assets or property (with a value in excess of $25,000) that are leased or
licensed by, Borrower and all leases (including leases of leased real property) covering or with
respect to such properties and assets and all warehouses, fulfillment houses or other locations at
which any of Borrower’s Inventory is located. Borrower enjoys peaceful and undisturbed possession
under all such leases and such leases are all the leases necessary for the operation of such
properties and assets, are valid and subsisting and are in full force and effect. All warehouse,
fulfillment and other agreements relating to Borrower’s Inventory are in full force and effect.



     5.5 Other Agreements



     Borrower is not (i) a party to any judgment, order or decree or any agreement, document or
instrument, or subject to any restriction, which would affect its ability to execute and deliver,
or perform under, any Loan Document or to pay the Obligations, (ii) in default in the performance,
observance or
fulfillment of any obligation, covenant or condition contained in any agreement, document or
instrument to which it is a party or to which any of its properties or assets are subject, which
default, if not remedied within any applicable grace or cure period would reasonably be expected to
have a Material Adverse Effect, nor is there any event, fact, condition or circumstance which, with
notice or passage of time or both, would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any applicable grace or
cure period would reasonably be expected to have a Material Adverse Effect; or (iii) a party or
subject to any agreement, document or instrument with respect to, or obligation to pay any,
Management or Service Fee with respect to, the ownership, operation, leasing or performance of any
of its business or any facility, nor is there any manager with respect to any such facility.



     5.6 Litigation



     There is no action, suit, proceeding or investigation pending or, to their knowledge,
threatened against Borrower that (i) questions or could prevent the validity of any of the Loan
Documents or the right of Borrower to enter into any Loan Document or to consummate the
transactions contemplated thereby, (ii) would reasonably be expected to be or have, either
individually or in the aggregate, any Material Adverse Change or Material Adverse Effect, or (iii)
would reasonably be expected to result in any Change of Control or other change in the current
ownership, control or management of Borrower. Borrower is not aware that there is any basis for
the foregoing. Borrower is not a party or subject to any order, writ, injunction, judgment or
decree of any Governmental Authority. There is no action, suit, proceeding or investigation
initiated by Borrower currently pending. Borrower has no existing accrued and/or unpaid
Indebtedness to any Governmental Authority or any other governmental payor.



     5.7 Hazardous Materials



     Borrower is in compliance with all applicable Environmental Laws. Borrower has not been
notified of any action, suit, proceeding or investigation (i) relating in any way to compliance by
or liability of Borrower under any Environmental Laws, (ii) which otherwise deals with any
Hazardous Substance or any Environmental Law, or (iii) which seeks to suspend, revoke or terminate
any license, permit or approval necessary for the generation, handling, storage, treatment or
disposal of any Hazardous Substance, except where such non-compliance would not reasonably be
expected to have a Material Adverse Effect.



18









 





     5.8 Potential Tax Liability; Tax Returns; Governmental Reports



     (a) Except as disclosed in Schedule 5.8, Borrower (i) has not received any oral or
written communication from the Internal Revenue Service with respect to any investigation or
assessment relating to the Borrower directly, or relating to any consolidated tax return which was
filed on behalf of Borrower, (ii) is not aware of any year which remains open pending tax
examination or audit by the IRS, and (iii) is not aware of any information that could give rise to
an IRS tax liability or assessment.



     (b) Borrower (i) has filed all federal, state, foreign (if applicable) and local tax returns
and other reports which are required by law to be filed by Borrower (after giving effect to any
permitted extension thereof), and (ii) has paid all taxes, assessments, fees and other governmental
charges, including, without limitation, payroll and other employment related taxes, in each case
that are due and payable, except only for items that Borrower is currently contesting in good faith
with adequate reserves under GAAP, which contested items are described on Schedule 5.8.



     5.9 Financial Statements and Reports



     All financial statements and financial information relating to Borrower that have been or may
hereafter be delivered to Lender by Borrower are accurate and complete in all material respects and
have been prepared in accordance with GAAP consistently applied with prior periods. Borrower has
no material obligations or liabilities of any kind not disclosed in such financial information or
statements, and since the date of the most recent financial statements submitted to Lender, there
has not occurred any Material Adverse Change, Material Adverse Effect or Liability Event or, to
Borrower’s knowledge, any other event or condition that would reasonably be expected to have a
Material Adverse Effect or cause or constitute a Liability Event.



     5.10 Compliance with Law



     (a) Borrower (i) is in compliance with all laws, statutes, rules, regulations, ordinances and
tariffs of any Governmental Authority applicable to Borrower and/or Borrower’s business, assets or
operations, including, without limitation, applicable requirements of the Standards for Privacy of
Individually Identifiable Health Information which were promulgated pursuant to the Health
Insurance Portability and Accountability Act of 1996 (as amended, and collectively with the
regulations promulgated thereunder, “HIPAA”), ERISA and Healthcare Laws, and (ii) is not in
violation of any order of any Governmental Authority or other board or tribunal, except in the case
of (i) and (ii) above where noncompliance or violation could not reasonably be expected to have a
Material Adverse Effect. There is no event, fact, condition or circumstance which, with notice or
passage of time, or both, would constitute or result in any noncompliance with, or any violation
of, any of the foregoing, in each case except where noncompliance or violation could not reasonably
be expected to have a Material Adverse Effect. Borrower has not received any notice that Borrower
is not in compliance in any respect with any of the requirements of any of the foregoing. Borrower
has (a) not engaged in any Prohibited Transactions as defined in Section 406 of ERISA and Section
4975 of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder, (b) not failed to meet any applicable minimum funding requirements under Section 302 of
ERISA in respect of its plans and no funding requirements have been postponed or delayed, (c) no
knowledge of any amounts due but unpaid to the Pension Benefit Guaranty Corporation, or of any
event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute
proceedings under Title IV of ERISA to terminate any of the employee benefit plans, (d) no
fiduciary responsibility under ERISA for investments with respect to any plan existing for the
benefit of Persons other than its employees or former employees, or (e) not withdrawn, completely
or partially, from any multi-employer pension plans so as to incur liability under the
MultiEmployer Pension Plan Amendments of 1980. With respect to Borrower, there exists no event
described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for
which the thirty (30) day notice period contained in 12 C.F.R. § 2615.3 has not been waived.
Borrower has maintained in all material respects all records required to be maintained by the Joint
Commission on Accreditation of Healthcare Organizations, the Food and Drug Administration, Drug
Enforcement Agency and State Boards of Pharmacy and the federal and state Medicare and Medicaid
programs as required by the Healthcare Laws and, to the best knowledge of Borrower, there are no
presently existing circumstances which would reasonably be expected to result in material
violations of the Healthcare Laws. There is no Liability Event.



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     (b) No Credit Party (i) is a Person whose property or interest in property is blocked or
subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by
Section 2 of such executive order, or is otherwise associated with any such Person in any manner
violative of such Section 2, or (iii) is a Person on the list of Specially Designated
Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S.
Department of Treasury’s Office of Foreign Assets Control regulation or executive order (“OFAC”).



     (c) No Credit Party engages in any dealings or transactions in violation of the Trade
Sanctions Reform and Export Enhancement Act of 2000, OFAC’s Iranian Transactions Regulations, 31
C.F.R. Part 560, and Sudanese Sanctions Regulations, 31 C.F.R. Part 538 or any other any other
applicable OFAC regulation or executive order.



     (d) Each Credit Party is in compliance, in all material respects, with the Patriot Act.



     5.11 Intellectual Property



     Except as set forth on Schedule 5.11, Borrower does not own, license or utilize, and
is not a party to, any material patents, patent applications, trademarks, trademark applications,
service marks, registered copyrights, copyright applications, copyrights, trade names, trade
secrets, software or licenses (collectively, the “Intellectual Property”).



     5.12 Licenses and Permits; Labor



     Borrower is in compliance with and has all Permits and Intellectual Property necessary or
required by applicable law or Governmental Authority for the operation of its businesses except any
of the foregoing which would not reasonably be expected to have a Material Adverse Effect. All of
the foregoing are in full force and effect and not in known conflict with the rights of others.
Borrower is not (i) in breach of or default under the provisions of any of the foregoing, nor is
there any event, fact, condition or circumstance which, with notice or passage of time or both,
would constitute or result in a conflict, breach, default or event of default under, any of the
foregoing which, if not remedied within any applicable grace or cure period would reasonably be
expected to have a Material Adverse Effect, (ii) a party to or subject to any agreement, instrument
or restriction that is so unusual or burdensome that it might have a Material Adverse Effect,
and/or (iii) and has not been, involved in any labor dispute, strike, walkout or union organization
which would reasonably be expected to have a Material Adverse Effect.



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     5.13 No Default



     There does not exist any Default or Event of Default or any event, fact, condition or
circumstance which, with the giving of notice or passage of time or both, would constitute or
result in a Default or Event of Default.



     5.14 Disclosure



     No Loan Document nor any other agreement, document, certificate, or statement furnished to
Lender by or on behalf of Borrower in connection with the transactions contemplated by the Loan
Documents, nor any representation or warranty made by Borrower in any Loan Document, contains any
untrue statement of material fact or omits to state any fact necessary to make the statements
therein not materially misleading. There is no fact known to Borrower which has not been disclosed
to Lender in writing which would reasonably be expected to have a Material Adverse Effect.



     5.15 Existing Indebtedness; Investments, Guarantees and Certain Contracts



     Except for Permitted Indebtedness, Borrower (i) has no outstanding Indebtedness, (ii) is not
subject or party to any mortgage, note, indenture, indemnity or guarantee of, with respect to or
evidencing any Indebtedness of any other Person, or (iii) does not own or hold any equity or
long-term debt investments in, and does not have any outstanding advances to, or any outstanding
guarantees for the obligations of, or any outstanding borrowings from, any Person. Borrower has
performed all material obligations required to be performed by Borrower pursuant to or in
connection with all Permitted Indebtedness and there has occurred no breach, default or event of
default under any document evidencing any such items, including without limitation the MHR
Subordinated Debt, or any fact, circumstance, condition or event which, with the giving of notice
or passage of time or both, would constitute or result in a breach, default or event of default
thereunder. Schedule 5.15 sets forth all Indebtedness with a maturity date during the
Term, and identifies such maturity date.



     5.16 Other Agreements



     Except as set forth on Schedule 5.16 and Schedule 5.22, (i) there are no
existing or proposed agreements, arrangements, understandings or transactions between Borrower and
any of Borrower’s officers, members, managers, directors, stockholders, partners, other interest
holders, employees or Affiliates or any members of their respective immediate families, and (ii)
none of the foregoing Persons are directly or indirectly, indebted to or have any direct or
indirect ownership, partnership or voting interest in, to Borrower’s knowledge, any Affiliate of
Borrower or any Person that competes with Borrower (except that any such Persons may own stock in
(but not exceeding two (2%) percent of the outstanding capital stock of) any publicly traded
company that may compete with Borrower.



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     5.17 Insurance



     Borrower has in full force and effect such insurance policies as are customary in its industry
and as may be required pursuant to Section 6.5 hereof. All such insurance policies are
listed and described on Schedule 5.17.



     5.18 Names; Location of Offices, Records and Collateral



     During the preceding five years, Borrower has not conducted business under or used any name
(whether corporate, partnership or assumed) other than as shown on Schedule 5.18A.
Borrower is the sole owner of all of its names listed on Schedule 5.18A, and any and all
business done and invoices issued in such names are Borrower’s sales, business and invoices. Each
trade name of Borrower represents a division or trading style of Borrower. Borrower maintains its
places of business and chief executive offices only at the locations set forth on Schedule
5.18B, and all Accounts of Borrower arise, originate and are located, and all of the
Collateral, including Inventory, and all books and records in connection therewith or in any way
relating thereto or evidencing the Collateral are located and shall only be located, in and at such
locations. All of the Collateral is located only in the continental United States.



     5.19 Non-Subordination



     The Obligations are not subordinated in any way to any other obligations of Borrower or to the
rights of any other Person.



     5.20 Accounts and Inventory



     (a) In determining which Accounts are Eligible Receivables, Lender may rely on all statements
and representations made by Borrower with respect to any Account. Unless otherwise indicated in
writing to Lender (including, without limitation, any Borrowing Certificate), (i) each Account of
Borrower is genuine and in all respects what it purports to be and is not evidenced by a judgment,
(ii) each Account of Borrower arises out of a completed, bona fide sale and delivery of goods or
rendering of Services by Borrower in the ordinary course of business and in accordance with the
terms and conditions of all purchase orders, contracts, certifications, participations,
certificates of need and other documents relating thereto or forming a part of the contract between
Borrower and the Account Debtor, (iii) each Account of Borrower is for a liquidated amount maturing
as stated in a claim or invoice covering such sale of goods or rendering of Services, a copy of
which has been furnished or is available to Lender, (iv) each Account of Borrower together with
Lender’s security interest therein, is not and will not be in the future (by voluntary act or
omission by Borrower), subject to any offset, lien, deduction, defense, dispute, counterclaim or
other adverse condition, is absolutely owing to Borrower and is not contingent in any respect or
for any reason (except Accounts owed or owing by Medicaid/Medicare Account Debtors that may be
subject to offset or deduction under applicable law), (v) there are no facts, events or occurrences
which in any way impair the validity or enforceability of any Account of Borrower or tend to reduce
the amount payable thereunder from the face amount of the claim or invoice and statements delivered
to Lender with respect thereto, (vi) (A) to the knowledge of Borrower, the Account Debtor under
each Account of Borrower had the capacity to contract at the time any contract or other document
giving rise thereto was executed and (B) to the knowledge of Borrower, each such Account Debtor is
solvent, (vii) to the knowledge of Borrower, there are no proceedings or actions which are
threatened or pending against any Account Debtor under any Account of Borrower which might result
in any Material Adverse Change in such Account Debtor’s financial condition or the collectability
thereof, (viii) each Account of Borrower has been billed and forwarded to the Account Debtor for
payment in accordance with applicable laws and is in compliance and conformance with any requisite
procedures, requirements and regulations governing payment by such Account Debtor with respect to
such Account, and, if due from a Medicaid/Medicare Account Debtor, is properly payable directly to
Borrower, (ix) Borrower has obtained and currently has all material Permits necessary in the
generation of each Account of Borrower, and (x) Borrower has disclosed to Lender on each Borrowing
Certificate the amount of all Accounts of Borrower for which Medicare is the Account Debtor and for
which payment has been denied and subsequently appealed pursuant to the procedure described in the
definition of Eligible Receivables hereof. Borrower is pursuing all available appeals in respect of
such Accounts which Borrower usually and customarily appeals in the ordinary course of its
business.



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     (b) In determining which Inventory is Eligible Inventory, Lender may rely on all statements
and representations made by Borrower with respect to any Inventory. Unless otherwise indicated in
writing to Lender (including, without limitation, any Borrowing Certificate), (i) Borrower has at
all times maintained correct and accurate records itemizing and describing the kind, type, quality
and quantity of Inventory in all material respects, Borrower’s cost therefore and daily withdrawals
therefrom and additions thereto; (b) has not removed any Inventory from the locations set forth or
permitted herein, except for sales of Inventory in the ordinary course of Borrower’s business and
except to move Inventory directly from one location set forth or permitted herein to another such
location; (c) has produced, used, stored, shipped and maintained Inventory with all reasonable care
and caution and in accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto); (d) except as set forth on
Schedule 5.20, has not sold Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate Borrower to repurchase such Inventory; (e) has kept
Inventory in good and marketable condition; and (f) has not acquired or accepted
any Inventory on consignment or approval except as set forth on Schedule 5.20 and (g)
has not permitted Inventory to be subject to any Lien except Liens in favor of Lender and other
Permitted Liens.



