CFHS Lease


    
      

    


    Exhibit
      10.1

     

     

    LEASE
      AGREEMENT

     

    This
      LEASE AGREEMENT (this “Agreement”) is made as of November 19, 2004, by and among
      CFHS Holdings, Inc., a Delaware corporation (“Lessee”), CFHS Equipment Holdings
      Trust, a Delaware statutory trust (“Trust”) and CFHS Leasing, LLC, a Delaware
limited
      liability company (“LLC”) (Trust and LLC are individually referred to herein as
“Lessor”
      and
      collectively as “Lessors”). This Agreement is entered into pursuant to that
      certain Sale and Leaseback Agreement dated as of the date hereof, by and among
      Lessors and Lessee (the “Sale and Leaseback Agreement”). The equipment listed on
      Exhibit A of the Sale and Leaseback Agreement, together with all present and
      future additions, parts, accessories, attachments, substitutions, repairs,
      improvements, and replacements thereof or thereto shall be referred to as
“Equipment” and Exhibit A of the Sale and Leaseback Agreement shall be referred
      to herein as the “Schedule” (the Lease Agreement, together with the Schedule
      hereinafter referred to as the “Lease”). Except as contemplated herein, Lessors
      have no obligation to enter into any additional leases with, or extend any
      future financing to, Lessee.

     

    1.  
      LEASE.
      Subject to, and upon all of the terms and conditions of, this Agreement
and
      the
      Schedule, Lessors hereby agree to lease to Lessee and Lessee hereby agrees
      to
      lease from
      Lessors
      the Equipment for the Term (as defined in Paragraph
      2
      below)
      thereof. All rights of Lessors hereunder (including, but not limited to, the
      right to give and receive notices and to exercise their rights upon an Event
      of
      Default) shall be governed by that certain Tenants-in-Common Agreement dated
      as
      of the date hereof, by and among Lessors and Lessee (the “TIC Agreement,” the
      TIC Agreement, together with the Lease and the Sale and Leaseback Agreement,
      shall hereinafter be referred to as the “Lease Documents”).

     

    2.  
      TERM.
      The Lease shall be effective and the term of the Lease (“Term”) shall commence
      on the date Lessors make the initial purchase of Equipment under the Sale and
      Leaseback Agreement (the “Lease Commencement Date”) and, unless sooner
      terminated (as hereinafter provided), shall expire on the date two years from
      the date of this Agreement (the “Initial Term”). So long as no Event of Default
      or event which, with the giving of notice, the passage of time, or both, would
      constitute an Event of Default, shall have occurred and be continuing, Lessee
      shall have the right to exercise up to three one-year renewal options, subject
      to the provisions of this Paragraph
      2
      (the
      first renewal option, referred to herein as the “First Renewal,” the second
      renewal option, referred to herein as the “Second Renewal” and the third renewal
      option, referred to herein as the “Third Renewal”). Lessee shall exercise the
      First Renewal by sending notice to Lessors of Lessee’s intention to extend the
      Term for an additional year (the “First Renewal Term”) at least thirty (30) day
      prior to the expiration of the Initial Term. Lessee shall exercise the Second
      Renewal (if Lessee exercised the First Renewal) by sending notice to Lessors
      of
      Lessee’s intention to extend the Term for an additional year (the “Second
      Renewal Term”) at least thirty (30) days prior to the expiration of the First
      Renewal Term. Lessee shall exercise the Third Renewal (if Lessee exercised
      the
      First Renewal and the Second Renewal and only if Lessors send the Lessors
      Extension Notice to Lessee, as defined in the next sentence, to Lessee) by
      sending notice to Lessors of Lessee’s intention to extend the Term for an
      additional year (the “Third Renewal Term”) at least thirty (30) days prior to
      the expiration of the Second Renewal Term. If Lessee exercises the First Renewal
      and the Second Renewal, the Term shall expire at the end of the Second Renewal
      Term (without regard to whether Lessee attempts to
      exercise the Third Renewal) unless Lessors send notice to Lessee (the “Lessors
      Extension Notice”) at least forty-five (45) days prior to the expiration of the
      Second Renewal Term of Lessors’ intention to permit Lessee to exercise the Third
      Renewal. Obligations due to be performed by Lessee during the Term shall
      continue until they have been performed in full.

     

     

    
      
        
          


        

        
        

      

      
        -1-

        
          

        

      

      
        
        

        
        

      

    



     

     

    3.  
      RENT.
      Lessee shall pay Lessors rent for the use of the Equipment pursuant to the
      terms
      of this Paragraph
      3
      (“Rent”). Rent shall accrue during the Initial Term, and Lessee shall
pay
      Lessors Rent attributable to the Initial Term at the expiration of the Term
      (in
      connection with
      Lessee’s
      payment under its purchase obligation pursuant to Paragraph
      7
      below),
      subject to Lessee’s right to pay Rent currently as it accrues. Lessee shall pay
      Rent to Lessors on a quarterly basis during each of the First Renewal Term,
      the
      Second Renewal Term and the Third Renewal Term, in each case if Lessee exercises
      the applicable renewal option. Rent during the Initial Term shall be equal
      to an
      annual rate of twelve percent (12%) of the Purchase Price (as defined in the
      Sale and Leaseback Agreement, taking into account the dates on which each
      installment of the Purchase Price is actually paid to Lessee), compounded
      quarterly. The Rent during the First Renewal Term shall be equal to an annual
      rate of thirteen percent (13%) of the Purchase Price (compounded quarterly
      if
      Lessee fails to pay Rent currently as required by this Paragraph
      3).
      Rent
      during the Second Renewal Term shall be equal to an annual rate of fourteen
      percent (14%) of the Purchase Price (compounded quarterly if Lessee fails to
      pay
      Rent currently as required by this Paragraph
      3).
      Rent
      during the Third Renewal Term shall be equal to an annual rate of fifteen
      percent (15%) of the Purchase Price (compounded quarterly if Lessee fails to
      pay
      Rent currently as required by this Paragraph
      3).
      If any
      Rent or other amount payable by Lessee is not paid within five days after the
      day on which it becomes payable, Lessee will pay on demand, as a late charge,
      an
      amount equal to 5% of such unpaid Rent or other amount but only to the extent
      permitted by applicable law. All payments provided for herein shall be payable
      to Lessors at the address specified in Paragraph
      23
      below,
      or at any other place designated by Lessors. For purposes of calculating the
      amount of Rent that accrues during any period, the Purchase Price shall be
      reduced by 100/105ths of any amounts treated as a reduction of Exercise Price
      in
      accordance with the last sentence of Paragraph
      7
      below,
      as of the date such amounts are paid to Lessors.

     

    4.  
      LEASE
      NOT CANCELABLE; LESSEE’S OBLIGATIONS ABSOLUTE. The Lease may not be canceled or
      terminated except as expressly provided herein. Lessee’s obligation to pay all
      Rent due or to become due hereunder shall be absolute and unconditional and
      shall not be subject to any delay, reduction, set-off, defense, counterclaim,
      or
      recoupment for any reason whatsoever, including any failure of the Equipment
      or
      any representations by the manufacturer or the vendor thereof. If the Equipment
      is unsatisfactory for any reason, Lessee shall make any claim solely against
      the
      manufacturer or the vendor thereof and shall, nevertheless, pay Lessors all
      Rent
      payable hereunder.

     

    5.  
      SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be responsible
      for
      selecting and using, and any results obtained from, the Equipment and any other
      associated equipment or services.