     5.21 Healthcare



     Without limiting or being limited by any other provision of any Loan Document, Borrower has
timely filed or caused to be filed all cost and other reports of every kind required under any
Healthcare Laws or any provider or other agreement relating to Borrower’s participation in Medicare
or Medicaid programs. Subject to subsection (a)(x) of Section 5.20, there are no claims,
actions or appeals pending (and Borrower has not filed any claims or reports which could reasonably
result in any such claims, actions or appeals) before any commission, board or agency or other
Governmental Authority, including, without limitation, any intermediary or carrier, the Provider
Reimbursement Review Board or the Administrator of the Centers for Medicare and Medicaid Services,
with respect to any state or federal Medicare or Medicaid cost reports or claims filed by Borrower,
or any disallowance by any commission, board or agency or other Governmental Authority in
connection with any audit of such cost reports. No validation review or program integrity review
related to Borrower or the consummation of the transactions contemplated herein or to the
Collateral have been conducted by any commission, board or agency or other Governmental Authority
in connection with the Medicare or Medicaid programs, and to the knowledge of Borrower, no such
reviews are scheduled, pending or threatened against or affecting any of the providers, any of the
Collateral or the consummation of the transactions contemplated hereby.



     5.22 Certain Agreements



     (a) No Borrower is in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in the MHR Subordinated Note or any of the documents, agreements
and instruments executed and delivered in connection therewith, nor is there any event, fact,
condition or circumstance which, with notice or passage of time or both, would constitute or result
in a conflict, breach, default or event of default under any of the foregoing which, if not
remedied within any applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect. There does not exist any default or event of default or any event, fact, condition
or circumstance, which, with the giving of notice or passage of time or both, would constitute or
result in a default or event of default on the part of any Borrower in connection with the MHR
Subordinated Note. Except as permitted by the MHR Subordination Agreement, no amendment or
modification has been made to the MHR Subordinated Note or any of the documents, agreements and
instruments executed and delivered in connection therewith.



     (b) Reserved.



23









 





     (c) No Borrower is in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in the Hills Settlement Agreement, nor is there any event, fact,
condition or circumstance which, with notice or passage of time or both, would constitute or result
in a conflict, breach, default or event of default under any of the foregoing which, if not
remedied within any applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect. As of the Closing Date, no amendment or modification has been made to the Hills
Settlement Agreement.



     (d) No Borrower is in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in the Merger Documents, nor is there any event, fact, condition or
circumstance which, with notice or passage of time or both, would constitute or result in a



     conflict, breach, default or event of default under any of the foregoing which, if not
remedied within any applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect. As of the Closing Date, no amendment or modification has been made to the Merger
Documents (except for amendments and supplements to the Company Disclosure Schedule or the Parent
Disclosure Schedule, amendments pursuant to Section 5.3(c) of the Merger Agreement, and waivers of
conditions precedent pursuant to Article VI of the Merger Agreement).



     (e) No Borrower is in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in the Bridge Loan Documents, nor is there any event, fact,
condition or circumstance which, with notice or passage of time or both, would constitute or result
in a conflict, breach, default or event of default under any of the foregoing which, if not
remedied within any applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect. As of the Closing Date, no amendment or modification has been made to the Bridge
Loan Documents.



     (f) No Borrower is in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained in the Preferred Stock Purchase Documents, nor is there any event,
fact, condition or circumstance which, with notice or passage of time or both, would constitute or
result in a conflict, breach, default or event of default under any of the foregoing which, if not
remedied within any applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect. As of the Closing Date, no amendment or modification has been made to the
Preferred Stock Purchase Documents.



     5.23 Survival



     Borrower makes the representations and warranties contained herein with the knowledge and
intention that Lender is relying and will rely thereon. All such representations and warranties
will survive the execution and delivery of this Agreement and the making of the Advances under the
Revolving Facility.



24









 





VI. AFFIRMATIVE COVENANTS




     Each Borrower, jointly and severally, covenants and agrees that, until full performance and
satisfaction, and indefeasible payment in full in cash, of all the Obligations and termination of
this Agreement:



     6.1 Financial Statements, Borrowing Certificate, Financial Reports and Other
Information



     (a) Financial Reports. In addition to providing the Borrowing Certificate in
accordance with Section 2.4, Borrower shall furnish to Lender (i) as soon as available and
in any event within ninety (90) calendar days after the end of each fiscal year of Borrower (or
such earlier date required by the laws, regulations and rules of the Securities and Exchange
Commission), audited annual consolidated financial statements of Borrower, including the notes
thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and
the related consolidated statements of income, retained earnings, cash flows and owners’ equity for
such completed fiscal year, which financial statements shall be prepared and certified without
qualification by an independent certified public accounting firm satisfactory to Lender and
accompanied by related management letters, if available, and (ii) as soon as available and in any
event within thirty (30) calendar days after the end of each
calendar month, unaudited consolidated financial statements of Borrower consisting of a balance sheet and statements of income,
retained earnings, cash flows and owners’ equity as of the end of the immediately preceding
calendar month. All such financial statements shall be prepared in accordance with GAAP
consistently applied with prior periods. With each such financial statement, Borrower shall also
deliver a certificate of its chief financial officer in substantially the form of Exhibit B
attached hereto (a “Compliance Certificate”) stating that (A) such person has reviewed the relevant
terms of the Loan Documents and the condition of Borrower, (B) no Default or Event of Default has
occurred or is continuing, or, if any of the foregoing has occurred or is continuing, specifying
the nature and status and period of existence thereof and the steps taken or proposed to be taken
with respect thereto, (C) Borrower has not engaged in any transactions or dealings which require an
OFAC Licenses which has not been obtained and remains in full force and effect and (D) Borrower is
in compliance with all financial covenants attached as Annex I.A. and Annex I.B.
hereto, as applicable. Such certificate shall be accompanied by the calculations necessary to show
compliance with the financial covenants in a form satisfactory to Lender and shall also set forth
any payments made in respect of Permitted Subordinated Debt as permitted under any Subordination
Agreement applicable thereto.



     (b) Other Materials. Borrower shall furnish to Lender as soon as available, and in any
event within ten (10) calendar days after the preparation or issuance thereof or at such other time
as set forth below: (i) copies of such financial statements (other than those required to be
delivered pursuant to Section 6.1(a)) prepared by, for or on behalf of Borrower and any
other notes, reports and other materials related thereto, including, without limitation, any pro
forma financial statements, (ii) any reports, returns, information, notices and other materials
that Borrower shall send to its stockholders, members, partners or other equity owners at any time,
(iii) all Medicare and Medicaid cost reports and other documents and materials filed by Borrower
and any other reports, materials or other information regarding or otherwise relating to Medicaid
or Medicare prepared by, for or on behalf of Borrower, including, without limitation, (A) copies of
licenses and permits required by any applicable federal, state, foreign or local law, statute
ordinance or regulation or Governmental Authority for the operation of its business, (B) Medicare
and Medicaid provider numbers and agreements, (C) state surveys pertaining to any healthcare
facility operated, owned or leased by Borrower or any of its Affiliates or Subsidiaries, and (D),
within ten (10) calendar days following the request of Lender, participating agreements relating to
medical plans, (iv) (A) within fifteen (15) calendar days following the request of Lender, a
summary report of the status of all payments, denials and appeals of all Medicare and/or Medicaid
Accounts and accounts receivable and account payable aging schedule for the most recent calendar
month and (B), within thirty (30) calendar days following the request of Lender, a sales and
collection report for the most recent calendar month, including a report of sales, credits issued
and collections received, all such reports showing a reconciliation to the amounts reported in the
monthly financial statements, (v) promptly upon receipt thereof, copies of any reports submitted to
Borrower by its independent accountants in connection with any interim audit of the books of such
Person or any of its Affiliates and copies of each management control letter provided by such
independent accountants, (vi) within fifteen (15) calendar days after the execution thereof, a copy
of any contracts with the federal government or with a Governmental Authority in the State of New
York, Vermont or Washington, and (vii) such additional information, documents, statements, reports
and other materials as Lender may reasonably request from a credit or security perspective or
otherwise from time to time.



25









 





     (c) Notices. Borrower shall promptly, and in any event within three (3) calendar days
after Borrower or any authorized officer of Borrower obtains knowledge thereof, notify Lender in
writing of (i) any pending or threatened litigation, suit, investigation, arbitration, dispute
resolution proceeding or administrative proceeding brought or initiated by or against Borrower or
otherwise affecting or involving or relating to Borrower or any of their property or assets to the
extent (A) the amount in controversy exceeds $100,000, or (B) to the extent any of the foregoing
seeks injunctive or declarative relief, (ii) any Default or Event of Default, which notice shall specify the nature and status thereof, the period
of existence thereof and what action is proposed to be taken with respect thereto, (iii) any other
development, event, fact, circumstance or condition that would reasonably be likely to have a
Material Adverse Effect, in each case describing the nature and status thereof and the action
proposed to be taken with respect thereto, (iv) any notice received by Borrower from any payor of
a claim, suit or other action such payor has, claims or has filed against Borrower in an amount
exceeding $100,000, (v) any matter(s) affecting the value, enforceability or collectability of any
of the Collateral, including, without limitation, claims or disputes in the amount of $100,000 or
more, singly or in the aggregate, in existence at any one time, (vi) any notice given by Borrower
to any other lender of Borrower, which notice to Lender shall be accompanied by a copy of the
applicable notice given to the other Lender, (vii) receipt of any notice or request from any
Governmental Authority or governmental payor regarding any liability or claim of liability (other
than notices received from any Governmental Authority in connection the usual and customary
processing of claims by Borrower in the ordinary course of business), (viii) any notice given by or
received by Borrower regarding any default, noncompliance, proposed termination, waiver or consent
under the MHR Subordinated Note, the Bridge Loan, the Hills Settlement Agreement, the CIGNA
Preferred Vendor Agreement, (ix) any Account becoming evidenced or secured by an Instrument or
Chattel Paper or (x) the termination or revocation of any OFAC License.



     (d) Consents. Borrower shall obtain and deliver from time to time all required
consents, approvals and agreements from such third parties as Lender shall determine are necessary
or desirable in its sole discretion, each of which must be satisfactory to Lender in its sole
discretion, with respect to (i) the Loan Documents and the transactions contemplated thereby, (ii)
claims against Borrower or the Collateral, and/or (iii) any agreements, consents, documents or
instruments to which Borrower is a party or by which any properties or assets of Borrower or any of
the Collateral is or are bound or subject, including, without limitation, Landlord Waivers and
Consents with respect to leases and Warehouse Waivers and Consents with respect to warehouse,
fulfillment and similar agreements.



26









 





     (e) Operating Budget. Borrower shall furnish to Lender on or prior to the Closing
Date and for each fiscal year of Borrower thereafter not later than the earlier of (i) thirty (30)
calendar days after the end of each fiscal year or (ii) thirty (30) calendar days after the same is
available, consolidated month by month projected operating budgets, annual projections, profit and
loss statements, balance sheets and cash flow reports of and for Borrower for such upcoming fiscal
year (including an income statement for each month and a balance sheet as at the end of the last
month in each fiscal quarter), in each case prepared in accordance with GAAP consistently applied
with prior periods.



     (f) OFAC Licenses. Borrower shall furnish to Lender, prior to engaging in any
transactions or dealings which require the issuance of a license by OFAC (including, without
limitation, licenses required under the Iranian Transactions Regulations, 31 C.F.R. Part 560, and
the Sudanese Sanctions Regulations, 31 C.F.R. Part 538), true and correct copies of any such
licenses (collectively, the “OFAC Licenses”)



     (g) Non-Compliance Fee. To the extent any of the foregoing items in this Section
6.1 are not delivered to Lender on a timely basis, Borrower shall be obligated to Lender for a
daily fee equal to the greater of (i) $500, or (ii) five one-hundredths of one percent (0.05%) of
the then current outstanding principal balance of the Obligations, for each day until such item is
delivered to Lender, whether or not a Default or Event of Default occurs or is declared, provided
that nothing shall prevent Lender from considering any failure to comply with the terms of this
Section 6.1 to be a Default or an Event of Default.



     6.2 Payment of Obligations



     Borrower shall make full and timely indefeasible payment in cash of the principal of and
interest on the Loans, Advances and all other Obligations.



     6.3 Conduct of Business and Maintenance of Existence and Assets



     Borrower shall (i) conduct its business in accordance with good business practices customary
to the industry, (ii) engage principally in the same or similar lines of business substantially as
heretofore conducted, (iii) collect its Accounts in the ordinary course of business, (iv) maintain
all of its material properties, assets and equipment used or useful in its business in good repair,
working order and condition (normal wear and tear excepted and except as may be disposed of in the
ordinary course of business and in accordance with the terms of the Loan Documents and otherwise as
determined by Borrower using commercially reasonable business judgment), (v) from time to time to
make all necessary or desirable repairs, renewals and replacements thereof, as determined by
Borrower using commercially reasonable business judgment, (vi) maintain and keep in full force and
effect its existence and all material Permits and qualifications to do business and good standing
in each jurisdiction in which the ownership or lease of property or the nature of its business
makes such Permits or qualification necessary and in which failure to maintain such Permits or
qualification could reasonably be expected to have a Material Adverse Effect; and (vii) remain in
good standing and maintain operations in all jurisdictions in which currently located, except where
the failure to maintain such good standing could not reasonably be expected to have a Material
Adverse Effect.



27









 





     6.4 Compliance with Legal and Other Obligations



     Borrower shall (i) comply in all material respects with all laws, statutes, rules,
regulations, ordinances and tariffs of all Governmental Authorities applicable to it or its
business, assets or operations, including applicable requirements of the Standards for Privacy of
Individually Identifiable Health Information which were promulgated pursuant to HIPAA; (ii) pay all
taxes, assessments, fees, governmental charges, claims for labor, supplies, rent and all other
obligations or liabilities of any kind, except liabilities being contested in good faith and
against which adequate reserves have been established in accordance with GAAP, (iii) perform in
accordance with its terms each contract, agreement or other arrangement to which it is a party or
by which it or any of the Collateral is bound, except where the failure to comply, pay or perform
would not reasonably be expected to have a Material Adverse Effect, (iv) maintain and comply with
all material Permits necessary to conduct its business and comply with any new or additional
requirements that may be imposed on it or its business, (v) properly file all Medicaid/Medicare
cost reports and (vi) obtain all required OFAC Licenses prior to engaging in any transactions or
dealings which require the issuance of such OFAC Licenses.



     6.5 Insurance



     Borrower shall (i) comply in all material respects with all laws, statutes, rules,
regulations, ordinances and tariffs of all Governmental Authorities applicable to it or its
business, assets or operations, including applicable requirements of the Standards for Privacy of
Individually Identifiable Health Information which were promulgated pursuant to HIPAA; (ii) pay all
taxes, assessments, fees, governmental charges, claims for labor, supplies, rent and all other
obligations or liabilities of any kind, except liabilities being contested in good faith and
against which adequate reserves have been established in accordance with GAAP, (iii) perform in
accordance with its terms each contract, agreement or other arrangement to which it is a party or
by which it or any of the Collateral is bound, except where the
failure to comply, pay or perform would not reasonably be expected to have a Material Adverse
Effect, (iv) maintain and comply with all material Permits necessary to conduct its business and
comply with any new or additional requirements that may be imposed on it or its business, and (v)
properly file all Medicaid/Medicare cost reports.



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     6.6 True Books



     Borrower shall (i) keep true, complete and accurate books of record and account in accordance
with commercially reasonable business practices in which true and correct entries are made of all
of its and their dealings and transactions in all material respects; and (ii) set up and maintain
on its books such reserves as may be required by GAAP with respect to doubtful accounts and all
taxes, assessments, charges, levies and claims and with respect to its business, and include such
reserves in its quarterly as well as year end financial statements.



     6.7 Inspection; Periodic Audits



     Borrower shall permit the representatives of Lender, at the expense of Borrower, from time to
time during normal business hours upon reasonable notice, to (i) visit and inspect any of its
offices or properties or any other place where Collateral is located to inspect the Collateral
and/or to examine or audit all of its books of account, records, reports and other papers (but not
more often than four (4) times per year so long as no Default or Event of Default exists), (ii)
make copies and extracts therefrom, and (iii) discuss its business, operations, prospects,
properties, assets, liabilities, condition and/or Accounts and Inventory with its officers and
independent public accountants (and by this provision such officers and accountants are authorized
to discuss the foregoing).



     6.8 Further Assurances; Post Closing



     At Borrower’s cost and expense, Borrower shall (i) take such further actions, obtain such
consents and approvals and duly execute and deliver such further agreements, assignments,
instructions or documents as Lender may request with respect to the purposes, terms and conditions
of the Loan Documents and the consummation of the transactions contemplated thereby, and (ii)
without limiting and notwithstanding any other provision of any Loan Document, execute and deliver,
or cause to be executed and delivered, such agreements and documents, and take or cause to be taken
such actions, and otherwise perform, observe and comply with such obligations, as are set forth on
Schedule 6.8.



     6.9 Payment of Indebtedness



     Except as otherwise prescribed in the Loan Documents, Borrower shall pay, discharge or
otherwise satisfy at or before maturity (subject to applicable grace periods and, in the case of
trade payables, to ordinary course payment practices) all of its material obligations and
liabilities, except when the amount or validity thereof is being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or other appropriate provisions
are being maintained by Borrower in accordance with GAAP to the satisfaction of Lender in its sole
discretion.



     6.10 Lien Searches



     If Liens other than Permitted Liens exist, Borrower immediately shall take, execute and
deliver all actions, documents and instruments necessary to release and terminate such Liens.



     6.11 Use of Proceeds



     Borrower shall use the proceeds from the Revolving Facility only for the purposes set forth in
Section 2.1(a) and shall not loan or advance any of such proceeds to National
Pharmaceuticals in excess of $300,000 per annum.



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     6.12 Collateral Documents; Security Interest in Collateral



     Borrower shall (i) execute, obtain, deliver, file, register and/or record any and all
financing statements, continuation statements, stock powers, instruments and other documents, or
cause the execution, filing, registration, recording or delivery of any and all of the foregoing,
that are necessary or required under law or otherwise or reasonably requested by Lender to be
executed, filed, registered, obtained, delivered or recorded to create, maintain, perfect,
preserve, validate or otherwise protect the pledge of the Collateral to Lender and Lender’s
perfected first priority Lien on the Collateral (and Borrower irrevocably grants Lender the right,
at Lender’s option, to file any or all of the foregoing), (ii) within two business days of learning
thereof, report to Lender any reclamation, return or repossession of goods in excess of $10,000
(individually or in the aggregate), and (iii) defend the Collateral and Lender’s perfected first
priority Lien thereon against all claims and demands of all Persons at any time claiming the same
or any interest therein adverse to Lender, and pay all reasonable costs and expenses (including,
without limitation, reasonable in-house documentation and diligence fees and legal expenses and
reasonable attorneys’ fees and expenses) in connection with such defense, which may at Lender’s
discretion be added to the Obligations.



     6.13 Right of First Refusal



     If at any time any Borrower or Guarantor (each, a “Credit Party”) or any of their respective
Subsidiaries or Affiliates receives from a third party an offer, term sheet or commitment or makes
a proposal accepted by any Person (each, an “Offer”) which provides for any type of financing
(other than an offering of common stock or other equity securities which do not contain or enjoy
any debt or debt-like rights or features (it being understood that preferred stock with a
liquidation preference or redemption features is not considered to be debt or debt-like for
purposes of this Section 6.13), which are not convertible or exchangeable into debt or
debt-like instruments or which may otherwise be characterized, whether for accounting, income tax
or any other purposes, as debt) to or for a Credit Party or any of its Affiliates, such Credit
Party, on behalf of itself or such Affiliate, shall immediately notify such third party making the
offer of Lender’s rights under this Section 6.13, and further shall immediately notify
Lender of the Offer in writing (including all material terms of the Offer). Lender shall have
thirty (30) calendar days after Receipt of such notice (the “Option Period”) to agree to provide
similar financing in the place of such Person upon substantially the same terms and conditions (or
terms more favorable to such Credit Party or Affiliate) as set forth in the Offer. Lender shall
notify Credit Party or Affiliate in writing of Lender’s acceptance of the Offer pursuant hereto
(the “Acceptance Notice”), in which case such Credit Party or Affiliate shall not accept the Offer
from such other Person. If no Acceptance Notice has been Received from Lender within the Option
Period, Credit Party or Affiliate may consummate the Offer with the other Person on the terms and
conditions set forth in the Offer (the “Transaction”); provided, however, that none
of foregoing or any failure by Lender to issue an Acceptance Notice shall be construed as a waiver
of any of the terms, covenants or conditions of any of the Loan Documents. If the Transaction is
not consummated on the terms set forth in the Offer or with the Person providing the Offer or
during the ninety (90) calendar day period following the expiration of the Option Period, Credit
Party shall not be permitted, and shall not permit its Affiliate, to consummate the Transaction
without again complying with this Section 6.13. The provisions of this Section
6.13
shall survive the payment in full of the Obligations and termination of this Agreement for a
period of one month. For purposes of this Section 6.13, “Lender” shall include
CapitalSource Finance LLC and any of its parents, subsidiaries or Affiliates. The provisions of
this Section 6.13 shall not apply to any Offer to an Affiliate of any Borrower or Guarantor
(or any of their respective Subsidiaries or Affiliates (other than the Affiliate receiving the
Offer)) if such financing is intended to be used solely for a business conducted by or to be
conducted by such Affiliate which is unrelated to the business of any such Borrower or Guarantor
(or any such respective Subsidiaries or Affiliates) as such business exists from time to time or
may result from any acquisition, merger or similar transaction how so ever structured which is the
subject of the Offer.



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     6.14 Taxes and Other Charges



     (a) All payments and reimbursements to Lender made under any Loan Document shall be free and
clear of and without deduction for all taxes, levies, imposts, deductions, assessments, charges or
withholdings, and all liabilities with respect thereto of any nature whatsoever, excluding taxes to
the extent imposed on Lender’s net income or franchise. If Borrower shall be required by law to
deduct any such amounts from or in respect of any sum payable under any Loan Document to Lender,
then the sum payable to Lender shall be increased as may be necessary so that, after making all
required deductions, Lender receives an amount equal to the sum it would have received had no such
deductions been made. Notwithstanding any other provision of any Loan Document, if at any time
after the Closing Date (i) any change in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (ii) any new law, regulation, treaty or directive
enacted or any interpretation or application thereof, or (iii) compliance by Lender with any
request or directive (whether or not having the force of law) from any Governmental Authority: (A)
subjects Lender to any tax, levy, impost, deduction, assessment, charge or withholding of any kind
whatsoever with respect to any Loan Document, or changes the basis of taxation of payments to
Lender of any amount payable thereunder (except for net income taxes, or franchise taxes imposed in
lieu of net income taxes, imposed generally by federal, state or local taxing authorities with
respect to interest or commitment fees or other fees payable hereunder or changes in the rate of
tax on the overall net income of Lender), or (B) imposes on Lender any other condition or increased
cost in connection with the transactions contemplated thereby or participations therein; and the
result of any of the foregoing is to increase the cost to Lender of making or continuing any Loan
hereunder or to reduce any amount receivable hereunder, then, in any such case, Borrower shall
promptly pay to Lender any additional amounts necessary to compensate Lender, on an after-tax
basis, for such additional cost or reduced amount as determined by Lender. If Lender becomes
entitled to claim any additional amounts pursuant to this Section 6.14 it shall promptly
(but in any event within ninety (90) days of becoming aware thereof) notify Borrower of the event
by reason of which Lender has become so entitled and a detailed calculation thereof, and each such
notice of additional amounts payable pursuant to this Section 6.14 submitted by Lender to
Borrower shall, absent manifest error, be final, conclusive and binding for all purposes.



     (b) Borrower shall promptly, and in any event within five (5) Business Days after Borrower or
any authorized officer of Borrower obtains knowledge thereof, notify Lender in writing of any oral
or written communication from the Internal Revenue Service or otherwise with respect to any (i) tax
investigations, relating to the Borrower directly, or relating to any consolidated tax return which
was filed on behalf of Borrower, (ii) notices of tax assessment or possible tax assessment, (iii)
years that are designated open pending tax examination or audit, and (iv) information that could
give rise to an IRS tax liability or assessment.



     6.15 Payroll Taxes



     Without limiting or being limited by any other provision of any Loan Document, Borrower at all
times shall retain and use a Person acceptable to Lender to process, manage and pay its payroll
taxes and shall cause to be delivered to Lender within ten (10) calendar days after the end of each
calendar month a report of its payroll taxes for the immediately preceding calendar month and
evidence of payment thereof. Lender acknowledges that ADP is an acceptable company engaged by
Borrower to process, manage and pay its payroll taxes as of the Closing Date. Borrower
acknowledges that in the event Borrower wishes to remove ADP as the company engaged to process,
manage and pay its payroll taxes, it will not do so until such time that Lender has consented in
writing to such change, which consent will not be unreasonably withheld.



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     6.16 Inventory Covenants



     With respect to the Inventory, Borrower: (a) shall at all times maintain inventory records
reasonably satisfactory to Lender, keeping correct and accurate records itemizing and describing
the kind, type, quality and quantity of Inventory, Borrower’s cost therefore and daily withdrawals
therefrom and additions thereto; (b) shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Lender, which consent shall not be
unreasonably denied or delayed, except for sales of Inventory in the ordinary course of Borrower’s
business and except to move Inventory directly from one location set forth or permitted herein to
another such location; (c) shall produce, use, store, ship and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act
of 1938, as amended and all rules, regulations and orders related thereto); (d) assumes all
responsibility and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (e) shall not sell Inventory to any customer on approval, or any
other basis which entitles the customer to return or may obligate Borrower to repurchase such
Inventory except as set forth on Schedule 5.20; (f) shall keep the Inventory in good and
marketable condition; and (g) shall not, without prior written notice to Lender, acquire or accept
any Inventory on consignment or approval except as set forth on Schedule 5.20.



     6.17 Diabetes Customer List Covenants



     (a) Borrower shall at all times maintain true, complete and accurate list of all Diabetes
Customers in a form and manner reasonably acceptable to Lender (the “Diabetes Customer List”).



     (b) Borrower shall not later than (i) thirty (30) days after the end of each calendar quarter
during the Term or (ii) immediately upon the written request of Lender deliver to the Escrow Agent
in the manner set forth in the Escrow Agreement (which shall include the transmission thereof in a
sealed envelope or other package) true and correct copies of the Diabetes Customer List maintained
by Borrower as of such time in either (a) hard-copy paper print-out or (b) a readable, electronic
format on CD or other electronic media in a form acceptable to Lender but containing, at a minimum
for each Diabetes Customer, patient name and address, billing and payor information, patient
number, date and amount of last shipment and cumulative balance of all shipments and, if password
protected, contemporaneous delivery of the password. Lender acknowledges that the Escrow Agent
shall execute and deliver a business associate agreement in a form mutually agreeable to Lender and
Borrower.



     (c) At the written request of Lender, Borrower shall promptly (but in any event within 15
Business Days following its Receipt of such written request) commence to cause an appraisal to be
made
of the Diabetes Customer List during the Term in its Permitted Discretion, which appraisal
shall be completed in a reasonable time period, be at the cost and expense of Borrower in
furtherance of its healthcare operations and be conducted by an appraiser acceptable to Lender;
provided that as long as no Event of Default shall have occurred and be continuing such an
appraisal shall not be required to be obtained on more than one occasion during any period of
twelve (12) consecutive calendar months. Lender acknowledges that the appraiser shall execute and
deliver a business associate agreement in a form mutually agreeable to Lender and Borrower and any
disclosures to be made by such appraiser of information subject to HIPAA to Lender shall be in
compliance with such business associate agreement.



     (d) At the written request of Lender, Borrower shall promptly (but in any event within 15
Business Days following its Receipt of such written request) (but not more than twice during any
period of twelve (12) consecutive calendar months unless a Default or Event of Default shall have
occurred) engage Borrower’s independent certified public accounting firm or such other independent
auditor selected by Borrower and reasonably acceptable to Lender, in furtherance of Borrower’s
healthcare operations, to perform an audit (or similar agreed upon procedure) of the Diabetes
Customer List in the possession of the Escrow Agent to confirm that (i) the Diabetes Customer List
is the same list of customers in the possession of Borrower (excepting additions of Diabetes
Customers thereto since the date of the submission of the last Diabetes Customer List to the Escrow
Agent) and (ii) the information contained therein is true, accurate and complete and in conformance
with the applicable provisions of this Agreement. Any such audits shall be completed in a
reasonable period of time and be at the cost and expense of Borrower. Lender acknowledges that the
auditor shall execute and deliver a business associate agreement in a form mutually agreeable to
Lender and Borrower and shall not make any disclosures of “protected health information” as defined
by HIPAA to Lender.



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     (e) Borrower acknowledges and agrees that the Diabetes Customer List, whether now existing or
hereinafter acquired or arising, constitutes a part of the Collateral granted to Lender under this
Agreement.



     (f) Once all of the Obligations have been fully performed and indefeasibly paid in full in
cash and this Agreement shall have been terminated, Lender shall deliver a joint written
notification promptly to the Escrow Agent to terminate the Escrow Agreement and have the Diabetes
Customer List then held in escrow to be returned to Borrower or as otherwise instructed by Borrower
in writing.



     6.18 Increased Costs; Capital Adequacy



     (a) If any Change in Law shall:



          (i) impose, modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by, Lender (except any
such reserve requirement reflected in the Applicable Rate); or



          (ii) impose on Lender any other condition affecting this Agreement or Loans made by Lender;
and



          (iii) the result of any of the foregoing shall be to increase the cost to Lender of making or
maintaining any Loan (or of maintaining its obligation to make any such Loan) or to reduce the
amount of any sum received or receivable by Lender hereunder (whether of principal, interest or
otherwise), then Borrower will pay to Lender such additional amount or amounts as will compensate
Lender for such additional costs incurred or reduction suffered.



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



33









 





     (c) A certificate of Lender setting forth the amount or amounts necessary to compensate Lender
or Lender’s holding company, as the case may be, as specified in Sections 6.18(a) and
(b), shall be delivered to Borrower and shall be conclusive absent manifest error.
Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.



     (d) Failure or delay on the part of Lender to demand compensation pursuant to this Section
6.18 shall not constitute a waiver of Lender’s right to demand such compensation;
provided that Borrower shall not be required to compensate Lender pursuant to this
Section 6.18 for any increased costs or reductions incurred more than 180 days prior to the
date Lender notifies Borrower of the Change in Law giving rise to such increased costs or
reductions and of Lender’s intention to claim compensation therefor; provided
further that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.