     

    6.  
      WARRANTIES. LESSORS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
      AS
      TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION
      OF THE EQUIPMENT
      OR ITS MERCHANTABILITY, SUITABILITY, QUALITY, OR FITNESS FOR
      A
      PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSEE SPECIFICALLY
      WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSORS FOR BREACH OF ANY WARRANTY
      WHATSOEVER. LESSEE LEASES THE EQUIPMENT “AS IS.” IN NO EVENT SHALL LESSORS HAVE
      ANY LIABILITY, NOR SHALL LESSEE HAVE ANY REMEDY AGAINST LESSORS, FOR ANY
      LIABILITY, CLAIM, LOSS, DAMAGE, OR EXPENSE CAUSED DIRECTLY OR INDIRECTLY BY
      THE
      EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR THE OPERATION, MAINTENANCE,
      OR
      REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS THAT TERM IS USED IN SECTION
      2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE, AS AMENDED FROM TIME TO TIME
      (“UCC”). Lessors grant to Lessee, for the sole purpose of prosecuting a claim,
      the benefits of any and all warranties made available by the manufacturer or
      the
      vendor of the Equipment to the extent assignable.

    



    
      
        
          
             

          

        

        
        

      

      
        -2-

        
          

        

      

      
        
        

        
        

      

    



     

     

    7.  PURCHASE
      OBLIGATION. On or prior to the last day of the Term (at the election of Lessee
      but in no event later than the last day of the Term), or as required by Lessors
      pursuant to Paragraph
      20
      below
      (or otherwise required by this Agreement) (the “Purchase Date”), in addition to
      payment of any other amounts owed by Lessee to Lessors pursuant to the Lease
      Documents, Lessee shall purchase the Equipment from Lessors for an amount equal
      to the sum of (i) the Rent, as accrued or owed pursuant to Paragraph
      3
      above to
      the extent not previously paid, and (ii) one hundred and five percent (105%)
      of
      the Purchase Price (such sum hereinafter referred to as the “Exercise Price,” as
      adjusted pursuant to the last sentence of this Paragraph 7). On the Purchase
      Date, Lessee shall pay to Lessors the Exercise Price, together with all sales
      and other taxes applicable to the transfer of the Equipment and any other amount
      payable and arising hereunder, in immediately available funds, whereupon Lessors
      shall transfer to Lessee, without recourse or warranty of any kind, express
      or
      implied, all of Lessors’ right, title, and interest in and to such Equipment on
      an “As Is, Where Is” basis. The Exercise Price shall be reduced by any payments
      made by Lessee to Lessors in excess of amounts otherwise owed by Lessee to
      Lessors pursuant to the Lease Documents (including, without limitation, pursuant
      to Paragraph
      8(d)(ii)
      below)
      to the extent Lessee and Lessors agree to characterize the payment as a
      reduction in the Exercise Price at the time of the payment.

     

    8.  OWNERSHIP;
      INSPECTION; MARKING; FINANCING STATEMENTS; FINANCIAL COVENANTS.

     

    (a)
      Lessee shall affix to the Equipment any labels supplied by Lessors indicating
      ownership of such Equipment. The Equipment is and shall be the sole property
      of
      Lessors. Lessee shall have no right, title, or interest therein, except as
      lessee under the Lease. The Equipment is and shall at all times be and remain
      personal property and shall not become a fixture. Lessee shall obtain and record
      such instruments and take such steps as may be necessary to prevent any person
      from acquiring any rights in the Equipment by reason of the Equipment being
      claimed or deemed to be real property. Unless the Lessors shall have provided
      advance written consent, the Equipment shall continue to be located on real
      property that is owed by Lessee (except as otherwise set forth on Schedule
      8(a)
      attached hereto) or which is neither leased (other than pursuant to a ground
      lease) nor mortgaged. Lessee shall make the Equipment and its maintenance
      records available for inspection by Lessors at reasonable times and upon
      reasonable notice.

    



    
      
        
          
             

          

        

        
        

      

      
        -3-

        
          

        

      

      
        
        

        
        

      

    



     

    (b)  To
      secure
      the prompt payment and performance to Lessors, Lessee hereby assigns, pledges
      and grants to Lessors for its benefit a continuing security interest in and
      to
      the Equipment and all other equipment owned by Lessee, whether now owned or
      existing or hereafter acquired or arising and wheresoever located (other than
      property otherwise agreed to in writing by Lessors as not subject to the
      continuing security interest) (collectively, the “Collateral”). Lessee shall
      mark its books and records as may be necessary or appropriate to evidence,
      protect and perfect Lessors’ security interest and shall cause its financial
      statements to reflect such security interest.

     

    (c)  Lessee
      shall take all action that may be necessary or desirable, or that Lessors may
      reasonably request, so as at all times to maintain the validity, perfection,
      enforceability and priority of Lessors’ security interest in the Collateral or
      to enable Lessors to protect, exercise or enforce its rights hereunder and
      in
      the Collateral, including, but not limited to, (i) immediately discharging
      all
      liens in the Collateral, (ii) delivering to Lessors, endorsed or accompanied
      by
      such instruments of assignment as Lessors may specify, and stamping or marking,
      in such manner as Lessors may specify, any and all chattel paper, instruments,
      letters of credits and advices thereof and documents evidencing or forming
      a
      part of the Collateral, (iii) entering into warehousing, lockbox and other
      custodial arrangements satisfactory to Lessors, and (iv) executing and
      delivering financing statements, control agreements, instruments of pledge,
      notices and assignments, in each case in form and substance satisfactory to
      Lessors, relating to the creation, validity, perfection, maintenance or
      continuation of Lessors’ security interest under the UCC or other applicable
      law. Lessors are hereby authorized to file financing statements signed by
      Lessors instead of Lessee in accordance with the UCC as adopted in any
      applicable State from time to time. By its signature hereto, Lessee hereby
      authorizes Lessors to file against Lessee, one or more financing, continuation,
      or amendment statements pursuant to the UCC in form and substance satisfactory
      to Lessors (which statements may have a description in respect of the Collateral
      which is broader than that set forth herein). All charges, expenses and fees
      Lessors may incur in doing any of the foregoing, and any local taxes relating
      thereto, shall be reimbursed by Lessee to Lessors immediately upon
      demand.

     

    (d)  Lessee
      will safeguard and protect all Collateral for Lessors’ general account and make
      no disposition thereof whether by sale, lease or otherwise except for the
      disposition or transfer of obsolete and worn-out equipment in the ordinary
      course of business during any fiscal year having an aggregate fair market value
      of not more than $100,000 and only to the extent that the proceeds of any such
      disposition are either (i) used to acquire replacement equipment which is
      subject to Lessors’ first priority security interest or (ii) are paid to Lessors
      and treated as a reduction in the Exercise Price in accordance with the last
      sentence of Paragraph
      7
      above.

     

    (e)  During
      the existence of an Event of Default, in addition to the rights and remedies
      set
      forth in Paragraph
      20
      below,
      Lessors: (i) may at any time take any steps Lessors deem necessary to protect
      Lessors’ interest in, and to preserve the Collateral; (ii) may hire security
      guards or place other security protection measures as Lessors may deem
      appropriate; (iii) may employ and maintain, at any of any Lessee’s premises, a
      custodian who shall have full authority to do all acts necessary to protect
      Lessors’ interests in the Collateral; (iv) may lease warehouse facilities to
      which Lessors may move all or part of the Collateral; (v) may use any of
      Lessee’s owned or leased lifts, hoists, trucks and other facilities or equipment
      for handling or removing the Collateral; and (v) shall have, and is hereby
      granted, a right of ingress and egress to the places
      where the Collateral is located, and may proceed over and through any of
      Lessee’s owned or leased property; provided, however,
      that
      Lessors shall (x) notify Lessee of any actions taken pursuant to this
Paragraph
      8(e);
      (y) make
      an effort to minimize business disruption to Lessee; and (z) take no action
      under clause (ii) above that Lessors have knowledge would cause Lessee to be
      in
      material violation of applicable laws. Lessee shall cooperate fully with all
      of
      Lessors’ efforts to preserve the Collateral and will take any actions directed
      by Lessors to preserve the Collateral. Lessee shall reimburse Lessors for any
      expenses incurred by them to preserve the Collateral, including any expenses
      relating to the bonding of a custodian, shall be reimbursed by Lessee to Lessors
      immediately upon demand.