     6.19 Minimum Liquidity Account



     Lender and Borrower acknowledge and agree that, as additional security for the payment and
performance of the Obligations, Borrower established with an FDIC insured bank (or other financial
or investment institution) reasonably acceptable to Lender a depository or investment account in
which Lender possesses a first priority lien and security interest pursuant to an account control
agreement acceptable to Lender and its legal counsel (the “Minimum Liquidity Account”). Lender and
Borrower acknowledge and agree that Borrower deposited the amount of One Million Five Hundred
Thousand Dollars ($1,500,000) from the proceeds of the Term Loan in the Minimum Liquidity Account
following the execution and delivery of the Third Restated Credit Agreement (the “Original
Liquidity Amount”). Borrower hereby agrees to deposit an additional One Million Five Hundred
Thousand Dollars ($1,500,000) from the proceeds of the Bridge Loan in the Minimum Liquidity Account
on the Closing Date (the “Bridge Loan Liquidity Amount”). Notwithstanding anything contained in the
Loan Documents to the contrary, upon the occurrence and during the continuance of an Event of
Default Lender may apply amounts held in the Minimum Liquidity Account to the Obligations at such
times and in such amounts as Lender shall from time to time determine in its sole and absolute
discretion. Lender hereby acknowledges and agrees that, so long as no Default or Event of
Default shall have occurred and be continuing, the Bridge Loan Liquidity Amount shall be released
to Borrower from the Minimum Liquidity Account on the Merger Effective Date. Borrower acknowledges
and agrees that the Bridge Loan Liquidity Amount shall be retained in the Minimum Liquidity Account
in the event that the Voluntary Series A Conversion occurs and may be applied to the Obligations
upon the occurrence and during the continuance of an Event of Default at such times and in such
amounts as Lender shall from time to time determine in its sole and absolute discretion. In
addition, Lender hereby acknowledges and agrees that, when the outstanding principal amount of the
Term Loan is less than or equal to One Million Five Hundred Thousand Dollars ($1,500,000), and so
long as no Default or Event of Default shall have occurred and be continuing, Borrower shall be
permitted to use the Original Liquidity Amount to pay the regularly scheduled installments of
principal required by Section 2.6(a) with respect to the Term Loan.



     6.20 Additional Subsidiaries



     If at any time after the Closing Date any Borrower shall form or acquire any new Subsidiary,
such Borrower shall promptly, and in any event not later than fifteen calendar days after the
creation or acquisition of such Subsidiary (or, if in connection with a Permitted Acquisition, upon
the closing date thereof), execute, and cause such new Subsidiary to execute, and deliver to Lender
such joinder agreements and amendments to this Agreement and the other Loan Documents, including
executing and delivering allonges or counterparts to any Notes to the extent issued hereunder in
form and substance satisfactory to Lender and providing such other documentation as Lender may
reasonably request, including, without limitation, UCC searches, as applicable, and filings, legal
opinions and corporate authorization documentation, and to take such other actions in each case as
Lender deems necessary or advisable to (a) join and make such new Subsidiary a co-Borrower
hereunder and thereunder, subject to all the rights and benefits and obligations and burdens of a
Borrower hereunder and (b) grant to Lender a perfected first priority security interest in the
Collateral subject to no Liens other than the Permitted Liens.



34









 





VII. NEGATIVE COVENANTS




     Each Borrower, jointly and severally, covenants and agrees that, until full performance and
satisfaction, and indefeasible payment in full in cash, of all of the Obligations and termination
of this Agreement:



     7.1 Financial Covenants



     Borrower shall not violate the financial covenants set forth on (A) Annex I.A. to this
Agreement, which is incorporated herein and made a part hereof, at any time prior to the earlier of
the Merger Effective Date or the Voluntary Series A Conversion Date and (B) Annex I.B. to
this Agreement, which is incorporated herein and made a part hereof, at any time following the
earlier of the Merger Effective Date or the Voluntary Series A Conversion Effective Date.



     7.2 Permitted Indebtedness



     Borrower shall not create, incur, assume or suffer to exist any Indebtedness, except the
following (collectively, “Permitted Indebtedness”): (i) Indebtedness under the Loan Documents, (ii)
any Indebtedness set forth on Schedule 7.2, (iii) Capitalized Lease Obligations incurred
after April 30, 2004 and Indebtedness incurred pursuant to purchase money Liens permitted by
Section 7.3(v), provided that the aggregate amount of such Capitalized Lease Obligations
and purchase money indebtedness outstanding at any time shall not exceed $250,000, (iv)
Indebtedness in connection with advances made by a stockholder in order to cure any default of the
financial covenants set forth on Annex I.A. and Annex I.B.; provided,
however, that such Indebtedness shall be on an unsecured basis, subordinated in right of
repayment and remedies to all of the Obligations and to all of Lender’s rights pursuant to a
subordination agreement in form and substance satisfactory to Lender; (v) accounts payable to trade
creditors and current operating expenses (other than for borrowed money) which are not aged more
than 120 calendar days from the billing date or more than 30 days from the due date, in each case
incurred in the ordinary course of business and paid within such time period, unless the same are
being contested in good faith and by appropriate and lawful proceedings and such reserves, if any,
with respect thereto as are required by GAAP and deemed adequate by Borrower’s independent
accountants shall have been reserved; (vi) Indebtedness incurred in the ordinary course of
business and not exceeding $100,000
individually or in the aggregate outstanding at any one time, provided,
however, that such Indebtedness shall be on an unsecured basis, subordinated in right of
repayment and remedies to all of the Obligations and to all of Lender’s rights pursuant to a
subordination agreement in form and substance satisfactory to Lender; (vii) Permitted Subordinated
Debt, and (viii) Indebtedness consisting of unsecured Deferred Purchase Price Obligations.
Borrower shall not make prepayments on any existing or future Indebtedness in excess of $100,000 to
any Person other than to Lender or to the extent specifically permitted by this Agreement or any
subsequent agreement between Borrower and Lender.



35









 






     7.3 Permitted Liens



     Borrower shall not create, incur, assume or suffer to exist any Lien upon, in or against, or
pledge of, any of the Collateral, or any of its properties or assets or any of its authorized but
unissued or treasury shares, securities or other equity or ownership or partnership interests,
whether now owned or hereafter acquired, except the following (collectively, “Permitted Liens”):
(i) Liens under the Loan Documents or otherwise arising in favor of Lender, (ii) Liens imposed by
law for taxes (other than payroll taxes), assessments or charges of any Governmental Authority for
claims not yet due or which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are being maintained by such
Person in accordance with GAAP to the satisfaction of Lender in its sole discretion, (iii) (A)
statutory Liens of landlords (provided that any such landlord has executed a Landlord Waiver and
Consent in form and substance satisfactory to Lender) and of carriers, warehousemen (provided that
any such warehousemen have executed a Warehouse Waiver and Consent in form and substance
satisfactory to Lender), mechanics, materialmen, and (B) other Liens imposed by law or that arise
by operation of law in the ordinary course of business from the date of creation thereof, in each
case only for amounts not yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other appropriate provisions are being
maintained by such Person in accordance with GAAP to the satisfaction of Lender in its sole
discretion, (iv) Liens (A) incurred or deposits made in the ordinary course of business (including,
without limitation, surety bonds and appeal bonds) in connection with workers’ compensation,
unemployment insurance and other types of social security benefits or to secure the performance of
tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory
obligations and other similar obligations, or (B) arising as a result of progress payments under
government contracts, (v) purchase money Liens (A) securing Indebtedness permitted under
Section 7.2(iii), or (B) in connection with the purchase by such Person of equipment in the
normal course of business, provided that such payables shall not exceed any limits on
Indebtedness provided for herein and shall otherwise be Permitted Indebtedness hereunder, (vi)
Liens securing the MHR Subordinated Debt and the Bridge Loan, and (vii) Liens disclosed on
Schedule 7.3; provided, that the Lien in favor of Gilbraltar Bank, FSB shall not extend to
any additional collateral or secure any Indebtedness in excess of $300,000.



     7.4 Investments; New Facilities or Collateral; Subsidiaries



     Borrower, directly or indirectly, shall not (i) purchase, own, hold, invest in or otherwise
acquire obligations or stock or securities of, or any other interest in, or all or substantially
all of the assets of, any Person or any joint venture, or (ii) make or permit to exist any loans,
advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable for or upon or incur any obligation of
any other Person (other than those created by the Loan Documents and Permitted Indebtedness and
other than (A) trade credit extended in the ordinary course of business, (B) advances for business
travel and similar temporary advances made in the ordinary course of business to officers,
directors and employees, and (C) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business). Borrower, directly or
indirectly, shall not purchase, own, operate, hold, invest in or otherwise acquire any facility,
property or
assets or allow the warehousing, location or storage of any Collateral other than at the
locations set forth on Schedule 5.18B unless Borrower shall provide to Lender at least
thirty (30) Business Days prior written notice. Borrower shall have no Subsidiaries other than (i)
those Subsidiaries , if any, existing on the Closing Date and set forth in Schedule 5.3 and
(ii) those Subsidiaries permitted to be formed in connection with Permitted Acquisitions.



          (i) Notwithstanding any provision of this Section 7.4 to the contrary, following the
earlier of the Merger Effective Date and the Voluntary Series A Conversion Effective Date, Borrower
may acquire obligations or stock or securities of, or any other interest in, or all or
substantially all of the assets of, any Person or any joint venture to the extent permitted by the
Permitted Acquisition Expenditure covenant set forth in Annex I.B. attached hereto;
provided that the following terms and conditions are satisfied (each, a “Permitted
Acquisition”):



36









 






          (a) immediately before, and immediately after giving effect to, the proposd Permitted
Acquisition, no Default or Event of Default shall have occurred and be continuing, or would
result;




          (b) no proceeds of the Loans are used to finance any portion of the purchase price for
the proposed Permitted Acquisition;




          (c) Borrower will not incur or assume any Indebtedness or other contingent liabilities
or obligations in connection with the proposed Permitted Acquisition other than Deferred
Purchase Price Obligations as permitted under this Agreement;




          (d) the portion, if any, of the purchase price for the proposed Permitted Acquisition
which consists of Indebtedness constituting Deferred Purchase Price Obligations shall be
unsecured and shall qualify as Permitted Subordinated Debt;




          (e) after giving effect to the proposed Permitted Acquisition Borrower shall be in
compliance with respect to its obligations under Sections 6.3 and 6.20;




          (f) If the proposed Acquisition involves a new business premises or warehouse, Lender
shall receive a Landlord Waiver and Consent or Warehouse Waiver and Consent, as applicable;




          (g) none of the obligations of Borrower in respect of the proposed Permitted
Acquisition would, if performed by Borrower, result in a breach of any provision of this
Agreement or any other Loan Document;




          (h) in connection with any acquisition of Capital Stock in any Person, such acquisition
will result in control by a Borrower of (i) the majority of all Capital Stock in such Person
and (ii) the majority of all voting Capital Stock in the such Person (which shall permit,
among other things, Borrower to appoint all the members of the board of directors or other
applicable governing or managing body of such Person);




          (i) Agent shall have received (or shall receive in connection with the closing of the
proposed Permitted Acquisition) for the benefit of Lender a first priority perfected
security interest (subject to Permitted Liens) in all property which would constitute
Collateral (including, without limitation, if required by Agent, the Capital Stock of the
Person being acquired) acquired pursuant to the proposed Permitted Acquisition; and




          (j) Borrower shall deliver to Lender for its review and approval at least ten (10)
Business Days prior to the closing date of the proposed Permitted Acquisition (i) a
Compliance Certificate for the period of four fiscal quarters immediately following such
proposed Permitted Acquisition (prepared in good faith and in a manner and using a
methodology consistent with the most recent financial statements delivered pursuant to
Section 6.1(a)) giving pro forma effect to the consummation of such acquisition and
demonstrating, to the reasonable satisfaction of Agent, that Borrower will be in compliance
on a pro forma basis with the financial covenants set forth in Annex I.B. attached
hereto after the consummation of the proposed Permitted Acquisition, (ii) the draft versions
of the asset/stock purchase agreement, bill of sale, assignment, non-competition and/or
non-solicitation agreement, and other material transaction documents; (iii) copies of UCC
search reports (together with copies of underlying UCC financing statements) from a
reputable corporate search company against the seller of the assets, (iv) a copy of the
corporate due diligence obtained by Borrower to verify the legal name and state of
organization of the seller of the assets, and (v) payoff letters from the holders of any
Liens covering the assets to be purchased (which payoff letter shall authorize the filing of
termination statements with respect to such Liens upon the receipt of the funds specified in
the payoff letter) and, if Lender does not provide any objections or comments to the
proposed Permitted Acquisition within three (3) Business Days of the delivery thereof to
Lender, all of the foregoing shall be deemed to be satisfactory in form and substance to and
consented to by Lender.



37









 





          (ii) Borrower shall deliver to Lender as soon as practicable (but not later than seven (7)
Business Days) following the closing date of the proposed Permitted Acquisition the final,
execution versions of the asset/stock purchase agreement, bill of sale, assignment, non-competition
and/or non-solicitation agreement, and other material transaction documents, together with a copy
of (a) any resolutions of the seller’s board of directors, managers or otherwise authorizing the
transaction and (b) a certificate stating that the Permitted Acquisition has been closed in
accordance with the terms and conditions of this Agreement.



          (iii) Borrower shall have collaterally assigned (or caused to be assigned) to Lender the
purchase agreement, non-compete agreements and restrictive covenants, if any, arising out of such
Permitted Acquisition (and the consent of the person bound thereby shall either have been obtained
or shall not be required) and, if required by Lender, executed such documents, agreements and
instruments and granted such liens and security interests as may be required by Lender and its
legal counsel.



          (iv) Borrower shall promptly take such actions, and execute and deliver such documents,
agreements and instruments as Lender and its legal counsel shall require to insure that Lender
obtains (subject to Permitted Liens) a first priority perfected Lien on any of the assets acquired
by Borrower in connection with the proposed Permitted Acquisition, including but not being limited
to uniform commercial code financing statements and termination statements, all of the foregoing to
be acceptable to Lender and its legal counsel.



All documents, agreements, instruments and other information required to be delivered to Lender
under this Section 7.4 shall be sent to the following persons at the addresses set forth
below (or to such other persons and such other address as such party may hereafter specify in a
notice given in the manner required under this Section 12.5 of this Agreement):




			
	               	 	Todd Gordon

Director

CapitalSource Finance LLC

4445 Willard Avenue, 12th Floor

Chevy Chase, MD 20815

Telephone: (301) 841-2978

Facsimile: (301) 841-2340


John F. Wolter

Updike, Kelly & Spellacy, P.C.

P.O. Box 231277

One State Street

Hartford, CT 06123-1277

Telephone: (860) 548-2645

Facsimile: (860) 548-6072





Any delivery under this Section 7.4 shall be given, and shall be deemed to have been
received by Lender, in the manner specified, and as otherwise set forth, in Section 12.5.



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     7.5 Dividends; Redemptions



          Borrower shall not (i) declare, pay or make any dividend or Distribution on any shares of
capital stock or other securities or interests (other than dividends or Distributions payable in
its stock, or split-ups or reclassifications of its stock), (ii) apply any of its funds, property
or assets to the acquisition, redemption or other retirement of any capital stock or other
securities or interests or of any options to purchase or acquire any of the foregoing (provided,
however, that Borrower may redeem its capital stock from terminated employees pursuant to, but only
to the extent required under, the terms of the related employment agreements as long as no Default
or Event of Default has occurred and is continuing or would be caused by or result from the payment
thereof and as long as the aggregate amount of payments made to such terminating employees in any
fiscal year does not exceed $100,000), (iii) otherwise make any payments or Distributions to any
stockholder, member, partner or other equity owner in such Person’s capacity as such, or (iv) make
any payment of any Management or Service Fee, except as permitted under the Management Fee
Subordination Agreement (“Management Fee Payment”); provided, however, Borrower
may make (x) payments for redemptions or puts as contemplated by Section 5 of the MHR Subordinated
Note to the extent that such payments are not otherwise prohibited under the terms of the MHR
Subordination Agreement and (a)[PENDING MHR CONFIRMATION, if such redemption occurs under Section
5(a) of the MHR Subordinated Note, the Obligations are being simultaneously paid in full in cash],
(b) if such redemption occurs under Section 5(b) thereof, either Lender has consented thereto or
the Obligations are being simultaneously paid in full in cash or (c) if such redemption occurs
under Section 5(c) of the MHR Subordinated Note, either Lender has consented thereto or the
Obligations are being simultaneously paid in full in cash, and (y) other payments with respect to
the MHR Subordinated Note to the extent such payments are not prohibited under the terms of the MHR
Subordination Agreement; provided, further, that Borrower shall not make or suffer
to exist any such payment described in (i) through (iv) above if a Default of Event of Default has
occurred and is continuing or would result therefrom. In the event payment of any Management Fee
Payment would be restricted by the foregoing provisions, such Management Fee Payment may be accrued
during the period payment thereof is so restricted and such Management Fee Payment will be
permitted to be paid when such restriction no longer exists, provided at the time of payment
thereof no Event of Default would arise as a result of such payment.



     7.6 Transactions with Affiliates



          Borrower shall not enter into or consummate any transaction of any kind with (i) any of its
Affiliates or (ii) any Guarantor or any of their respective Affiliates other than: (a) salary,
bonus, severance, employee stock option and other compensation and employment arrangements with
directors or officers in the ordinary course of business, provided, that no payment of any
bonus or severance shall be permitted if a Default or Event of Default has occurred and remains in
effect or would be caused by or result from such payment and provided further that, regardless of
whether a Default or Event of Default shall have occurred and remain in effect or would be caused
by or result from such payment, bonus and severance payments may be paid from the proceeds of
Qualified Equity Investments specifically allocated for such purposes, (b) Distributions and
dividends (including any Management Fee Payment) permitted pursuant to Section 7.5, (c)
transactions with Lender or any Affiliate of Lender, (d) payments permitted under and pursuant to
written agreements entered into by and between Borrower and one or more of its Affiliates that
both (A) reflect and constitute transactions on overall terms at least as favorable to Borrower as
would be the case in an arm’s-length transaction between unrelated parties of equal bargaining
power, and (B) are subject to such terms and conditions as determined by Lender in its sole
discretion; provided, that notwithstanding the foregoing clauses (A) and (B) above
Borrower shall not (Y) enter into or consummate any transaction or agreement pursuant to which it
becomes a party to any mortgage, note, indenture or guarantee evidencing any Indebtedness of any
of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or
otherwise, pursuant to agreement for any Indebtedness of any such Affiliate, or (Z) make any
payment (other than payments otherwise permitted under this Section 7.6, to any of its
Affiliates in excess of $10,000 without the prior written consent of Lender, (e) transactions with
ComVest as set forth in the Merger Agreement, the Bridge Loan Agreement, the Preferred Stock
Documents and the Management Agreement, (f) additional Qualified Equity Investments, (g) as long
as no Default or Event of Default shall have occurred and be continuing, and, notwithstanding
clause (d) above, transactions with ComVest and its Affiliates on terms that reflect and
constitute transactions on overall terms at least as favorable to Borrower as would be the case in
an arm’s-length transaction between unrelated parties of equal bargaining power as long as, in
connection with any such transaction involving the payment of management, consulting, retainer or
similar fees, a Subordination Agreement is executed and delivered in favor of Lender and (h)
subject to the MHR Subordination Agreement, transactions with MHR contemplated by the MHR
Subordinated Note, the Investment Unit Purchase Agreement, dated as of February 28, 2005, by and
among MHR and the Borrower and the other “Transaction Documents” as defined therein, the
Acknowledgment, dated as of April 15, 2009, by and among MHR and the Borrower, each as amended,
and transactions with MHR contemplated by the Limited Waiver and Consent to Convertible Secured
Notes dated April 30, 2009 by and among the Borrower, MHR and the other parties thereto.



39









 





     7.7 Charter Documents; Fiscal Year; Name; Jurisdiction of Organization;
Dissolution; Use of Proceeds



          Borrower shall not (i) amend, modify, restate or change its certificate of incorporation or
formation or bylaws or similar charter documents in a manner that would be adverse to Lender
(although Borrower shall be permitted to amend and/or restate its certificate of incorporation as
contemplated by the Merger Agreement and the Preferred Stock Purchase Agreement), (ii) change its
fiscal year unless Borrower demonstrates to Lender’s satisfaction compliance with the covenants
contained herein for both the fiscal year in effect prior to any change and the new fiscal year
period by delivery to Lender of appropriate interim and annual pro forma, historical and current
compliance certificates for such periods and such other information as Lender may reasonably
request, (iii) without at least 20 days prior written notice to Lender, change its name or change
its jurisdiction of organization; (iv) amend, alter or suspend or terminate or make provisional in
any material way, any Permit without the prior written consent of
Lender, which consent shall not be unreasonably withheld, (v) wind up, liquidate or dissolve
(voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result
in any of the foregoing, or (vi) use any proceeds of any Advance for “purchasing” or “carrying”
“margin stock” as defined in Regulations U, T or X of the Board of Governors of the Federal Reserve
System.



     7.8 Truth of Statements



          Borrower shall not furnish to Lender any certificate or other document that contains any
untrue statement of a material fact or that omits to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished.



     7.9 IRS Form 8821



          Borrower shall not alter, amend, restate, or otherwise modify, or withdraw, terminate or
re-file the IRS Form 8821 required to be filed pursuant to the Conditions Precedent in Section
4.1 hereof.



40









 





     7.10 Transfer of Assets



          Notwithstanding any other provision of this Agreement or any other Loan Document, Borrower
shall not sell, lease, transfer, assign or otherwise dispose of any interest in any properties or
assets (other than obsolete equipment or excess equipment no longer needed in the conduct of the
business in the ordinary course of business and sales of Inventory in the ordinary course of
business), or agree to do any of the foregoing at any future time, except that:



          (a) Borrower may lease (as lessee) real or personal property or surrender all or a portion of
a lease of the same, in each case in the ordinary course of business (so long as such lease does
not create or result in and is not otherwise a Capitalized Lease Obligation prohibited under this
Agreement), provided that a Landlord Waiver and Consent and such other consents as are
required by Lender are signed and delivered to Lender with respect to any lease of real or other
property, as applicable, if such real or other property serves as corporate headquarters or a
billing office, if any books or records, Accounts or other properties relating to Accounts are
located thereat or if other assets in excess of $10,000 are maintained at such property;



          (b) Borrower may arrange for the warehousing, fulfillment or storage of Inventory at locations
not owned or leased by Borrower, in each case in the ordinary course of business, provided
that a Warehouse Waiver and Consent and such other consents as are required by Lender are signed
and delivered to Lender with respect to any such location;



          (c) Borrower may license or sublicense Intellectual Property or customer lists from third
parties in the ordinary course of business, provided, that such licenses or sublicenses
shall not interfere with the business or other operations of Borrower and that Borrower’s rights,
title and/or interest in or to such Intellectual Property and customer lists and interests therein
are pledged to Lender as further security for the Obligations and included as part of the
Collateral if permitted in accordance with its terms; and



          (d) Borrower may consummate such other sales or dispositions of property or assets (including
any sale or transfer or disposition of all or any part of its assets and thereupon and within one
year thereafter rent or lease the assets so sold or transferred) only to the extent prior written
notice has
been given to Lender and to the extent Lender has given its prior written consent thereto,
subject in each case to such conditions as may be set forth in such consent.



     7.11 Payment on Permitted Subordinated Debt



          Except as permitted by the Subordination Agreement relating to such Permitted Subordinated
Debt, Borrower shall not (i) make any prepayment of any part or all of any Permitted Subordinated
Debt, (ii) repurchase, redeem or retire any instrument evidencing any such Permitted Subordinated
Debt prior to maturity, or (iii) enter into any agreement (oral or written) which could in any way
be construed to amend, modify, alter or terminate any one or more instruments or agreements
evidencing or relating to any Permitted Subordinated Debt in a manner adverse to Lender, as
determined by Lender in its sole discretion.



41









 





     7.12 Diabetes Customer Lists



          Borrower shall not sell, lease or otherwise dispose of any Diabetes Customer List, permit any
Diabetes Customer List to be subject to any Lien or provide or permit access to any Diabetes
Customer List to any Person other than Lender, the Escrow Agent or as otherwise required by
applicable law.



     7.13 OFAC



          No Credit Party nor any Subsidiary of any Credit Party (i) will be or become a Person whose
Property or interests in Property are blocked or subject to blocking pursuant to Section 1 of
Executive Order 13224 of September 23, 2001 Blocking property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001), (ii) will
engage in any dealings or transactions prohibited by Section 2 of such executive order, or
otherwise be associated with any such Person in any manner violative of Section 2 of such executive
order, or (iii) otherwise will become a Person on the list of Specially Designated Nationals and
Blocked Persons or subject to the limitations or prohibitions under any other OFAC regulation or
executive order. Further, no Credit Party nor any Subsidiary of any Credit Party shall engage in
any dealings or transactions in violation of the Trade Sanctions Reform and Export Enhancement Act
of 2000, OFAC’s Iranian Transactions Regulations, 31 C.F.R. Part 560, and Sudanese Sanctions
Regulations, 31 C.F.R. Part 538 or any other applicable OFAC regulation or executive order.



     7.14 Modifications of Certain Documents



          (a) Borrower shall not amend, modify, supplement or cancel, or waive any other party’s
compliance with, any provision of any of the Merger Documents, except for amendments and
supplements to the Company Disclosure Schedule or the Parent Disclosure Schedule (as such terms are
defined in the Merger Agreement), amendments pursuant to Section 5.3(c) of the Merger Agreement and
waivers of conditions precedent pursuant to Article VI of the Merger Agreement.



          (b) Borrower shall not amend, modify, supplement or cancel, or waive any other party’s
compliance with, any provision of the Bridge Loan Agreement, except for amendments in connection
with transactions contemplated by Section 5.3(c) of the Merger Agreement or for amendments which
decrease the rate of interest applicable thereunder or extend the maturity date of the Bridge Loan.



          (c) Borrower shall not amend, modify, supplement or cancel, or waive any other party’s
compliance with, any provision of any of the Hills Settlement Agreement except as permitted under
the Hills Subordination Agreement.



          (d) Borrower shall not amend, modify, supplement or cancel, or waive any other party’s
compliance with, any provision of any of the Preferred Stock Purchase Documents, except for
amendments in connection with transactions contemplated by Section 5.3(c) of the Merger Agreement
and amendments necessary to permit any Qualified Equity Investment or the Voluntary Series A
Conversion Equity Investment.



42









 





VIII. EVENTS OF DEFAULT




     8.1 Events Constituting Events of Default



          The occurrence of any one or more of the following shall constitute an “Event of Default:”



          (a) Borrower shall fail to pay any amount on the Obligations or provided for in any Loan
Document when due (whether on any payment date, at maturity, by reason of acceleration, by notice
of intention to prepay, by required prepayment or otherwise);



          (b) any representation, statement or warranty made or deemed made by Borrower or any Guarantor
in any Loan Document or in any other certificate, document, report or opinion delivered in
conjunction with any Loan Document to which it is a party, shall not be true and correct in all
material respects or shall have been false or misleading in any material respect on the date when
made or deemed to have been made (except to the extent already qualified by materiality, in which
case it shall be true and correct in all respects and shall not be false or misleading in any
respect);



          (c) Borrower or any Guarantor or other party thereto other than Lender shall be in violation,
breach or default of, or shall fail to perform, observe or comply with any covenant, obligation or
agreement set forth in, any Loan Document and such violation, breach, default or failure shall not
be cured within the applicable period set forth in the applicable Loan Document; provided
that, with respect to the affirmative covenants set forth in Article VI (other than
Sections 6.1(c), 6.2, 6.3(i), (ii) and (iii), 6.5, 6.8, 6.9, 6.11, 6.17 and 6.19
for which there shall be no cure period), there shall be a fifteen (15) calendar day cure period
commencing from the earlier of (i) Receipt by such Person of written notice of such breach,
default, violation or failure, and (ii) the time at which such Person or any authorized officer
thereof knew or became aware, or should have known or been aware, of such failure, violation,
breach or default, but no Advances will be made during the cure period;



          (d) (i) any of the Loan Documents ceases to be in full force and effect, or (ii) any Lien
created thereunder ceases to constitute a valid perfected first priority Lien on the Collateral in
accordance with the terms thereof (other than as a result of the action or inaction of Lender), or
Lender ceases to have a valid perfected first priority security interest in any of the Collateral
or any securities pledged to Lender pursuant to the Security Documents;



          (e) one or more tax assessments, judgments or decrees is rendered against any Borrower or
Guarantor in an amount in excess of $50,000 individually or $100,000 in the aggregate, which is/are
not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being
rendered but no Advances will be made before the judgment is stayed, vacated or discharged;



          (f) (i) any default occurs, which is not cured or waived, (x) in the payment of any amount
with respect to any Indebtedness for borrowed money (other than the Obligations) of any Borrower or
Guarantor in excess of $100,000, (y) in the performance, observance or fulfillment of any provision
contained in any agreement, contract, document or instrument to which any Borrower or Guarantor is
a party or to which any of their properties or assets are subject or bound under or pursuant to
which any Indebtedness was issued, created, assumed, guaranteed or secured and such default
continues for more than any applicable grace period or permits the holder of any Indebtedness to
accelerate the maturity thereof, or (z) in the performance, observance or fulfillment of any
provision contained in any agreement, contract, document or instrument between any Borrower or
Guarantor and Lender or any Affiliate of Lender (other than the Loan Documents), or (ii) any
Indebtedness of any Borrower or any Guarantor is declared to be due and payable or is required to
be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof, or
any obligation of such Person for the payment of Indebtedness (other than the Obligations) is not
paid when due or within any applicable grace period, or any such obligation becomes or is declared
to be due and payable before the expressed maturity thereof, or there occurs an event which, with
the giving of notice or lapse of time, or both, would cause any such obligation to become, or allow
any such obligation to be declared to be, due and payable;



43









 





          (g) any Borrower or Guarantor shall (i) be unable to pay its debts generally as they become
due, (ii) have total liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) that exceed its assets, at a Fair Valuation, (iii) have an unreasonably small capital
base with which to engage in its anticipated business, (iv) file a petition under any insolvency
statute, (v) make a general assignment for the benefit of its creditors, (vi) commence a proceeding
for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or
any substantial part of its property, or (vii) file a petition seeking reorganization or
liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute;



          (h) a court of competent jurisdiction shall (A) enter an order, judgment or decree appointing
a custodian, receiver, trustee, liquidator or conservator of any Borrower or Guarantor or the whole
or any substantial part of any such Person’s properties, which shall continue unstayed and in
effect for a period of thirty (30) calendar days, (B) shall approve a petition filed against any
Borrower or Guarantor seeking reorganization, liquidation or similar relief under any Debtor Relief
Law or any other applicable law or statute, which is not dismissed within thirty (30) calendar days
or, (C) under the provisions of any Debtor Relief Law or other applicable law or statute, assume
custody or control of any Borrower or Guarantor or of the whole or any substantial part of any such
Person’s properties, which is not irrevocably relinquished within thirty (30) calendar days, or
(ii) there is commenced against any Borrower or Guarantor any proceeding or petition seeking
reorganization, liquidation or similar relief under any Debtor Relief Law or any other applicable
law or statute and either (A) any such proceeding or petition is not unconditionally dismissed
within thirty (30) calendar days after the date of commencement, or (B) any Borrower or Guarantor
takes any action to indicate its approval of or consent to any such proceeding or petition, but no
Advances will be made before any such order, judgment or decree described above is stayed, vacated
or discharged, any such petition described above is dismissed, or any such custody or control
described above is relinquished;



          (i) (i) any Change of Control (other than a Change of Control resulting from the consummation
of the Merger or the Voluntary Series A Conversion) occurs or any agreement or commitment to cause
or that may result in any such Change of Control is entered into, (ii) any Material Adverse Effect,
or Material Adverse Change occurs or is reasonably expected to occur, (iii) any Liability Event
occurs or is reasonably expected to occur, or (iv) any Borrower or Guarantor ceases a material
portion of its business operations as currently conducted;



          (j) Lender receives any indication or evidence that any Borrower or Guarantor may have
directly or indirectly been engaged in any type of activity which, in Lender’s judgment, is likely
to result in forfeiture of any property to any Governmental Authority which shall have continued
unremedied for a period of ten (10) calendar days after written notice from Lender (but no Advances
will be made before any such activity ceases);



          (k) an Event of Default occurs under any other Loan Document;