    



    
      
        
          
             

          

        

        
        

      

      
        -4-

        
          

        

      

      
        
        

        
        

      

    



     

     

    (f)  Until
      (i)
      satisfaction of Lessee’s obligations under the Lease Documents and (ii)
      termination of this Agreement, Lessors’ interests in the Collateral shall
      continue in full force and effect. During such period Lessee shall not, without
      Lessors’ prior written consent, pledge, sell (except to the extent permitted in
Paragraph
      8(d)
      above),
      assign, transfer, create or suffer to exist a lien upon or encumber or allow
      or
      suffer to be encumbered in any way, any part of the Collateral. Lessee shall
      defend Lessors’ interests in the Collateral against any and all persons
      whatsoever. At any time more than five (5) days following demand by Lessors
      for
      payment of amounts owed by Lessee under this Agreement and until such payment
      is
      made (including any penalty in connection with any late payment), Lessors shall
      have the right to take possession of the indicia of the Collateral and the
      Collateral in whatever physical form. If Lessors exercise their right to take
      possession of the Collateral, Lessee shall, upon demand, assemble it and make
      it
      available to Lessors at a place reasonably convenient to Lessors. Lessors also
      shall be entitled to all of the rights and remedies set forth herein and further
      provided by the UCC or other applicable law. Lessee shall, and Lessors may,
      at
      their option, instruct all suppliers, carriers, forwarders, warehousers or
      others receiving or holding Collateral to deliver the Collateral to Lessors
      or
      subject to Lessors’ order.

     

    (g)  At
      all
      times, Lessee shall have positive Liquidity (i.e., Liquidity of greater than
      $0). For purposes of this Agreement, “Liquidity” shall mean, as calculated as of
      any measurement date: (i) Available Cash on hand as of such measurement date
      (and if such measurement date is the date on which any Permitted Distribution
      (as defined in Paragraph 9(c)(iii)) is to be made or paid (a “Distribution
      Date”) or the date any payment is to be made pursuant to the Lease (a “Lease
      Payment Date”), taking into account the making or payment of such Permitted
      Distribution or Lease Payment), plus (or minus, if EBITDA for such Test Period
      is negative) (ii) EBITDA of Lessee for the trailing Test Period ending on the
      last day of the calendar month for which monthly financial statements have
      been
      delivered to Lessors pursuant to Paragraph
      26(c)
      below
      (the “Month-End Test Date”), plus (iii) Fixed Charges that are scheduled to
      become due or that are otherwise committed (in the case of Capital Expenditures)
      or declared (in the case of dividends) to be made or paid during the Test Period
      commencing on the day immediately succeeding such Month-End Test Date; provided
      that in each case, as applicable, (A) for calculations related to term debt
      (which shall not include the term loan portion of the Credit Facility (as
      defined in Paragraph 9(c)(i)) nor the Lease Documents), compare the actual
      amortization to straight line amortization (as of final maturity) for the
      remaining term, and use the greater of the two amounts during the Test Period;
      (B) for calculations related to revolving or line of credit debt (which shall
      not include the revolving facility portion of the Credit Facility), use the
      average outstanding daily amount during the preceding Test Period, and use
      straight line amortization over the remaining term; (C) for calculations
      of Interest Expense (which shall include cash interest only, and no
      paid-in-capital interest; provided, however,
      to the
      extent paid-in-capital has been capitalized, such calculation shall be subject
      to clauses (A) and (B) above, as applicable) for each item of indebtedness
      (including, without limitation, interest or comparable obligations in connection
      with the Credit Facility and the Lease), (1) determine the outstanding principal
      amount of such item of indebtedness and the current interest borne by such
      indebtedness as of the Month-End Test Date and then calculate the aggregate
      accrual of interest in such indebtedness as if the outstanding principal amount
      remaining the same over the entire Test Period, unless maturing prior to the
      last day of the Test Period, in which event the calculation shall be through
      such earlier maturity date and then (2) add to such total all fees and other
      amounts comprising Interest Expense payable during the Test Period based on
      the
      foregoing calculation methodology (provided that if Interest Expense for any
      item of indebtedness is not reasonably susceptible to calculation in this
      manner, as determined by Lessors in their reasonable discretion, then calculate
      the Interest Expense for such item of indebtedness on a trailing six (6) month
      basis); and (D) for purposes of the calculation of taxes, use six months
      trailing taxes. Notwithstanding the forgoing, Liquidity, as calculated for
      any
      Month-End Test Date ending prior to the last day of the sixth (6th) complete
      calendar month following the Closing Date by using a Test Period equal to the
      number of complete calendar months between the Closing Date and such Month-End
      Test Date multiplied by six (6), in the case of one month; three (3) in the
      case
      of two months, two (2) in the case of three months; three-halves (3/2) in the
      case of four months; and six-fifths (6/5) in the case of five
      months.

    



    
      
        
          
             

          

        

        
        

      

      
        -5-

        
          

        

      

      
        
        

        
        

      

    



     

     

    For
      purposes of the covenants set forth in this Paragraph
      8(g),
      the
      terms listed below shall have the following meanings:

     

    “Available
      Cash” shall mean, for and on any date, the sum without duplication of the
      following for Lessee: (a) unrestricted cash on hand on such date, (b) Cash
      Equivalents held on such date, and (c) the unborrowed availability under
      applicable loan documents of Lessee on and as of such date.

     

    “Capital
      Expenditures” shall mean all expenditures (whether paid in cash or accrued as
      liabilities) that are or should be treated as capital expenditures under
      GAAP.

     

    “Capital
      Lease” shall mean, as to any person, a lease of any interest in any kind of
      property or asset by that Person as lessee that is, should be or should have
      been recorded as a “capital lease” in accordance with GAAP.

     

    “Cash
      Equivalents” shall mean (a) securities issued, or directly and fully guaranteed
      or insured, by the United States or any agency or instrumentality thereof
      (provided that the full faith and credit of the United States is pledged in
      support thereof) having maturities of not more than six months from the date
      of
      acquisition, (b) U.S. dollar denominated time deposits, certificates of deposit
      and bankers’ acceptances of (i) any domestic commercial bank of recognized
      standing having capital and surplus in excess of $500,000,000, or (ii) any
      bank
      (or the parent company of such bank) whose short-term commercial paper rating
      from Standard & Poor’s Ratings Services (“S&P”) is at least A-2 or the
      equivalent thereof or from Moody’s Investors Service, Inc. (“Moody’s”) is at
      least P-2 or the equivalent thereof in each case with maturities of not more
      than six months
      from the date of acquisition (any bank meeting the qualifications specified
      in
      clauses (b)(i) or (ii), an “Approved Bank”), (c) repurchase obligations with a
      term of not more
      than
      seven days for underlying securities of the types described in clause (a),
      above,
      entered
      into with any Approved Bank, (d) commercial paper issued by any Approved Bank
      or
      by the parent company of any Approved Bank and commercial paper issued by,
      or
      guaranteed by, any industrial or financial company with a short-term commercial
      paper rating of at least A-2 or the equivalent thereof by S&P or at least
      P-2 or the equivalent thereof by Moody’s, or guaranteed by any industrial
      company with a long term unsecured debt rating of at least A or A2, or the
      equivalent of each thereof, from S&P or Moody’s, as the case may be, and in
      each case maturing within six months after the date of acquisition and (e)
      investments in money market funds substantially all of whose assets are
      comprised of securities of the type described in clauses (a) through (d)
      above.