          (l) uninsured damage to, or loss, theft or destruction of, any portion of the Collateral
occurs that exceeds $100,000 in the aggregate;



          (m) any Borrower or Guarantor or any of their respective directors or senior officers is
criminally indicted or convicted under any law that could lead to a forfeiture of any Collateral;



44









 





          (n) the issuance of any process for levy, attachment or garnishment or execution upon or prior
to any judgment against any Borrower or Guarantor or any of their property or assets which is/are
not satisfied, stayed, vacated or discharged of record within thirty (30) calendar days of being
issued;



          (o) any Borrower or Guarantor does, or enters into or becomes a party to any agreement or
commitment to do, or cause to be done, any of the things described in this Article VIII or
otherwise prohibited by any Loan Document (subject to any cure periods set forth therein);



          (p) any default or event of default shall occur under (i) the MHR Subordinated Note, the Hills
Settlement Agreement, the Bridge Loan Documents, the Preferred Stock Purchase Documents or any of
the documents, agreements and instruments evidencing, securing or otherwise relating to the MHR
Subordinated Debt, the Hills Settlement Agreement, the Bridge Loan Documents or the Preferred Stock
Purchase, provided such default or event of default is not cured within any applicable cure
periods;



          (q) the Merger shall be consummated without the satisfaction of the conditions set forth in
Section 4.2 or the Voluntary Series A Conversion shall be consummated without the
satisfaction of the conditions set forth in Section 4.3; or



          (r) Borrower or any Guarantor or other party thereto other than Lender shall be in violation,
breach or default of, or shall fail to perform, observe or comply with any covenant, obligation or
agreement set forth in, any document governing the relations between any Borrower with any
Affiliate and such violation, breach, default or failure shall not be cured within the applicable
period set forth in that document;



then, and in any such event, notwithstanding any other provision of any Loan Document, Lender may,
without notice or demand, do any of the following: (i) terminate its obligations to make Advances
hereunder, whereupon the same shall immediately terminate and (ii) declare all or any of the Loans,
all interest thereon and all other Obligations to be due and payable immediately (except in the
case of an Event of Default under Section 8.1(d), (g), (h) or
(i)(iii), in which event all of the foregoing shall automatically and without further act
by Lender be due and payable, provided that, with respect to non-material breaches or
violations that constitute Events of Default under clause (ii) of Section 8.1(d), there
shall be a three (3) Business Day cure period (but no Advances will be made during any such cure
period) commencing from the earlier of (A) Receipt by the applicable Person of written notice of
such breach or violation or of any event, fact or circumstance constituting or resulting in any of
the foregoing, and (B) the time at which such Person or any authorized officer thereof knew or
became aware, or should have known or been aware, of such breach or violation and resulting Event
of Default or of any event,
fact or circumstance constituting or resulting in any of the foregoing), in each case without
presentment, demand, protest or further notice of any kind, all of which are hereby expressly
waived by Borrower.



45









 








IX. RIGHTS AND REMEDIES AFTER DEFAULT




     9.1 Rights and Remedies



     (a) In addition to the acceleration provisions set forth in Article VIII above, upon
the occurrence and continuation of an Event of Default, Lender shall have the right to exercise any
and all rights, options and remedies provided for in the Loan Documents, under the UCC or at law or
in equity, including, without limitation, the right to (i) apply any property of any Borrower held
by Lender to reduce the Obligations, (ii) foreclose the Liens created under the Security Documents,
(iii) realize upon, take possession of and/or sell any Collateral or securities pledged (other than
Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court
order or compliance with applicable law) with or without judicial process (subject, in the case of
the Diabetes Customer Lists only, to the provisions of (x) subsection (b) of this Section 9.1 and
(y) Section 9.4), (iv) exercise all rights and powers with respect to the Collateral as any
Borrower, as applicable, might exercise (other than with respect to Collateral consisting of
Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court order or compliance with
applicable law), (v) collect and send notices regarding the Collateral (other than with respect to
Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account Debtors absent a court
order or compliance with applicable law), with or without judicial process, (vi) by its own means
or with judicial assistance, enter any premises at which Collateral and/or pledged securities are
located, or render any of the foregoing unusable or dispose of the Collateral and/or pledged
securities on such premises without any liability for rent, storage, utilities, or other sums, and
no Borrower shall resist or interfere with such action, (vii) at Borrower’s expense, require that
all or any part of the Collateral be assembled and made available to Lender at any place designated
by Lender, (viii) reduce or otherwise change the Facility Cap, (ix) relinquish or abandon any
Collateral or securities pledged or any Lien thereon and/or (x) continue to charge all interest,
fees and other amounts provided under this Agreement on the Minimum Balance regardless of whether
Advances are made or outstanding. Notwithstanding any provision of any Loan Document, Lender shall
have the right, at any time that Borrower fails to do so, and from time to time, without prior
notice, to: (i) obtain insurance covering any of the Collateral to the extent required hereunder or
Lender to the extent required under Landlord Waiver and Consent or Warehouse Waiver and Consent;
(ii) pay for the performance of any of Obligations; (iii) discharge taxes or Liens on any of the
Collateral that are in violation of any Loan document unless Borrower is in good faith with due
diligence by appropriate proceedings contesting those items; and (iv) pay for the maintenance and
preservation of the Collateral, including the payment of rent, warehouse fees or other per diem
charges if required under any Landlord Waiver and Consent or Warehouse Waiver and Consent. Such
expenses and advances shall be added to the Obligations until reimbursed to Lender and shall be
secured by the Collateral, and such payments by Lender shall not be construed as a waiver by Lender
of any Event of Default or any other rights or remedies of Lender.



     (b) Borrower agrees that notice received by it at least ten (10) calendar days before the time
of any intended public sale, or the time after which any private sale or other disposition of
Collateral (fifteen (15) calendar days in the case of any intended public sale, or the time after
which any private sale or other disposition of the Diabetes Customer List) is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law,
any perishable Collateral which threatens to speedily decline in value or which is sold on a
recognized market may be sold immediately by Lender without prior notice to Borrower. At any sale
or disposition of Collateral or securities pledged, Lender may (to the extent permitted by
applicable law) purchase all or any part thereof free from any right of redemption by any Borrower which right is hereby waived and released.
Borrower covenants and agrees not to, and not to permit or cause any of its Subsidiaries to,
interfere with or impose any obstacle to Lender’s exercise of its rights and remedies with respect
to the Collateral. Lender, in dealing with or disposing of the Collateral or any part thereof,
shall not be required to give priority or preference to any item of Collateral or otherwise to
marshal assets or to take possession or sell any Collateral with judicial process.



     9.2 Application of Proceeds



     In addition to any other rights, options and remedies Lender has under the Loan Documents, the
UCC, at law or in equity, all dividends, interest, rents, issues, profits, fees, revenues, income
and other proceeds collected or received from collecting, holding, managing, renting, selling, or
otherwise disposing of all or any part of the Collateral or any proceeds thereof upon exercise of
its remedies hereunder shall be applied in the following order of priority: (i) first, to
the payment of all costs and expenses of such collection, storage, lease, holding, operation,
management, sale, disposition or delivery and of conducting Borrower’s business and of maintenance,
repairs, replacements, alterations, additions and improvements of or to the Collateral, and to the
payment of all sums which Lender may be required or may elect to pay, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part thereof, and all other
payments that Lender may be required or authorized to make under any provision of this Agreement
(including, without limitation, in each such case, in-house documentation and diligence fees and
legal expenses, search, audit, recording, professional and filing fees and expenses and reasonable
attorneys’ fees and all expenses, liabilities and advances made or incurred in connection
therewith); (ii) second, to the payment of all Obligations as provided herein; (iii)
third, to the satisfaction of Indebtedness secured by any subordinate security interest of
record in the Collateral if written notification of demand therefor is received before distribution
of the proceeds is completed, provided, that, if requested by Lender, the holder of a
subordinate security interest shall furnish reasonable proof of its interest, and unless it does
so, Lender need not address its claims; and (iv) fourth, to the payment of any surplus then
remaining to Borrower, unless otherwise provided by law or directed by a court of competent
jurisdiction, provided that Borrower shall be liable for any deficiency if such proceeds
are insufficient to satisfy the Obligations or any of the other items referred to in this section.



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     9.3 Rights of Lender to Appoint Receiver



     Without limiting and in addition to any other rights, options and remedies Lender has under
the Loan Documents, the UCC, at law or in equity, upon the occurrence and continuation of an Event
of Default, Lender shall have the right to apply for and have a receiver appointed by a court of
competent jurisdiction in any action taken by Lender to enforce its rights and remedies in order to
manage, protect and preserve the Collateral and continue the operation of the business of Borrower
and to collect all revenues and profits thereof and apply the same to the payment of all expenses
and other charges of such receivership including the compensation of the receiver and to the
payments as aforesaid until a sale or other disposition of such Collateral shall be finally made
and consummated.



     9.4 Rights of Lender to Certain Assets of Borrower



     Without limiting and in addition to any other rights, options and remedies Lender has under
the Loan Documents, the UCC, at law or in equity, upon (i) the termination by Lender of its
obligations to make Advances under Section 8.1, (ii) the declaration by Lender that all or any of
the Notes, all interest thereon and all other Obligations are due and payable immediately (or, in
the case of an Event of Default under Section 8.1(d), (g), (h) or
(i)(iii), the automatic acceleration of the foregoing as provided in Section 8.1 above, and (iii) the failure of Lender to pay all Obligations so due and payable (or post
cash collateral acceptable to Lender in an amount equal to 105% of the Obligations) within a ten
(10) Business Days period commencing from the earlier of (A) Receipt by Borrower of written notice
of such termination and acceleration of the Loans, and (B) the time at which any authorized officer
of Borrower knew or became aware of such termination or acceleration, in each case without
presentment, demand, protest or further notice of any kind, all of which are hereby expressly
waived by Borrower, Lender may in connection with a Borrower Sale (whether by public sale, private
sale or other disposition), without notice or demand, instruct the Escrow Agent to immediately
deliver to Lender (or any investment banker or other consultant retained by Lender to conduct a
Borrower Sale and who has executed a business associate agreement substantially in the form of
Exhibit D attached hereto) the Diabetes Customer List then in the possession of the Escrow
Agent in order to permit Lender (or such investment banker or consultant) to perform due diligence
for the Borrower Sale. In addition, if Lender has not previously obtained possession of the
Diabetes Customer List from the Escrow Agent under this Section 9.4, Borrower acknowledges and
agrees that Lender may assign its rights under the Escrow Agreement (including, without limitation,
the right to obtain possession of the Diabetes Customer List) to a Person for the sole purpose of
consummating any Borrower Sale. The rights of Lender under this Section 9.4 shall be in addition
to, and without limitation upon, all rights of Lender to, and liens and security interests
possessed by Lender in, any other customer lists and other books, records and other information
concerning Borrower’s diabetes business then in the possession of Borrower or which may be in
transit to the Escrow Agent. The ten (10) Business Day period set forth in this Section 9.4 is not
a cure period and shall not restrict the right of Lender to exercise any of its other rights and
remedies under this Agreement, the other Loan Documents or applicable law against Borrower, any
Guarantor or any other Collateral during such period. For purposes of this Section 9.4, “Borrower
Sale” shall mean the sale, transfer, merger or consolidation of all or a part of the assets of
Borrower to or with another “covered entity” under HIPAA or an entity that following such sale,
transfer, merger or consolidation will become a “covered entity” under HIPAA or due diligence with
respect to such sale, transfer, merger or consolidation.



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     9.5 Rights and Remedies not Exclusive



     Lender shall have the right in its sole discretion to determine which rights, Liens and/or
remedies Lender may at any time pursue, relinquish, subordinate or modify, and such determination
will not in any way modify or affect any of Lender’s rights, Liens or remedies under any Loan
Document, applicable law or equity. The enumeration of any rights and remedies in any Loan
Document is not intended to be exhaustive, and all rights and remedies of Lender described in any
Loan Document are cumulative and are not alternative to or exclusive of any other rights or
remedies which Lender otherwise may have. The partial or complete exercise of any right or remedy
shall not preclude any other further exercise of such or any other right or remedy.



X. WAIVERS AND JUDICIAL PROCEEDINGS




     10.1 Waivers



     Except as expressly provided for herein, Borrower hereby waives setoff, counterclaim, demand,
presentment, protest, all defenses with respect to any and all instruments and all notices and
demands of any description, and the pleading of any statute of limitations as a defense to any
demand under any Loan Document. Borrower hereby waives any and all defenses and counterclaims it
may have or could interpose in any action or procedure brought by Lender to obtain an order of
court recognizing the assignment of, or Lien of Lender in and to, any Collateral, whether or not
payable by a
Medicaid/Medicare Account Debtor. With respect to any action hereunder, Lender conclusively
may rely upon, and shall incur no liability to Borrower in acting upon, any request or other
communication that Lender reasonably believes to have been given or made by a person authorized on
Borrower’s behalf, whether or not such person is listed on the incumbency certificate delivered
pursuant to Section 4.1 hereof. In each such case, Borrower hereby waives the right to
dispute Lender’s action based upon such request or other communication, absent manifest error.



     10.2 Delay; No Waiver of Defaults



     No course of action or dealing, renewal, release or extension of any provision of any Loan
Document, or single or partial exercise of any such provision, or delay, failure or omission on
Lender’s part in enforcing any such provision shall affect the liability of any Borrower or
Guarantor or operate as a waiver of such provision or affect the liability of any Borrower or
Guarantor or preclude any other or further exercise of such provision. No waiver by any party to
any Loan Document of any one or more defaults by any other party in the performance of any of the
provisions of any Loan Document shall operate or be construed as a waiver of any future default,
whether of a like or different nature, and each such waiver shall be limited solely to the express
terms and provisions of such waiver. Notwithstanding any other provision of any Loan Document, by
executing this Agreement and/or by making Advances on or after the Closing Date, Lender does not
waive any breach of any representation or warranty under any Loan Document, and all of Lender’s
claims and rights resulting from any such breach or misrepresentation are specifically reserved.



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     10.3 Jury Waiver



     EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM
OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.



     10.4 Cooperation in Discovery and Litigation



     In any litigation, arbitration or other dispute resolution proceeding relating to any Loan
Document, Borrower waives any and all defenses, objections and counterclaims it may have or could
interpose with respect to (i) any of its directors, officers, employees or agents being deemed to
be employees or managing agents of Borrower for purposes of all applicable law or court rules
regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or
otherwise), (ii) Lender’s counsel examining any such individuals as if under cross-examination and
using any discovery deposition of any of them as if it were an evidence deposition, and/or (iii)
using all commercially reasonable efforts to produce in any such dispute resolution proceeding, at
the time and in the manner requested by Lender, all Persons, documents (whether in tangible,
electronic or other form) and/or other things under its control and relating to the dispute.



XI. EFFECTIVE DATE AND TERMINATION




     11.1 Termination and Effective Date Thereof



     (a) Subject to Lender’s right to terminate and cease making Advances upon or after any Event
of Default, this Agreement shall continue in full force and effect until the full performance and
indefeasible payment in cash of all Obligations, unless terminated sooner as provided in this
Section 11.1. Borrower may terminate this Agreement at any time upon not less than thirty
(30) calendar days’ prior written notice to Lender and upon full performance and indefeasible
payment in full in cash of all Obligations on or prior to such 30th calendar day after
Receipt by Lender of such written notice; provided, that, if Lender has not otherwise exercised its
option to extend the Term under Section 2.2, then Lender may exercise such option during
such thirty (30) day period solely for purposes of the calculation of Yield Maintenance. All of
the Obligations shall be immediately due and payable upon any such termination on the termination
date stated in any notice of termination (the “Termination Date”); provided that,
notwithstanding any other provision of any Loan Document, the Termination Date shall be effective
no earlier than the first Business Day of the month following the expiration of the thirty (30)
calendar days’ prior written notice period. Notwithstanding any other provision of any Loan
Document, no termination of this Agreement shall affect Lender’s rights or any of the Obligations
existing as of the effective date of such termination, and the provisions of the Loan Documents
shall continue to be fully operative until the Obligations have been fully performed and
indefeasibly paid in cash in full. The Liens granted to Lender under the Security Documents and
the financing statements filed pursuant thereto and the rights and powers of Lender shall continue
in full force and effect notwithstanding the fact that Borrower’s borrowings hereunder may from
time to time be in a zero or credit position until all of the Obligations have been fully performed
and indefeasibly paid in full in cash.