    



    
      
        
          
             

          

        

        
        

      

      
        -6-

        
          

        

      

      
        
        

        
        

      

    



     

     

    “EBITDA”
      shall mean, as calculated as of any measurement date and for any Test
      Period,
      the sum,
      without duplication, of the following for Lessee, on a consolidated basis for
      Lessee: Net Income determined in accordance with GAAP, plus, (a) Interest
      Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation
      expense, (d) amortization expense, (e) all other non-cash, non recurring charges
      and expenses, excluding
      accruals for cash expenses made in the ordinary course of business, and (f)
      loss
      from any
      sale of assets, other than sales in the ordinary course of business, all of
      the
      foregoing determined in accordance with GAAP, minus (x) gains from any sale
      of
      assets, other than sales in the ordinary course of business and (y) other
      extraordinary or non-recurring gains.

     

    “Fixed
      Charges” shall mean, the sum of the following: (a) Total Debt Service, (b)
      Capital Expenditures, and (c) income taxes paid in cash.

     

    “GAAP”
      shall mean generally accepted accounting principals.

     

    “Interest
      Expense” shall mean, for any Test Period, total interest expense (including
      attributable to Capital Leases in accordance with GAAP) fees with respect to
      all
      outstanding Indebtedness including capitalized interest but excluding
      commissions, discounts and other fees owed with respect to letters of credit
      and
      bankers’ acceptance financing and net costs under Interest Rate
      Agreements.

     

    “Interest
      Rate Agreement” shall mean any interest rate swap, cap or collar agreement or
      other similar agreement or arrangement designed to hedge the position with
      respect to interest rates.

     

    “Net
      Income” shall mean, the net income (or loss) determined in conformity with
      GAAP,
      provided
      that there shall be excluded (i) the income (or loss) of any person in which
      any
      other person (other than Lessee) has a joint interest, except to the extent
      of
      the amount of dividends
      or other distributions actually paid to Lessee by such person, (ii) the income
      (or
      loss) of
      any person accrued prior to the date it becomes part of Lessee or is merged
      into
      or consolidated with Lessee or that person’s assets are acquired by Lessee,
      (iii) the income of any subsidiary of Lessee to the extent that the declaration
      or payment of dividends
      or similar distributions of that income by that subsidiary is not at the time
      permitted by operation of the terms of the charter or any agreement, instrument,
      judgment, decree, order, statute, rule or governmental regulation applicable
      to
      that subsidiary, (iv) compensation expense resulting from the issuance of
      capital stock, stock options or stock appreciation rights to former or current
      employees, including officers, of Lessee, or the exercise of such options or
      rights, in each case to the extent the obligation (if any) associated therewith
      is not expected to be settled by the payment of cash by Lessee or any affiliate
      thereof, and (v) compensation expense resulting from the repurchase of capital
      stock, options and rights described in clause (iv) of this definition of Net
      Income.
       

    

    



    
      
        
          
             

          

        

        
        

      

      
        -7-

        
          

        

      

      
        
        

        
        

      

    



     

    “Test
      Period” shall mean two (2) consecutive fiscal quarters of Lessee (taken as one
      accounting period) or such other period as may be otherwise specified in this
      Paragraph
      8(g).

     

    “Total
      Debt Service” shall mean the sum of (i) scheduled or other required payments of
      principal on indebtedness, and (ii) Interest Expense, in each case for such
      period.

     

    9. EQUIPMENT
      USE; CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS; RESTRICTED
      PAYMENTS.

     

    (a)  Lessee
      agrees that the Equipment will be operated by competent, qualified personnel
      in
      connection with Lessee’s business for the purpose for which the Equipment was
      designed and in accordance with applicable operating instructions, laws, and
      government regulations, and that Lessee shall use all reasonable precautions
      to
      prevent loss or damage to the Equipment from fire and other hazards. Lessee
      shall procure and maintain in effect all orders, licenses, certificates,
      permits, approvals, and consents required by federal, state, or local laws
      or by
      any governmental body, agency, or authority in connection with the delivery,
      installation, use, and operation of the Equipment.

     

    (b)  Lessee
      shall, until satisfaction of Lessee’s obligations under the Lease Documents and
      termination of this Agreement, (i) conduct continuously and operate actively
      its
      business according to good business practices and maintain all of its properties
      useful or necessary in its business in good working order and condition
      (reasonable wear and tear excepted and except as may be disposed of in
      accordance with the terms of this Agreement); (ii) keep in full force and effect
      its existence and comply in all material respects with the laws and regulations
      governing the conduct of its business; and (iii) make all such reports and
      pay
      all such franchise and other taxes and license fees and do all such other acts
      and things as may be lawfully required to maintain its rights, licenses, leases,
      powers and franchises under the laws of the United States or any political
      subdivision thereof.

     

    (c)  During
      the Term and until Lessee satisfies its obligations under the Lease Documents,
      Lessee shall not, without prior written consent of Lessors:

     

    (i)
      create, incur, assume or suffer to exist any indebtedness, or become liable
      upon
      the obligations of any person by assumption, endorsement or guaranty thereof
      or
      otherwise, except the following (collectively, “Permitted
      Indebtedness”): (A) indebtedness up to $105,000,000 under the Revolving Credit,
      Term Loan and Security Agreement dated November 18, 2004, by and between Lessee
      and CapitalSource Finance LLC, a Delaware limited liability company, as such
      agreement may be amended or supplemented after the date hereof (the “Credit
      Facility”); (B) non-recourse indebtedness secured by fixed assets other than (1)
      the Collateral or (2) the Hospital Core Properties; and (C) other indebtedness
      so long as Lessee remains in compliance, on a pro forma incurrence basis with
      Paragraph
      8(g)
      above,
      after taking into account such indebtedness permitted hereunder (For purposes
      of
      this Paragraph
      9(c),“Hospital
      Core Properties” shall mean the Hospital buildings, the land on which the
      Hospitals are located, and the fixtures and personal property located in the
      Hospital buildings and used in connection with or incidental to the Hospital
      Core Activities. For purposes of clarity, it is understood that the Lessee
      may
      sub-divide or re-parcel the land on which the Hospital building are located
      and
      that any resulting parcels on which the Hospital buildings are not located
      shall
      not be deemed to be Hospital Core Properties if and to the extent Hospital
      Core
      Activities do not take place on or in connection with such sub-divided or
      re-parceled land. For purposes of this Paragraph
      9(c),“Hospitals”
      shall mean the hospitals known as (x) Centinela Hospital Medical Center, located
      at 555 E. Hardy Street, Inglewood, California, (y) Daniel Freeman Memorial
      Hospital, located at 333 North Prairie Avenue, Inglewood, California and (z)
      Daniel Freeman Marina Hospital, located at [4650 and 4658] Lincoln Boulevard,
      Marina Del Rey, California);
       

    

    



    
      
        
          
             

          

        

        
        

      

      
        -8-

        
          

        

      

      
        
        

        
        

      

    



     

    (ii)
      create, incur, assume or suffer to exist any lien upon, in or against, or pledge
      of, any of the Collateral, except the following (collectively, “Permitted
      Liens”): (A) liens under the Credit Facility, the Lease Documents or otherwise
      arising in favor of Lessors; (B) 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 generally
      accepted accounting principals (“GAAP”) to the satisfaction of Lessors in their
      sole discretion; (C) (1) statutory liens of landlords and of carriers,
      warehousemen, mechanics, materialmen, and (2) 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 Lessors in their sole
      discretion; (D) liens (1) 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 (2) arising as a result of progress payments under government
      contracts; and (E) encumbrances on real estate consisting of easements, rights
      of way, zoning restrictions, restrictions on the use of real property and
      defects and irregularities in the title thereto, landlord’s or lessor’s liens
      and other minor liens, provided that none of such liens interferes materially
      with the use of the property affected in the ordinary conduct of the business
      of
      Lessee;
       

    

    



    
      
        
          
             

          

        

        
        

      

      
        -9-

        
          

        

      

      
        
        

        
        

      

    



     

    
      	(iii)  	
              (A)
                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); (B) 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 Lessee 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 Event
                of Default has occurred and is continuing or would be caused by or
                result
                therefrom); (C) otherwise make any payments or distributions to any
                stockholder or other equity owner in such Person’s capacity as such;
                provided, however,
                that in the event that (1) Lessee has obtained and maintains both
                its
                Medi-Cal provider number/in-patient service contracts and its Medicare
                provider number; (2) no Event of Default has occurred and is continuing
                or
                would otherwise arise from or be caused by such proposed Permitted
                Distribution (as defined below); and (3) Lessee would not be in breach
                of
                the covenant set forth in Paragraph 8(g) as of the applicable Distribution
                Date after giving effect to such proposed Permitted Distribution,
                Lessee
                may, upon twenty (20) days prior written notice to Lender, (each,
                a
                “Permitted Distribution”), (x) declare and pay cash dividends or other
                distributions to any of its stockholders in and on account of their
                capacity as such, at Lessee’s sole discretion; (y) apply 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, and/or (z) otherwise make
                any
                payments or distributions to any stockholder or other equity owner
                in such
                person’s capacity as such;

            


    

     

    
      	(iv)  	
              enter
                into or consummate any transaction with respect to the management
                of
                Lessee, the Hospitals or the Hospital Core Properties with any of
                its
                affiliates or any of their respective affiliates other than the payment
                of: (A) management or services fees to Westridge Capital LLC in an
                amount
                not to exceed $500,000 per year plus reasonable out-of-pocket expenses;
                (B) the $750,000 closing fee to Westridge Capital LLC provided for
                in the
                existing agreement between Lessee and Westridge Capital LLC; (C)
                reimbursement of expenses incurred by Westridge Capital LLC in connection
                with the transactions contemplated hereby; (D) the $100,000 closing
                fee to
                Hospital Acquisition 005, Inc. (“HAI”) pursuant to the existing agreement
                between Lessee and HAI; (E) payment of purchase price and other amounts
                to
                HAI pursuant to the Purchase Agreement between HAI and Lessee related
                to
                the rights to acquire the Hospital Properties; and (F) management
                bonuses
                paid in the ordinary course to executive officers and managers of
                Lessee
                who, by virtue of the ownership interest in the Lessee are also
                affiliates, consistent with management bonuses of other executive
                officers
                and managers. Nothing in the preceding sentence shall prevent Lessee
                from
                entering into an agreement with any affiliate with respect to any
                matter
                other than management of Lessee, the Hospital or Hospital Core Properties,
                provided that such agreement is entered into for a fair consideration
                in
                an arm’s length transaction;

            


    

    



    
      
        
          
             

          

        

        
        

      

      
        -10-

        
          

        

      

      
        
        

        
        

      

    



     

     

    
      	(v)  	
              (A)
                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 Lessors; (B) change its fiscal year unless Lessee demonstrates
                to Lessors’ 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 Lessors of appropriate interim and annual
                pro
                forma, historical and current compliance certificates for such periods
                and
                such other information as Lessors may reasonably request; (C) without
                at
                least twenty (20) days prior written notice to Lessors, change its
                name or
                change its jurisdiction of organization; (D) amend, alter or suspend
                or
                terminate or make provisional in any material way, any permit affecting
                the Collateral or otherwise affecting in any material way the operation
                of
                any of the Hospitals or other Hospital facilities without the prior
                written consent of Lessors, which consent shall not be unreasonably
                withheld; (E) wind up, liquidate or dissolve (voluntarily or
                involuntarily) or commence or suffer any proceedings seeking or that
                would
                result in any of the foregoing;

            


    

     

    
      	(vi)  	
              furnish
                to Lessors 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;

            


    

     

    
      	(vii)  	
              sell,
                lease, transfer, assign or otherwise dispose of any interest in the
                Collateral or in any of the Hospital Core Properties (other than
                obsolete
                equipment or excess equipment no longer needed in the conduct of
                the
                business in the ordinary course of business), or agree to do any
                of the
                foregoing at any future time;

            


    

     

    
      	(viii)  	
              enter
                into any merger, consolidation or other reorganization with or into
                any
                other person or acquire all or a substantial portion of the assets
                or
                stock of any person or permit any other person to consolidate with
                or
                merge with it, in each case that would result in a change in control
                of
                Lessee;

            


    

    



    
      
        
          
             

          

        

        
        

      

      
        -11-

        
          

        

      

      
        
        

        
        

      

    



     

     

       


    


    
      	 (ix)	directly
              or
              indirectly in any fiscal year (A) contract for, purchase or make any
              capital expenditure or commitments for capital expenditures and (B)
              enter
              as lessee into any lease arrangement  real  or personal
              property with a
              value, in an aggregate amount (including amounts described in both
              clause
              (A) and (B)) in excess of $10,500,000;
               

            
	 	 
	 (x)	once
              accreditation of the Hospitals by JCAHO to operate fully all services
              at
              the Hospitals shall have been obtained by each of the Hospitals, fail
              to
              keep such accreditation in full force and effect;
	 	 
	
               (xi)

            	
               form
                or acquire any wholly owned subsidiary unless (A) such subsidiary
                expressly joins in this Agreement in writing as a lessee and becomes
                jointly and severally liable for the obligations of     
                Lessee hereunder and (B) Lessors shall have received all documents,
                including legal opinions, they may reasonably require to establish
                compliance with each of the foregoing
                conditions.

            


    

    


     

    10.  
      MAINTENANCE. Lessee, at its sole cost and expense, shall keep the Collateral
      in
      a suitable environment as specified by the manufacturer’s guidelines or the
      equivalent, shall meet all recertification requirements, and shall maintain
      the
      Collateral in its original condition and working order, ordinary wear and tear
      excepted. At the reasonable request of Lessors, Lessee shall furnish proof
      of
      maintenance of the Collateral.

     

    11.  
      ALTERATION; MODIFICATIONS; PARTS. Lessee may alter or modify the Collateral
      so
      as to reduce the value of the Collateral or render it unfit for the use for
      which it is intended only with the prior written consent of Lessors. Any
      alteration shall be removed and the Collateral restored to its normal, unaltered
      condition at Lessee’s expense (without damaging the Collateral’s originally
      intended function or its value) prior to its delivery to Lessors. Any part
      installed in connection with warranty or maintenance service or which cannot
      be
      removed in accordance with the preceding sentence shall be the property of
      Lessors.

     

    12.  RETURN
      OF
      EQUIPMENT ON DEFAULT. The Equipment shall not be returned to Lessors unless
      Lessors exercise their rights pursuant to Paragraph
      20
      below or
      as otherwise provided in this Agreement.

     

    13.  CASUALTY
      INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at its own expense, liability
      and property damage insurance relating to the Collateral, insuring against
      such
      risks as are customarily insured against on the type of equipment leased
      hereunder by businesses in which Lessee is engaged in such amounts, in such
      form, and with insurers satisfactory to Lessors; provided, however,
      that the
      amount of insurance against damage or loss shall not be less than the greater
      of
      (i) 125% of the Purchase Price or (ii) the replacement value of the Collateral.
      Each liability insurance policy shall provide coverage (including, without
      limitation, personal injury coverage) of not less than $1,000,000 for each
      occurrence, and shall name Lessors as an additional insured; and each property
      damage policy shall name Lessors as sole
      loss
      payee up to the amount of Lessee’s obligations to Lessors hereunder, and all
      policies shall contain a clause requiring the insurer to give Lessors at least
      thirty days’ prior written notice of any alteration in the terms or cancellation
      of the policy. Upon request by Lessors, Lessee shall furnish to Lessors a copy
      of each insurance policy (with endorsements) or other evidence satisfactory
      to
      Lessors that the required insurance coverage is in effect (including any annual
      certificates necessary to evidence the continuing effectiveness of the insurance
      coverage each year); provided, however,
      Lessors
      shall have no duty to ascertain the existence of or to examine the insurance
      policies to advise Lessee if the insurance coverage does not comply with the
      requirements of this Paragraph
      13.
      If
      Lessee fails to insure the Equipment as required, Lessors shall have the right
      but not the obligation to obtain such insurance, and the cost of the insurance
      shall be for the account of Lessee due as part of the Rent. Lessee consents
      to
      Lessors’ release, upon Lessee’s failure to obtain appropriate insurance
      coverage, of any and all information necessary to obtain insurance with respect
      to the Equipment or Lessors’ interest therein.