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     (b) If (i) Borrower terminates the Revolving Facility under this Section 11.1, (ii) Borrower
voluntarily or involuntarily repays the Obligations (other than reductions to zero of the
outstanding balance of the Revolving Facility resulting from the ordinary course operation of the
provisions of Section 2.4), whether by virtue of Lender’s exercising its right of set off or
otherwise; or (iii) the Obligations are accelerated by Lender (each of the events described in (i),
(ii) and (iii) above being hereinafter referred to as a “Revolver Termination"), then at the
effective date of any such Revolver Termination, Borrower shall pay Lender (in addition to the then
outstanding principal, accrued interest and other Obligations relating to the Revolving Facility
pursuant to the terms of this Agreement and any other Loan Document), to compensate Lender for the
loss of bargain and not as a penalty, an amount equal to Yield Maintenance.



     11.2 Survival



     All obligations, covenants, agreements, representations, warranties, waivers and indemnities
made by Borrower in any Loan Document shall survive the execution and delivery of the Loan
Documents, the Closing, the making of the Advances and any termination of this Agreement until all
Obligations are fully performed and indefeasibly paid in full in cash. The obligations and
provisions of Sections 3.5, 3.6, 6.13, 10.1, 10.3, 11.1, 11.2, 12.4, 12.7 and 12.10 shall
survive termination of the Loan Documents and any payment, in full or in part, of the Obligations.



XII. MISCELLANEOUS




     12.1 Governing Law; Jurisdiction; Service of Process; Venue



     The Loan Documents shall be governed by and construed in accordance with the internal laws of
the State of Maryland without giving effect to its choice of law provisions. Any judicial
proceeding against Borrower with respect to the Obligations, any Loan Document or any related
agreement may be brought in any federal or state court of competent jurisdiction located in the
State of Maryland. By execution and delivery of each Loan Document to which it is a party,
Borrower (i) accepts the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees
to be bound by any judgment rendered thereby, (ii) waives personal service of process, (iii) agrees
that service of process upon it may be made by certified or registered mail, return receipt
requested, pursuant to Section 12.5 hereof, (iv) waives any objection to jurisdiction and
venue of any action instituted hereunder and agrees not to assert any defense based on lack of
jurisdiction, venue or convenience, and (v) agrees that this loan was made in Maryland, that Lender
has accepted in Maryland Loan Documents executed by Borrower and has disbursed Advances under the
Loan Documents in Maryland. Nothing shall affect the right of Lender to serve process in any
manner permitted by law or shall limit the right of Lender to bring proceedings against Borrower in
the courts of any other jurisdiction having jurisdiction. Any judicial proceedings against Lender
involving, directly or indirectly, the Obligations, any Loan Document or any related agreement
shall be brought only in a federal or state court located in the State of Maryland. All parties
acknowledge that they participated in the negotiation and drafting of this Agreement and that,
accordingly, no party shall move or petition a court construing this Agreement to construe it more
stringently against one party than against any other.



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     12.2 Successors and Assigns; Participations; New Lenders



     (a) THE LOAN DOCUMENTS SHALL INURE TO THE BENEFIT OF LENDER, TRANSFEREES AND ALL FUTURE
HOLDERS OF ANY NOTE, THE OBLIGATIONS AND/OR ANY OF THE COLLATERAL, AND EACH OF THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS. EACH LOAN DOCUMENT SHALL BE BINDING UPON THE PERSONS’ OTHER THAN LENDER
THAT ARE PARTIES THERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, AND NO SUCH PERSON MAY
ASSIGN, DELEGATE OR TRANSFER ANY LOAN DOCUMENT OR ANY OF ITS RIGHTS OR OBLIGATIONS THEREUNDER
WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER. NO RIGHTS ARE INTENDED TO BE CREATED UNDER ANY LOAN
DOCUMENT FOR THE BENEFIT OF ANY THIRD PARTY DONEE, CREDITOR OR INCIDENTAL BENEFICIARY OF ANY
BORROWER OR GUARANTOR. NOTHING CONTAINED IN ANY LOAN DOCUMENT SHALL BE CONSTRUED AS A DELEGATION
TO LENDER OF ANY OTHER PERSON’S DUTY OF PERFORMANCE. BORROWER ACKNOWLEDGES AND AGREES THAT LENDER
AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND RESTATE ANY NOTE, AND/OR (II) SELL, ASSIGN OR
GRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
LOAN DOCUMENT, NOTE, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS (EACH SUCH TRANSFEREE,
ASSIGNEE OR PURCHASER, A “TRANSFEREE”). EACH TRANSFEREE SHALL HAVE ALL OF THE RIGHTS AND BENEFITS
WITH RESPECT TO THE OBLIGATIONS, NOTES, COLLATERAL AND/OR LOAN DOCUMENTS HELD BY IT AS FULLY AS IF
THE ORIGINAL HOLDER THEREOF, AND EITHER LENDER OR ANY TRANSFEREE MAY BE DESIGNATED AS THE SOLE
AGENT TO MANAGE THE TRANSACTIONS AND OBLIGATIONS CONTEMPLATED THEREIN; PROVIDED THAT,
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN ANY LOAN DOCUMENT,
BORROWER SHALL NOT BE OBLIGATED TO PAY UNDER THIS AGREEMENT TO ANY TRANSFEREE ANY SUM IN EXCESS OF
THE SUM WHICH BORROWER WOULD HAVE BEEN OBLIGATED TO PAY TO LENDER HAD SUCH PARTICIPATION NOT BEEN
EFFECTED. NOTWITHSTANDING ANY OTHER PROVISION OF ANY LOAN DOCUMENT, LENDER MAY DISCLOSE TO ANY
TRANSFEREE ALL INFORMATION, REPORTS, FINANCIAL STATEMENTS, CERTIFICATES AND DOCUMENTS OBTAINED
UNDER ANY PROVISION OF ANY LOAN DOCUMENT.



     (b) Lender may assign or pledge all or any portion of the Loans or Notes held by it to any
Federal Reserve Bank or the United States Treasury as collateral security to secure obligations of
Lender, including without limitation, any assignment or pledge pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal
Reserve Bank, provided, that any payment in respect of such assigned Loans or Notes made by
Borrower to or for the account of the assigning or pledging Lender in accordance with the terms of
this Agreement shall satisfy Borrowers’ obligations hereunder in respect to such assigned Loans or
Notes to the extent of such payment. No such assignment shall release the assigning Lender from
its obligations hereunder.



     12.3 Application of Payments



     To the extent that any payment made or received with respect to the Obligations is
subsequently invalidated, determined to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver, custodian or any other Person under any Debtor
Relief Law, common law or equitable cause or any other law, then the Obligations intended to be
satisfied by such payment shall be revived and shall continue as if such payment had not been
received by Lender. Any payments with respect to the Obligations received shall be credited and
applied in such manner and order as Lender shall decide in its sole discretion.



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     12.4 Indemnity



     Each Borrower jointly and severally shall indemnify Lender, its Affiliates and its and their
respective managers, members, officers, employees, Affiliates, agents, representatives, successors,
assigns, accountants and attorneys (collectively, the “Indemnified Persons”) from and against any
and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without limitation,
reasonable fees and disbursements of counsel and in-house documentation and diligence fees and
legal expenses) which may be imposed on, incurred by or asserted against any Indemnified Person
with respect to or arising out of, or in any litigation, proceeding or investigation instituted or
conducted by any Person with respect to any aspect of, or any transaction contemplated by or
referred to in, or any matter related to, any Loan Document or any agreement, document or
transaction contemplated thereby, whether or not such Indemnified Person is a party thereto, except
to the extent that any of the foregoing arises out of the gross negligence or willful misconduct of
such Indemnified Person. If any Indemnified Person uses in-house counsel for any purpose for which
any Borrower is responsible to pay or indemnify, each Borrower expressly agrees that its
indemnification obligations include reasonable charges for such work commensurate with the fees
that would otherwise be charged by outside legal counsel selected by such Indemnified Person in its
sole discretion for the work performed. Lender agrees to give Borrower reasonable notice of any
event of which Lender becomes aware for which indemnification may be required under this
Section 12.4, and Lender may elect (but is not obligated) to direct the defense thereof,
provided that the selection of counsel shall be subject to Borrower’s consent, which consent shall
not be unreasonably withheld or delayed. Any Indemnified Person may, in its reasonable discretion,
take such
actions as it deems necessary and appropriate to investigate, defend or settle any event or take
other remedial or corrective actions with respect thereto as may be necessary for the protection of
such Indemnified Person or the Collateral. Notwithstanding the foregoing, if any insurer agrees to
undertake the defense of an event (an “Insured Event”), Lender agrees not to exercise its right to
select counsel to defend the event if that would cause any Borrower’s insurer to deny coverage;
provided, however, that Lender reserves the right to retain counsel to represent
any Indemnified Person with respect to an Insured Event at its sole cost and expense. To the
extent that Lender obtains recovery from a third party other than an Indemnified Person of any of
the amounts that any Borrower has paid to Lender pursuant to the indemnity set forth in this
Section 12.4, then Lender shall promptly pay to such Borrower the amount of such recovery.



     12.5 Notice



     Any notice or request under any Loan Document shall be given to any party to this Agreement at
such party’s address set forth beneath its signature on the signature page to this Agreement, or at
such other address as such party may hereafter specify in a notice given in the manner required
under this Section 12.5. Any notice or request hereunder shall be given only by, and shall
be deemed to have been received upon (each, a “Receipt”): (i) registered or certified mail, return
receipt requested, on the date on which received as indicated in such return receipt, (ii) delivery
by a nationally recognized overnight courier, one (1) Business Day after deposit with such courier,
or (iii) facsimile transmission, in each case upon telephone or further electronic communication
from the recipient acknowledging receipt (whether automatic or manual from recipient), as
applicable. In the case of Borrower, any notice or request under this Section 12.5 shall
be effective upon the Receipt thereof by any one of the Persons designated to receive notices or
requests on the signature page to this Agreement.



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     12.6 Severability; Captions; Counterparts; Facsimile Signatures



     If any provision of any Loan Document is adjudicated to be invalid under applicable laws or
regulations, such provision shall be inapplicable to the extent of such invalidity without
affecting the validity or enforceability of the remainder of the Loan Documents which shall be
given effect so far as possible. The captions in the Loan Documents are intended for convenience
and reference only and shall not affect the meaning or interpretation of the Loan Documents. The
Loan Documents may be executed in one or more counterparts (which taken together, as applicable,
shall constitute one and the same instrument) and by facsimile transmission, which facsimile
signatures shall be considered original executed counterparts. Each party to this Agreement agrees
that it will be bound by its own facsimile signature and that it accepts the facsimile signature of
each other party.



     12.7 Expenses



     Borrower shall pay, whether or not the Closing occurs, all reasonable costs and expenses
incurred by Lender and/or its Affiliates, including, without limitation, documentation and
diligence fees and expenses, all search, audit, appraisal, recording, professional and filing fees
and expenses and all other reasonable out-of-pocket charges and expenses (including, without
limitation, UCC and judgment and tax lien searches and UCC filings and fees for post-Closing UCC
and judgment and tax lien searches and wire transfer fees and audit expenses), and reasonable
attorneys’ fees and expenses, (i) in any effort to enforce, protect or collect payment of any
Obligation or to enforce any Loan Document or any related agreement, document or instrument, (ii)
in connection with entering into, negotiating, preparing, reviewing and executing the Loan
Documents and/or any related agreements, documents or instruments, (iii) arising in any way out of
administration of the Obligations, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Lender’s Liens in any of the Collateral or
securities pledged under the Loan Documents, whether through judicial proceedings or otherwise, (v)
in defending or prosecuting any actions, claims or proceedings arising out of or relating to
Lender’s transactions with Borrower, (vi) in seeking, obtaining or receiving any advice with
respect to its rights and obligations under any Loan Document and any related agreement, document
or instrument, (vii) in connection with any modification, restatement, supplement, amendment,
waiver or extension of any Loan Document and/or any related agreement, document or instrument and
(viii) any of the foregoing items (i) through (vii) which were incurred pursuant to, and remain
unpaid under, the Second Restated Agreement. All of the foregoing shall be charged to Borrower’s
account and shall be part of the Obligations. If Lender or any of its Affiliates uses in-house
counsel for any purpose under any Loan Document for which Borrower is responsible to pay or
indemnify, Borrower expressly agrees that its Obligations include the allocable costs of such
in-house counsel. Without limiting the foregoing, Borrower shall pay all taxes (other than taxes
based upon or measured by Lender’s income or revenues or any personal property tax), if any, in
connection with the issuance of any Note and the filing and/or recording of any documents and/or
financing statements.



     12.8 Entire Agreement



     This Agreement and the other Loan Documents to which Borrower is a party constitute the entire
agreement between Borrower and Lender with respect to the subject matter hereof and thereof, and
supersede all prior agreements and understandings, if any, relating to the subject matter hereof or
thereof. Any promises, representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing signed by Borrower and Lender.
No provision of this Agreement may be changed, modified, amended, restated, waived, supplemented,
discharged, canceled or terminated orally or by any course of dealing or in any other manner other
than by an agreement in writing signed by Lender and Borrower. Each party hereto acknowledges that
it has been advised by counsel in connection with the negotiation and execution of this Agreement
and is not relying upon oral representations or statements inconsistent with the terms and
provisions hereof.



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     12.9 Lender Approvals



     Unless expressly provided herein to the contrary, any approval, consent, waiver or
satisfaction of Lender with respect to any matter that is subject of any Loan Document may be
granted or withheld by Lender in its sole and absolute discretion.



     12.10 Confidentiality and Publicity



     (a) Borrower agrees, and agrees to cause each of its Affiliates, (i) not to transmit or
disclose provisions of any Loan Document to any Person (other than to Borrower’s advisors and
officers on a need-to-know basis or as otherwise may be required by law, regulation or judicial
process) without Lender’s prior written consent, (ii) to inform all Persons of the confidential
nature of the Loan Documents and to direct them not to disclose the same to any other Person and to
require each of them to be bound by these provisions. Borrower agrees to submit to Lender and
Lender reserves the right to review and approve all materials that Borrower or any of their
Affiliates prepares that contain Lender’s name or describe or refer to any Loan Document, any of
the terms thereof or any of the transactions contemplated thereby. Borrower further agrees that
except as required by law, regulation or judicial process, including, without limitation, the
filing of this Agreement with the United States Securities and Exchange Commission, Borrower shall
not use Lender’s name, logo or other indicia germane to Lender without the prior consent of Lender,
which consent shall not be unreasonably withheld. Nothing
contained in any Loan Document is intended to permit or authorize Borrower or any of their
Affiliates to contract on behalf of Lender.



     (b) Borrower hereby agrees that Lender or any Affiliate of Lender may (i) disclose a general
description of transactions arising under the Loan Documents for advertising, marketing or other
similar purposes, (ii) use Borrower’s or any Guarantor’s name, logo or other indicia germane to
such party in connection with such advertising, marketing or other similar purposes and (iii)
disclose any and all information concerning the Loan Documents, as well as any information
regarding Credit Party and its operations, received by Lender in connection with the Loan Documents
to its lenders or funding or financing sources.