    



    
      
        
          
             

          

        

        
        

      

      
        -12-

        
          

        

      

      
        
        

        
        

      

    



     

     

    Lessee
      shall bear the entire risk of the theft or destruction of, or damage to, the
      Equipment including, without limitation, any condemnation, seizure, or
      requisition of title or use (“Casualty Loss”). No Casualty Loss shall relieve
      Lessee from its obligations to pay Rent or fulfill Lessee’s obligations
      hereunder. All insurance proceeds received by Lessors as a result of claims
      made
      under an insurance policy required to be maintained by Lessee under this
Paragraph
      13
      shall be
      treated as a reduction in the Exercise Price in accordance with the last
      sentence of Paragraph
      7
      above.

     

    14.  
      TAXES.
      Lessee shall pay when due, and indemnify and hold each Lessor harmless from,
      all
      sales, use, excise, and other taxes, charges, and fees (including, but not
      limited to, income, franchise, business and occupation, gross receipts,
      licensing, registration, titling, personal property, stamp and interest
      equalization taxes, levies, imposts, duties, charges, or withholdings of any
      nature), and any fines, penalties, or interest thereon, imposed or levied by
      any
      governmental body, agency, or tax authority upon or in connection with the
      Equipment, its purchase, ownership, delivery, leasing, possession, use, or
      relocation of the Equipment or otherwise in connection with the transactions
      contemplated hereunder, excluding any taxes on or measured by the net income
      of
      a Lessor (except as provided in Paragraph
      30
      below).
      Upon request,
      Lessee will provide proof of payment of any taxes (or other amounts) required
      to
      be paid
      by
      Lessee pursuant to the prior sentence. Unless Lessors elect otherwise, Lessee
      will pay all property taxes on the Equipment. Lessee shall timely prepare and
      file all reports and returns which are required to be made with respect to
      any
      obligation of Lessee under this Paragraph
      14.
      Lessee
      shall, to the extent permitted by law, cause all billings of any fees, taxes,
      levies, imposts, duties, withholdings, and governmental charges to be made
      to
      Lessors in care of Lessee. Upon request, Lessee will provide Lessors with copies
      of all such billings. The provision of this Paragraph
      14
      shall
      survive the termination of this Agreement.

     

    15.  
      LESSORS’
PAYMENT. If Lessee fails to perform its obligations under Paragraph
      13
      or
Paragraph
      14
      above,
      or Paragraph
      21
      below,
      Lessors shall have the right to substitute performance, in which case Lessee
      shall immediately reimburse Lessors therefor.

     

    16.  GENERAL
      INDEMNITY. The Lease is a net lease. Therefore, Lessee shall indemnify Lessors
      and their successors and assigns against, and hold Lessors and their successors
      and assigns harmless from, any and all claims, actions, damages, obligations,
      liabilities, and all costs and expenses, including, without limitation, legal
      fees incurred by Lessors or its successors and assigns arising out of the Lease
      including, without limitation, the purchase, ownership, delivery, lease,
      possession, maintenance, condition, use, or return of the Equipment, or arising
      by operation of law, except that Lessee shall not be liable for any claims,
      actions, damages, obligations, and costs and expenses determined by a
      non-appealable, final order of a court of competent jurisdiction to have
      occurred as a result of the gross negligence or willful misconduct of Lessors
      or
      their successors and assigns. Lessee agrees that upon written notice by Lessors
      of the assertion of any claim, action, damage, obligation, liability, or lien,
      Lessee shall assume full responsibility for the defense thereof, provided that
      Lessors’ failure to give such notice shall not limit or otherwise affect its
      rights hereunder. Any payment pursuant to this Paragraph
      16
      (except
      for any payment of Rent) shall be of such amount as shall be necessary so that,
      after paying any taxes required to be paid thereon by Lessors, including taxes
      on or measured by the net income of Lessors, the balance will equal the amount
      due hereunder. The provisions of this Paragraph
      16
      with
      regard to matters arising during the Lease shall survive the expiration or
      termination of the Lease.

    



    
      
        
          
             

          

        

        
        

      

      
        -13-

        
          

        

      

      
        
        

        
        

      

    



     

     

    17.  
      ASSIGNMENT BY LESSEE. Lessee shall not, without the prior written consent of
      Lessors (other than as provided in Paragraph
      8(d)
      above),
      (a) assign, transfer, pledge, or otherwise dispose of the Lease or Collateral,
      or any interest therein; (b) sublease or lend any Collateral
      or permit it to be used by anyone other than Lessee and its employees; or (c)
      move any
      Collateral away from the location where the Collateral is situated as of the
      date hereof.

     

    18.  
      ASSIGNMENT BY LESSORS. Lessors may assign its interest or grant a security
      interest in the Lease, the Equipment and the Collateral, individually or
      together, in whole or in part. If Lessee is given written notice of any such
      assignment, it shall immediately make all payments of Rent and other amounts
      hereunder directly to the assignee. The assignee shall have all of the rights
      of
      Lessors under the Lease, and Lessee shall not assert, against any assignee,
      any
      set-off, defense or counterclaim that Lessee may have against Lessors or any
      other person.

     

    19.  
      DEFAULT;
      NO WAIVER. The occurrence of any of the following events shall constitute an
      event of default hereunder (each, an “Event of Default”): (a) Lessee’s failure
      to pay within five days after notice of when due any amount required to be
      paid
      by Lessee hereunder; (b) Lessee’s failure to perform any other provision
      hereunder; (c) any representation made or financial information delivered or
      furnished by Lessee hereunder shall prove to have been inaccurate in any
      material respect when made; (d) Lessee shall make an assignment for the benefit
      of creditors, whether voluntary or involuntary, or consent to the appointment
      of
      a trustee or receiver and, in the case of any involuntary proceeding, the
      proceeding remains undismissed or unstayed for forty-five days following the
      commencement thereof; (e) any judgment shall be rendered against Lessee which
      shall remain unpaid or unstayed for a period of sixty days; (f) Lessee shall
      dissolve, liquidate, wind up or cease its business, sell or otherwise dispose
      of
      all or substantially
      all of its assets, or make any material change in its line of business without
      the prior
      written
      consent of Lessors; (g) Lessee shall amend or modify its name, unless Lessee
      delivers to Lessors, thirty days prior to any such proposed amendment or
      modification, written notice of the amendment or modification and within ten
      days before the amendment or modification delivers executed financing statements
      (in form and substance satisfactory to Lessors); (h) Lessee shall merge
      or
      consolidate with any other entity or make any material change in its capital
      structure, in each case without Lessors’ prior written consent; (i) Lessee shall
      suffer any loss or suspension of any material license, permit, or other right
      or
      asset necessary to the conduct of its business, fail generally to pay its debts
      as they mature, or call a meeting for purposes of compromising its debts; (j)
      Lessee shall deny or disaffirm its obligations hereunder or under any of the
      documents delivered in connection herewith; (k) Lessee shall suffer a material
      adverse change in its business,
      operations, results of operations, assets, liabilities, or condition (financial
      or otherwise);
      or (l)
      Lessee shall be in default under any loan document or documents which in the
      aggregate have a principal loan amount in excess of $10,000,000.
       

    

    



    
      
        
          
             

          

        

        
        

      

      
        -14-

        
          

        

      

      
        
        

        
        

      

    



     

    20.
      REMEDIES.

     

    (a)  Upon
      the
      occurrence and continuation of an Event of Default, Lessors shall have the
      right, in their sole discretion, to terminate the Lease and trigger Lessee’s
      purchase obligation under Paragraph
      7
      above
      (which shall be in addition to any other obligations of Lessee under the Lease
      Documents). During the existence of any Event of Default, Lessors shall have
      the
      right to exercise any and all other rights and remedies provided for herein,
      under the UCC and at law or equity
      generally, including, without limitation, the right to foreclose the security
      interests granted
      herein
      and to realize upon any Collateral by any available judicial procedure or to
      take possession of and sell any or all of the Collateral with or without
      judicial process. During the existence of an Event of Default, Lessors may
      enter
      any of Lessee’s premises without legal process and without incurring liability
      to Lessee therefor, and Lessors may thereupon, or at any time thereafter, in
      its
      discretion without notice or demand, take and remove the Collateral to any
      place
      deemed advisable by Lessors, and Lessors may require Lessee to make the
      Collateral available to Lessors at a convenient place. During the existence
      of
      an Event of Default, with or without having the Collateral at the time or place
      of sale, Lessors may sell the Collateral, or any part thereof, at public or
      private sale, at any time or place, in one or more sales, at such price or
      prices, and upon such terms, either for cash, credit or future delivery, as
      Lessors may elect. Lessors shall give Lessee any written notice mailed to Lessee
      at least five (5) days prior to any sale or sales. At any public sale, Lessors
      may bid for and become the purchaser, and Lessors or any other purchaser at
      any
      such sale thereafter shall hold the Collateral sold absolutely free from any
      claim or right of whatsoever kind, including any equity of redemption and such
      right and equity are hereby expressly waived and released by Lessee. Lessors
      may
      sell the Collateral without giving any warranties as to the Collateral. Lessors
      specifically disclaim any warranties of title, possession, quiet enjoyment
      and
      the like. If Lessors dispose of any of the Collateral upon credit, Lessee will
      be credited with only those payments actually made by the purchaser and received
      by Lessors. In the event the purchaser of Collateral fails to pay for such
      Collateral, Lessors may resell such Collateral and Lessee shall be credited
      with
      any cash proceeds of the sale.

     

    (b)  Lessors
      shall have the right in its sole discretion to determine which rights, liens,
      security interests or remedies Lessors may at any time pursue, relinquish,
      subordinate, or modify or to take any other action with respect thereto and
      any
      such determination will not in any way modify or affect any of Lessors’ rights
      hereunder.

     

    (c)  In
      addition to any other rights which Lessors may have under applicable law, upon
      the occurrence of an Event of Default hereunder, Lessors shall have a right
      to
      apply Lessee’s
      property held by Lessors to reduce any of Lessee’s obligations under the Lease
      Documents.



    
      
        
          
             

          

        

        
        

      

      
        -15-

        
          

        

      

      
        
        

        
        

      

    



     

     

    (d)
      The
      enumeration of the foregoing rights and remedies under this Paragraph
      20
      is not
      intended to be exhaustive and the exercise of any right or remedy shall not
      preclude the exercise of any other right or remedies provided for herein or
      otherwise provided by law, all of which shall be cumulative and not
      alternative.

     

    21.  LESSORS’
      EXPENSE. Lessee shall pay Lessors on demand all out-of-pocket costs and expenses
      incurred (a) in the preparation, negotiation and execution of the Lease, the
      Sale and Leaseback Agreement and the TIC Agreement (and any ancillary
      documentation related thereto), including legal, appraisal and filing fees;
      (b)
      in the course of traveling to and inspecting the Collateral; (c) in connection
      with protecting and enforcing Lessors’ rights and interests in the Lease and the
      Collateral, including, legal, collection, and remarketing fees; and (d) by
      Lessors in enforcing
      the terms, conditions, or provisions of the Lease, the Sale and Leaseback
      Agreement or
      the TIC
      Agreement or upon the occurrence and continuation of an Event of
      Default.

     

    22.  LESSEE’S
      WAIVERS. To the extent permitted by applicable law, Lessee hereby waives any
      and
      all rights and remedies conferred upon a lessee by Sections 2A-508 through
      2A-522 of the UCC. To the extent permitted by applicable law, Lessee also hereby
      waives any rights now or hereafter conferred by statute or otherwise which
      may
      require Lessors to sell, lease, or otherwise use any Equipment in mitigation
      of
      Lessors’ damages as set forth in Paragraph
      20
      above or
      which may otherwise limit or modify any of Lessors’ rights or remedies under
Paragraph
      20
      above.
      Any action by Lessee against Lessors for any default by Lessors under any Lease
      shall be commenced within one year after any such cause of action
      accrues.

     

    23.  NOTICES;
      ADMINISTRATION. Except as otherwise provided herein, all notices, approvals,
      consents, correspondence, or other communications required or desired to be
      given hereunder shall be given in writing and shall be delivered by overnight
      courier, hand delivery, or certified or registered mail, postage
      prepaid:

     

    if
      to
      Lessee, at its address at:

     

    CFHS
      Holdings, Inc.

    c/o
      Centinela Hospital Medical Center
      555 East
      Hardy Avenue

    Inglewood,
      CA 90301

    Attention:
      Michael Rembis

    Telephone
      No.: (310) 680-8092 Telecopy No.: (310) 677-0535

    



    
      
        
          
             

          

        

        
        

      

      
        -16-

        
          

        

      

      
        
        

        
        

      

    



     

    with
      a
      copy to:

     

    Nixon
      Peabody LLP

    Two
      Embarcadero Center

    Suite
      2700

    San
      Francisco, CA 94111-3996 Attention: John B. Duncan Telephone No.: 415-984-8271
      Telecopy No.: 866-748-6040

     

    if
      to
      Lessors, at the address of LLC at:

     

    CFHS
      Leasing, LLC

    c/o
      Equis
      Financial Group
      200
      Nyala Farm Rd.

    Westport,
      CT 06880

    Attention:
      James A. Coyne Telephone No.: 203-341-0515 Telecopy No.:
      203-341-9988

     

    with
      a
      copy to:

     

    Shefsky
      & Froelich Ltd.

    444
      N.
      Michigan Ave., Suite 2500
      Chicago,
      Illinois 60611

    Attention:
      Michael J. Choate Telephone No.: 312-836-4066 Telecopy No.:
      312-527-5921

     

    and
      a
      copy to the Investor Representative (as defined in the TIC Agreement)
      at
      the
      address instructed by Trust

     

    or
      to
      such other address as shall be designated by such party in a written notice
      to
      the other party. All such notices shall be deemed given (i) if sent by certified
      or registered mail, three days after being postmarked, (ii) if sent by overnight
      delivery service, when received at the above stated addresses or when delivery
      is refused and (iii) if sent by facsimile transmission, when receipt of such
      transmission is acknowledged.

     

    24.
      REPRESENTATIONS. Lessee represents and warrants to Lessors that (a) Lessee
      is
      duly organized, validly existing, and in good standing under the laws of the
      State of its incorporation; (b) the execution, delivery, and performance by
      Lessee of this Agreement are within Lessee’s powers, have been duly authorized
      by all necessary action, and do not and will not contravene (i) Lessee’s
      organizational documents or (ii) any law, regulation, rule, or any contract
      or
      other agreement to which Lessee is a party; (c) no authorization or approval
      or
      other action by, and no notice to or filing with, any governmental authority
      or
      regulatory body is required for the due execution, delivery, and performance
      by
      Lessee of this Agreement; (d) the Lease constitutes the legal, valid, and
      binding obligation of Lessee enforceable against Lessee in accordance with
      its
      terms; and (e) all information supplied by Lessee to Lessors in connection
with
      the
      Lease is materially correct and does not omit any material statement necessary
      to insure that the information supplied is not misleading.