     12.11 Release of Lender



     Notwithstanding any other provision of any Loan Document, Borrower voluntarily, knowingly,
unconditionally and irrevocably, with specific and express intent, for and on behalf of itself,
its managers, members, directors, officers, employees, stockholders, Affiliates, agents,
representatives, accountants, attorneys, successors and assigns and their respective Affiliates
(collectively, the “Releasing Parties”), hereby fully and completely releases and forever
discharges the Indemnified Parties and any other Person or insurer which may be responsible or
liable for the acts or omissions of any of the Indemnified Parties, or who may be liable for the
injury or damage resulting therefrom (collectively, with the Indemnified Parties, the “Released
Parties”), of and from any and all actions, causes of action, damages, claims, obligations,
liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, matured or
unmatured, vested or contingent, that any of the Releasing Parties has against any of the Released
Parties as of the Closing Date. Borrower acknowledges that the foregoing release is a material
inducement to Lender’s decision to extend to Borrower the financial accommodations hereunder and
has been relied upon by Lender in agreeing to make the Advances.



54









 





     12.12 Agent



     Lender and its successors and assigns hereby (i) designate and appoint CapitalSource Finance
LLC, a Delaware limited liability company, and its successors and assigns (“CapitalSource”), to act
as agent for Lender and its successors and assigns under this Agreement and all other Loan
Documents, (ii) irrevocably authorize CapitalSource to take all actions on its behalf under the
provision of this Loan Agreement and all other Loan Documents, and (iii) to exercise all such
powers and rights, and to perform all such duties and obligations hereunder and thereunder.
CapitalSource, on behalf of Lender, shall hold all Collateral, payments of principal and interest,
fees, charges and collections received pursuant to this Agreement and all other Loan Documents.
Borrower acknowledges that Lender and its successors and assigns transfer and assign to
CapitalSource the right to act as Lender’s agent to enforce all rights and perform all obligations
of Lender contained herein and in all of the other Loan Documents. Borrower shall within ten (10)
Business Days after Lender’s reasonable request, take such further actions, obtain such consents
and approvals and duly execute and deliver such further agreements, amendments, assignments,
instructions or documents as Lender may request to evidence the appointment and designation of
CapitalSource as agent for Lender and other financial institutions from time to time party hereto
and to the other Loan Documents.



     12.13 Concerning Joint and Several Liability of the Borrowers



          (a) Each Borrower is accepting joint and several liability hereunder and under the other Loan
Documents in consideration of the financial accommodations to be provided by Lender under this
Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in consideration
of the undertakings of each other Borrower to accept joint and several liability for the
Obligations.



          (b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not
merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers,
with respect to the payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this Section 12.13), it being the intention of
the parties hereto that all the Obligations shall be the joint and several obligations of each
Borrower without preferences or distinction among them.



          (c) If and to the extent that any Borrower shall fail to make any payment with respect to any
of the Obligations as and when due or to perform any of the Obligations in accordance with the
terms thereof, then in each such event any other Borrower will make such payment with respect to,
or perform, such Obligation.



          (d) The Obligations of Borrower under the provisions of this Section 12.13 constitute
the full recourse Obligations of Borrower enforceable against each Borrower to the full extent of
its properties and assets, irrespective of the validity, regularity or enforceability of this
Agreement or the other Loan Documents or any other circumstance whatsoever as to any other
Borrower.



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          (e) Except as otherwise expressly provided herein, each Borrower hereby waives promptness,
diligence, presentment, demand, protest, notice of acceptance of its joint and several liability,
notice of any and all Advances under the Revolving Facility, notice of occurrence of any Default or
Event of Default (except to the extent notice is expressly required to be given pursuant to the
terms of this Agreement or any of the other Loan Documents), or of any demand for any payment under
this Agreement, notice of any action at any time taken or omitted by Lender or under or in respect
of any of the Obligations hereunder, any requirement of diligence and, generally, all demands,
notices and other formalities of every kind in connection with this Agreement and the other Loan
Documents. Each Borrower hereby waives all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to
require the marshaling of assets of the Borrowers and any other entity or Person primarily or
secondarily liable with respect to any of the Obligations, and all suretyship defenses generally.
Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time
for the payment, or place or manner for payment, compromise, refinancing, consolidation or renewals
of any of the Obligations hereunder, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by Lender at any time or times in respect of any default by
any Borrower in the performance or satisfaction of any term, covenant, condition or provision of
this Agreement and the other Loan Documents, any and all other indulgences whatsoever by Lender in
respect of any of the Obligations hereunder, and the taking, addition, substitution or release, in
whole or in part, at any time or times, of any security for any of such Obligations or the
addition, substitution or release, in whole or in part, of any Borrower or any other entity or
Person primarily or secondarily liable for any Obligation. Such Borrower further agrees that its
Obligations shall not be released or discharged, in whole or in part, or otherwise affected by the
adequacy of any rights which Lender may have against any collateral security or other means of
obtaining repayment of any of the Obligations, the impairment of any collateral security securing
the Obligations, including, without limitation, the failure to protect or preserve any rights which
Lender may have in such collateral security or the substitution, exchange, surrender, release, loss
or destruction of
any such collateral security, any other act or omission which might in any manner or to any
extent vary the risk of such Borrower, or otherwise operate as a release or discharge of such
Borrower, all of which may be done without notice to such Borrower; provided,
however, that the foregoing shall in no way be deemed to create commercially unreasonable
standards as to Lender’s duties as secured party under the Loan Documents (as such rights and
duties are set forth therein). If for any reason any Borrower has no legal existence or is under
no legal obligation to discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from any Borrower by reason of any other Borrower’s insolvency, bankruptcy or
reorganization or by other operation of law or for any reason, this Agreement and the other Loan
Documents to which it is a party shall nevertheless be binding on such Borrower to the same extent
as if such Borrower at all times had been the sole obligor on such Obligations. Without limiting
the generality of the foregoing, each Borrower (if more than one) assents to any other action or
delay in acting or failure to act on the part of Lender, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder which might, but for the provisions of this Section
12.13, afford grounds for terminating, discharging or relieving such Borrower, in whole or in
part, from any of its obligations under this Section 12.13, it being the intention of
Borrowers that, so long as any of the Obligations hereunder remain unsatisfied, the obligations of
such Borrower under this Section 12.13 shall not be discharged except by performance and
then only to the extent of such performance. The Obligations of each Borrower under this
Section 12.13 shall not be diminished or rendered unenforceable by any winding up,
reorganization, amalgamation, arrangement, liquidation, reconstruction or similar proceeding with
respect to any reconstruction or similar proceeding with respect to any other Borrower or Lender.
The joint and several liability of each Borrower hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name,
ownership, membership, constitution or place of formation of any Borrower or Lender. Each Borrower
acknowledges and confirms that it has established its own adequate means of obtaining from each
other Borrower on a continuing basis all information desired by such Borrower concerning the
financial condition of each other Borrower and that each such Borrower will look to each other
Borrower and not to Lender for such Borrower to keep adequately informed of changes in each of the
other Borrower’s respective financial conditions.



56









 





          (f) Each Borrower acknowledges that all or any portion of the Obligations may now or hereafter
be secured by a Lien or Liens upon real property evidenced by certain documents including deeds of
trust and assignments of rents. Lender may, pursuant to the terms of said real property security
documents and applicable law, foreclose under all or any portion of one or more of said Liens by
means of judicial or nonjudicial sale or sales. Each Borrower agrees that Lender may exercise
whatever rights and remedies it may have with respect to said real property security, all without
affecting the liability of such Borrower hereunder, except to the extent Lender realizes payment by
such action or proceeding. No election to proceed in one form of action or against any party, or
on any obligation shall constitute a waiver of Lender’s right to proceed in any other form of
action or against such Borrower or any other Borrower or other Person, or diminish the liability of
such Borrower, or affect the right of Lender to proceed against such Borrower for any deficiency,
except to the extent Lender realizes payment by such action, notwithstanding the effect of such
action upon such Borrower’s rights of subrogation, reimbursement or indemnity, if any, against any
other Borrower or any other Person.



          (g) The provisions of this Section 12.13 are made for the benefit of Lender and their
respective permitted successors and assigns, and may be enforced by it or them from time to time
against any or all of the Borrowers as often as occasion therefore may arise and without
requirement on the part of Lender or such successor or assign first to marshal any of its or their
claims or to exercise any of its or
their rights against any of the other Borrowers or to exhaust any remedies available to it or
them against any of the other Borrowers or to resort to any other source or means of obtaining
payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this
Section 12.13 shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in
respect of any of the Obligations, is rescinded or must otherwise be restored or returned by Lender
upon the insolvency, bankruptcy or reorganization of any of the Borrowers, or otherwise, the
provisions of this Section 12.13 will forthwith be reinstated in effect, as though such
payment had not been made.



          (h) Each Borrower hereby agrees that it will not enforce any of its rights of reimbursement,
contribution, subrogation or the like against the other Borrowers with respect to any liability
incurred by it hereunder or under any of the other Loan Documents, any payments made by it to
Lender with respect to any of the Obligations or any collateral security therefore until such time
as all of the Obligations have been Paid in Full. Any claim which any Borrower may have against
any other Borrower with respect to any payments to Lender hereunder or under any other Loan
Documents are hereby expressly made subordinate and junior in right of payment, without limitation
as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in
full of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceeding under the laws of any jurisdiction relating to any
Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be
paid in full before any payment or distribution of any character, whether in cash, securities or
other property, shall be made to any other Borrower therefor.



          (i) Each Borrower hereby agrees that the payment of any amounts due with respect to the
indebtedness owing by any Borrower to any Borrower is hereby subordinated to the prior payment in
full in cash of the Obligations. Each Borrower hereby agrees that after the occurrence and during
the continuance of any Default or Event of Default, such Borrower will not demand, sue for or
otherwise attempt to collect any indebtedness of any other Borrower owing to such Borrower until
the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence,
such Borrower shall collect, enforce or receive any amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received by such Borrower as trustee for Lender and be
paid over to Lender to be applied to repay the Obligations.



57









 





     12.14 Agreement Controls



     In the event of any inconsistency between this Agreement and any of the other Loan Documents,
the terms of this Agreement shall control.



     12.15 Amendment and Restatement



     On the Closing Date, the Third Restated Credit Agreement shall be amended and restated in its
entirety by this Agreement and (i) all references to the Third Restated Credit Agreement in any
Loan Document other than this Agreement (including in any amendment, waiver or consent) shall be
deemed to refer to the Third Restated Credit Agreement as amended and restated hereby, (ii) all
references to any section (or subsection) of the Third Restated Credit Agreement in any Loan
Document (but not herein) shall be amended to be, mutatis mutandis, references to the corresponding
provisions of this Agreement and (iii) except as the context otherwise provides, all references to
this Agreement herein (including for purposes of indemnification and reimbursement of fees) shall
be deemed to be reference to the Third Restated Credit Agreement as amended and restated hereby.
This Agreement is not intended to constitute, and does not constitute, a novation of the
obligations and liabilities under the Third Restated
Credit Agreement (including the Term Loan and the Existing Advances it being agreed that the
Term Loan and the Existing Advances are being continued under this Agreement) or to evidence
payment of all or any portion of such obligations and liabilities.



     On and after the Closing Date, (i) the Third Restated Credit Agreement shall be of no further
force and effect except as amended and restated hereby and except to evidence (1) the incurrence by
any Credit Party of the “Obligations” under and as defined therein (whether or not such
“Obligations” are contingent as of the Closing Date), (2) the representations and warranties made
by any Credit Party prior to the Closing Date, and (3) any action or omission performed or required
to be performed pursuant to such Third Restated Credit Agreement prior to the Closing Date
(including any failure, prior to the Closing Date, to comply with the covenants contained in such
Third Restated Credit Agreement), and (ii) the terms and conditions of this Agreement and Lenders’
rights and remedies under the Loan Documents, shall apply to all Obligations incurred under the
Third Restated Credit Agreement.



     Except as expressly provided in any Loan Documents, this Agreement (x) shall not cure any
breach of the Third Restated Credit Agreement or any “Default” or “Event of Default” thereunder
existing prior to the date hereof and (y) is limited as written and is not a consent to any other
modification of any term or condition of any Loan Document, each of which shall remain in full
force and effect.



     Each of the Credit Parties reaffirms the Liens granted pursuant to the Loan Documents (as
applicable) to Lender, which Liens shall continue in full force and effect during the term of this
Agreement and any renewals or extensions hereof and shall continue to secure the Obligations.



     12.16 Patriot Act



     Lender hereby notifies Borrower that pursuant to the requirements of the Patriot Act, it may
be required to obtain, verify and record information that identifies Borrower, which information
includes the name and address of Borrower and other information that will allow Lender to identify
Borrower in accordance with the Patriot Act.



58









 





     12.17 Administrative Borrower



     Each Credit Party hereby irrevocably appoints NationsHealth (“Administrative Borrower”) as its
agent to act as specified in the Loan Documents and Administrative Borrower hereby accepts such
appointment. Each Credit Party hereby irrevocably authorizes and directs Administrative Borrower
to take on its behalf all actions required of such Person under the Loan Documents, and to exercise
all powers and to perform all duties of such Person thereunder, including, without limitation: (i)
to submit and receive all certificates, notices, elections and communications and (ii) to receive
and disburse the proceeds of Loans. Any of the foregoing taken or received by Administrative
Borrower on behalf of any Credit Party shall be deemed for all purposes to have been taken or
received by such Credit Party and shall be binding on such Person to the same extent as if directly
taken or received by such Credit Party. Notwithstanding anything to the contrary contained herein,
Lender may at any time elect to disburse the proceeds of Loans directly to the accounts of any
Borrower.



[INTENTIONALLY LEFT BLANK — SIGNATURE PAGE FOLLOWS]




59









 





[Signature Page to Fourth Amended and Restated Revolving Credit,

Term Loan and Security Agreement]




     IN WITNESS WHEREOF, each of the parties has duly executed this Fourth Amended and Restated
Revolving Credit, Term Loan and Security Agreement as of the date first written above.



	 	 	 	 	 
	 	UNITED STATES PHARMACEUTICAL
GROUP, L.L.C. d/b/a NATIONSHEALTH

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Its CEO: 	 
	 
	 	NATIONSHEALTH HOLDINGS, L.L.C.

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Its: CEO 	 
	 
	 	NATIONSHEALTH, INC.

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Its: CEO 	 
	 
	 	DIABETES CARE & EDUCATION, INC.

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Its: CEO 	 
	 
	 	NATIONAL PHARMACEUTICALS AND
MEDICAL
PRODUCTS (USA),
LLC

 	 
	 	By:  	/s/ Glenn Parker
 	 
	 	 	Name:  	Glenn Parker 	 
	 	 	Its: CEO 	 
	 
	 	Address for Notices:

13630 N.W. 8th Street

Suite 210

Sunrise, FL 33325

Attention: Tim Fairbanks

Telephone: (954) 903-5018

FAX: (954) 903-5005

 	 
	 	 	 
	 	 	 
	 	 	 
	 




60









 








[Signature Page to Fourth Amended and Restated Revolving Credit,

Term Loan and Security Agreement]




	 	 	 	 	 
	 	With a copy to:

13630 N.W. 8th Street

Suite 210

Sunrise, FL 33325

Attention: Joshua Weingard, Esq.

Telephone: (954) 903-5840

FAX: (954) 846-8063

 	 
	 	 	 
	 	 	 
	 	 	 
	 
	 	CAPITALSOURCE FINANCE LLC AS AGENT

 	 
	 	By:  	/s/ Natasha R. Luddington
 	 
	 	 	Name:  	Natasha R. Luddington 	 
	 	 	Its: Authorized Signatory	 
	 
	 	Address for Notices:

CapitalSource Finance LLC

4445 Willard Avenue, 12th Floor

Chevy Chase, MD 20815

Attention: Healthcare Finance Group, Portfolio Manager

Telephone: (301) 841-2700

FAX: (301) 841-2340

 	 
	 	 	 
	 	 	 
	 	 	 
	 




 61