    



    
      
        
          
             

          

        

        
        

      

      
        -17-

        
          

        

      

      
        
        

        
        

      

    



     

     

    25.  
      FURTHER
      ASSURANCES. Lessee, upon the request of Lessors, will execute, acknowledge,
      record, or file, as the case may be, such further documents and do such further
      acts as may be reasonably necessary, desirable, or proper to carry out more
      effectively the purposes of this Agreement. Lessee hereby appoints LLC as its
      attorney-in-fact to execute on behalf of Lessee and authorizes LLC to file
      without Lessee’s signature any UCC financing statements and amendments LLC deems
      advisable.

     

    26.  
      FINANCIAL STATEMENTS. Lessee shall deliver to LLC (and following an Event of
      Default also to Trust): (a) as soon as available, but not later than 120 days
      after the end of each fiscal year of Lessee and its consolidated subsidiaries,
      the consolidated balance sheet, income statement, and statements of cash flows
      and shareholders equity for Lessee and its consolidated subsidiaries (the
“Financial Statements”) for such year, reported on by independent certified
      public accountants without an adverse qualification together with a
      certification duly executed by a responsible officer of Lessee that the
      Financial Statements have been prepared in accordance with generally accepted
      accounting principles and are fairly stated in all material respects (subject
      to
      normal year-end audit adjustments); (b) as soon as available, but not later
      than
      60 days after the end of each of the first three fiscal quarters in any fiscal
      year of Lessee and its consolidated subsidiaries, the financial statements
      for
      the most recently completed fiscal quarter; (c) any Financial Statements or
      other similar report provided to any of Lessee’s lenders; and (d) any other
      relevant documents Lessors reasonably request. Prior to an Event of Default,
      within 90 days after the end of each fiscal year of Lessee, Lessee shall deliver
      to Trust a summary of significant financial and other events. Lessee shall
      also
      deliver to Lessors as soon as available copies of all press releases and other
      similar communications issued by Lessee.

     

    27.  
      CONSENT
      TO JURISDICTION. Lessee irrevocably submits to the jurisdiction of any Delaware
      state or federal court sitting in Delaware for any action or proceeding arising
      out of or relating to this Agreement or the transactions contemplated hereby,
      and Lessee irrevocably agrees that all claims in respect of any such action
      or
      proceeding may be heard and determined in such Delaware state or federal
      court.

     

    28.  WAIVER
      OF
      JURY TRIAL. LESSEE AND LESSORS IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY
      IN
      ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
      AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     

    29.  
      FINANCE
      LEASE. Lessee and Lessors agree that the Lease is a “Finance Lease” as defined
      by Section 2A-103(1)(g) of the UCC as adopted in any applicable State from
      time
      to time.

     

    30.  
      SPECIAL
      TAX INDEMNIFICATION. Each of the parties hereby agrees to treat the Lease (a)
      as
      one or more loans (taken together with the Sale and Leaseback Agreement) from
      Lessors to Lessee in the principal amount equal to the Purchase Price (as
      defined in the Sale and Leaseback Agreement) for federal income tax purposes
      under the Internal Revenue Code of 1986, as amended, and any corresponding
      state
      or local income tax laws and state and local sales and
      use
      tax laws (and agree to report these transaction as one or more loans on all
      federal, state and local tax, informational or other returns unless required
      to
      report them differently by any applicable taxing jurisdiction or under any
      applicable law) and (b) as a financing transaction under the laws of any
      applicable State (including Cal. Code Regs. 18 section 1660(a) (3) if California
      law is deemed applicable). If Lessors are required to treat the Lease (or the
      Lease taken together with the Sale and Leaseback Agreement) as one or more
      transactions other than loans from Lessors to Lessee for federal, state or
      local
      tax purposes, and a Lessor is subject to additional federal, state or local
      taxes as a result of such a recharacterization of the Lease (or the Lease taken
      together with the Sale and Leaseback Agreement), Lessee shall pay the Lessor
      additional rent (“Additional Rent”) in a lump sum in an amount needed to provide
      the Lessor with the same after-tax yield and after-tax cash flow as would have
      been realized by the Lessor had the Lessor been entitled to treat the Lease
      (taken together with the Sale and Leaseback Agreement) as a loan from Lessors
      to
      Lessee. The Additional Rent shall be computed by Lessors, which computation
      shall be binding on Lessee. The Additional Rent shall be due immediately upon
      written notice by Lessors to Lessee of a Lessor’s inability to obtain tax
      benefits, the inclusion of any amount in income other than the Rent or the
      recognition of income in respect of the Rent earlier than anticipated pursuant
      to this Agreement. The provision of this Paragraph
      30
      shall
      survive the termination of this Agreement.

    



    
      
        
          
             

          

        

        
        

      

      
        -18-

        
          

        

      

      
        
        

        
        

      

    



     

     

    31.  OBSERVER
      RIGHTS. Lessors shall designate up to two (2) authorized representatives
      who shall be entitled to (a) attend all meetings of Lessee’s Board of Directors
      and
      committees appointed by Lessee’s Board of Directors as a non-voting observer and
      (b) receive all information provided to members of Lessee’s Board of Directors
      and members of committees appointed by Lessee’s Board of Directors.

     

    32.  GOVERNING
      LAW; SEVERABILITY. The Lease shall be governed by the laws of the State of
      New
      York without giving effect to the conflict of law principles thereof. If any
      provision shall be held to be invalid or unenforceable, the validity and
      enforceability of the remaining provisions shall not in any way be affected
      or
      impaired.

     

    Lessee
      acknowledges that Lessee has read the Lease, understands it, and agrees to
      be
      bound by its terms and conditions. Further, Lessee and Lessors agree that the
      Lease, the Sale and Leaseback Agreement and the TIC Agreement are the complete
      and exclusive statement of the agreement between the parties relating to the
      subject matter hereof, superseding all proposals or prior agreements, oral
      or
      written, and all other communications between the parties relating to the
      subject matter hereof.

     

    33.  CONCERNING
      THE TRUST COMPANY. Notwithstanding any other provision herein or elsewhere,
      this
      Agreement has been executed and delivered by Deutsche Bank National Trust
      Company, not in its individual capacity, but solely in its capacity as Equipment
      Trustee of Trust, in no event shall Deutsche Bank National Trust Company or
      the
      Equipment Trustee have any liability in respect of the representations,
      warranties, or obligations of Trust hereunder, as to all of which recourse
      shall
      be had solely to the assets of the relevant series of Trust, and for all
      purposes of this Agreement, Deutsche Bank National Trust Company shall be
      entitled to the benefits of the governing instrument of Trust.

     

    [Remainder
      of Page Intentionally Left Blank]

    



    
      
        
          
             

          

        

        
        

      

      
        -19-

        
          

        

      

      
        
        

        
        

      

    



     

    IN
      WITNESS WHEREOF, the parties hereto have executed or caused this Agreement
      to be
      duly executed as of the date first written above.

     

    LESSEE:

     

    CFHS
      HOLDINGS, INC.,
      a
      Delaware corporation

     

    By:

    Name:
      Title:

     

    LESSORS:

     

    CFHS
      EQUIPMENT HOLDINGS TRUST,
      a
      Delaware statutory trust

     

    By:
      DEUTSCHE BANK NATIONAL TRUST COMPANY, not it its individual capacity but solely
      as Equipment Trustee

     

    By:

    Name:
      Title:

     

    CFHS
      LEASING, LLC,

    a
      Delaware limited liability company

     

    By:

     

    Name:
      Title: