exv10w1






REVOLVING CREDIT AND SECURITY AGREEMENT




between




AMERICA SERVICE GROUP INC.

PRISON HEALTH SERVICES, INC.

PRISON HEALTH SERVICES OF INDIANA, L.L.C.

SECURE PHARMACY PLUS, LLC

CORRECTIONAL HEALTH SERVICES, LLC




and




CAPITALSOURCE BANK




Dated as of

July 28, 2009





 









 










TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 
	 	 	 	 
	I.
	 	DEFINITIONS
	 	 	1	 
	1.1
	 	General Terms
	 	 	1	 
	II.
	 	ADVANCES, PAYMENT AND INTEREST
	 	 	2	 
	2.1
	 	The Revolving Facility
	 	 	2	 
	2.2
	 	The Revolving Loans; Maturity
	 	 	2	 
	2.3
	 	Interest
on the Revolving Facility
	 	 	2	 
	2.4
	 	Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate
	 	 	3	 
	2.5
	 	Collections; Repayment; Borrowing Availability and Lockbox
	 	 	3	 
	2.6
	 	Manner of Payment; Promise to Pay
	 	 	4	 
	2.7
	 	Repayment of Excess Advances
	 	 	4	 
	2.8
	 	Payments by Agent
	 	 	5	 
	2.9
	 	Grant of Security Interest; Collateral
	 	 	5	 
	2.10
	 	Collateral Administration
	 	 	6	 
	2.11
	 	Power of Attorney
	 	 	7	 
	2.12
	 	Letters of Credit
	 	 	8	 
	2.13
	 	Evidence of Loans
	 	 	11	 
	III.
	 	FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE
	 	 	12	 
	3.1
	 	Unused Line Fee
	 	 	12	 
	3.2
	 	Collateral Management Fee
	 	 	12	 
	3.3
	 	Early Termination Fee
	 	 	12	 
	3.4
	 	Computation of Fees; Lawful Limits
	 	 	13	 
	3.5
	 	Default Rate of Interest
	 	 	13	 
	3.6
	 	Acknowledgement of Joint and Several Liability
	 	 	13	 
	IV.
	 	CONDITIONS PRECEDENT
	 	 	14	 
	4.1
	 	Conditions to Effectiveness of Agreement and Closing
	 	 	14	 
	4.2
	 	Conditions to Each Advance and Issuance of Each Letter of Credit
	 	 	16	 
	V.
	 	REPRESENTATIONS AND WARRANTIES
	 	 	16	 
	5.1
	 	Organization and Authority
	 	 	17	 
	5.2
	 	Loan Documents
	 	 	17	 
	5.3
	 	Subsidiaries, Capitalization and Ownership Interests
	 	 	17	 
	5.4
	 	Properties
	 	 	18	 
	5.5
	 	Other Agreements
	 	 	18	 
	5.6
	 	Litigation
	 	 	18	 
	5.7
	 	Hazardous Materials
	 	 	18	 
	5.8
	 	Tax Returns; Governmental Reports
	 	 	19	 
	5.9
	 	Financial Statements and Reports
	 	 	19	 
	5.10
	 	Compliance with Law
	 	 	19	 
	5.11
	 	Intellectual Property
	 	 	20	 
	5.12
	 	Licenses and Permits; Labor
	 	 	20	 
	5.13
	 	No Default
	 	 	20	 
	5.14
	 	Disclosure
	 	 	20	 
	5.15
	 	Existing Indebtedness; Investments, Guarantees and Certain Contracts
	 	 	20	 
	5.16
	 	Other Agreements
	 	 	21	 






i









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 
	 	 	 	 
	5.17
	 	Insurance
	 	 	21	 
	5.18
	 	Names; Location of Offices, Records and Collateral
	 	 	21	 
	5.19
	 	Non-Subordination
	 	 	21	 
	5.20
	 	Accounts
	 	 	21	 
	5.21
	 	Survival
	 	 	22	 
	5.22
	 	Performance and Payment Bonds for Government Contracts
	 	 	22	 
	5.23
	 	OFAC and Anti-Terrorism Regulations
	 	 	22	 
	VI.
	 	AFFIRMATIVE COVENANTS
	 	 	22	 
	6.1
	 	Financial Statements, Reports and Other Information
	 	 	22	 
	6.2
	 	Payment of Obligations
	 	 	24	 
	6.3
	 	Conduct of Business and Maintenance of Existence and Assets
	 	 	24	 
	6.4
	 	Compliance with Legal and Other Obligations
	 	 	24	 
	6.5
	 	Insurance
	 	 	25	 
	6.6
	 	True Books
	 	 	25	 
	6.7
	 	Inspection; Periodic Audits
	 	 	25	 
	6.8
	 	Further Assurances; Post Closing
	 	 	26	 
	6.9
	 	Payment of Indebtedness
	 	 	26	 
	6.10
	 	Lien Terminations
	 	 	26	 
	6.11
	 	Use of Proceeds
	 	 	26	 
	6.12
	 	Collateral Documents; Security Interest in Collateral
	 	 	26	 
	6.13
	 	Taxes and Other Charges
	 	 	27	 
	6.14
	 	New Subsidiaries
	 	 	27	 
	6.15
	 	Schedules to the Loan Agreement
	 	 	28	 
	6.16
	 	New Government Contracts
	 	 	28	 
	VII.
	 	NEGATIVE COVENANTS
	 	 	28	 
	7.1
	 	Financial Covenants
	 	 	28	 
	7.2
	 	Permitted Indebtedness
	 	 	28	 
	7.3
	 	Permitted Liens
	 	 	29	 
	7.4
	 	Investments; New Facilities or Collateral; Subsidiaries
	 	 	30	 
	7.5
	 	Dividends; Redemptions; Equity
	 	 	30	 
	7.6
	 	Transactions with Affiliates
	 	 	31	 
	7.7
	 	Charter Documents; Fiscal Year; Dissolution; Collateral Assignment
	 	 	31	 
	7.8
	 	Transfer of Assets
	 	 	32	 
	7.9
	 	Contingent Obligations
	 	 	32	 
	7.10
	 	Truth of Statements
	 	 	32	 
	7.11
	 	Payment on Subordinated Debt
	 	 	32	 
	7.12
	 	IRS Form 8821
	 	 	32	 
	VIII.
	 	EVENTS OF DEFAULT
	 	 	32	 
	IX.
	 	RIGHTS AND REMEDIES AFTER DEFAULT
	 	 	35	 
	9.1
	 	Rights and Remedies
	 	 	35	 
	9.2
	 	Application of Proceeds
	 	 	35	 
	9.3
	 	Rights of Agent to Appoint Receiver
	 	 	36	 
	9.4
	 	Rights and Remedies not Exclusive
	 	 	36	 
	X.
	 	WAIVERS AND JUDICIAL PROCEEDINGS
	 	 	36	 
	10.1
	 	Waivers
	 	 	36	 
	10.2
	 	Delay; No Waiver of Defaults
	 	 	37	 






ii









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 
	 	 	 	 
	10.3
	 	Jury Waiver
	 	 	37	 
	10.4
	 	Cooperation in Discovery and Litigation
	 	 	38	 
	10.5
	 	Amendment and Waivers
	 	 	38	 
	XI.
	 	EFFECTIVE DATE AND TERMINATION
	 	 	38	 
	11.1
	 	Effectiveness and Termination
	 	 	39	 
	11.2
	 	Survival
	 	 	39	 
	XI-A.
	 	AGENCY PROVISIONS
	 	 	39	 
	11-A.1
	 	Agent
	 	 	39	 
	11-A.2
	 	Consents
	 	 	43	 
	11-A.3
	 	Set Off and Sharing of Payments
	 	 	43	 
	11-A.4
	 	Disbursement of Funds
	 	 	44	 
	11-A.5
	 	Settlements; Payments and Information
	 	 	44	 
	11-A.6
	 	Dissemination of Information
	 	 	46	 
	XI-B.
	 	BORROWING AGENCY
	 	 	46	 
	11-B.1
	 	Borrowing Agency Provisions
	 	 	46	 
	11-B.2
	 	Waiver of Subrogation
	 	 	47	 
	XII.
	 	MISCELLANEOUS
	 	 	47	 
	12.1
	 	Governing Law; Jurisdiction; Service of Process; Venue
	 	 	47	 
	12.2
	 	Successors and Assigns; Assignments and Participation; New Lenders
	 	 	47	 
	12.3
	 	Application of Payments
	 	 	49	 
	12.4
	 	Indemnity
	 	 	50	 
	12.5
	 	Notice
	 	 	50	 
	12.6
	 	Severability; Captions; Counterparts; Facsimile Signatures
	 	 	51	 
	12.7
	 	Expenses
	 	 	51	 
	12.8
	 	Entire Agreement
	 	 	51	 
	12.9
	 	Agent Approvals
	 	 	52	 
	12.10
	 	Confidentiality and Publicity
	 	 	52	 
	12.11
	 	Release of Agent and Lenders
	 	 	52	 
	12.12
	 	Agreement Controls
	 	 	53	 
	12.13
	 	Patriot Act
	 	 	53	 







iii











 





REVOLVING CREDIT AND SECURITY AGREEMENT




     THIS REVOLVING CREDIT AND SECURITY AGREEMENT (the “Agreement”) dated as of July 28, 2009, is
entered into between AMERICA SERVICE GROUP INC., a Delaware corporation (“ASG”), PRISON HEALTH
SERVICES, INC., a Delaware corporation (“PHS”), PRISON HEALTH SERVICES OF INDIANA, L.L.C., an
Indiana limited liability company (“PHS Indiana”), SECURE PHARMACY PLUS, LLC, a Tennessee limited
liability company (“SPP”), and CORRECTIONAL HEALTH SERVICES, LLC, a New Jersey limited liability
company (“CHS” and together with ASG, PHS, PHS Indiana, and SPP, individually and collectively as
the “Borrower”), CAPITALSOURCE BANK, a California industrial bank (“CapitalSource”), as
administrative agent and collateral agent for Lenders (in such capacities, the “Agent”), and the
Lenders party hereto.



     WHEREAS, Borrower has requested that Lenders make available to Borrower a revolving credit
facility (the “Revolving Facility”) in a maximum principal amount at any time outstanding of up to
Forty Million Dollars ($40,000,000) (the “Facility Cap”) and within the Facility Cap, a sublimit of
Fifteen Million Dollars ($15,000,000) (the “L/C Sublimit”), the proceeds of such Revolving Facility
shall be used by Borrower for general corporate matters and purposes, and working capital needs in
connection with its provision of medical and related services to correctional facilities;



     WHEREAS, the parties agree that the Existing Letters of Credit (as defined below) shall be
governed by and deemed to be outstanding under the terms and conditions of this Agreement; and



     WHEREAS, Lenders are willing to make the Revolving Facility available to Borrower 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, Agent and
Lenders hereby agree 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 and Annex I hereto shall have the
meanings given such terms in Appendix A and Annex I, which are incorporated herein
and made a part hereof. All capitalized terms used which are not specifically defined 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, any agreement
or contract referred to herein or in Appendix A shall mean such agreement 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 or
elsewhere in this Agreement shall have the meanings given to such terms in and shall be interpreted
in accordance with GAAP. References herein to “Eastern Time” shall mean eastern standard time or
eastern daylight savings time as in effect on any date of determination in the eastern United
States of America.




 









 








II. ADVANCES, PAYMENT AND INTEREST




     2.1 The Revolving Facility



          (a) Subject to the provisions of this Agreement, each Lender agrees to make available its Pro
Rata Share of Advances, including Advances in connection with the issuance or collateralization of
Letters of Credit, to Borrower under the Revolving Facility from time to time during the Term;
provided, that (i) the Pro Rata Share of the Advances of any Lender shall not at any time exceed
its separate Commitment, and (ii) the aggregate amount of all Advances at any time outstanding
under the Revolving Facility, together with the then aggregate amount of L/C Exposure, shall not
exceed the lesser of (A) the Facility Cap and (B) the Availability. The obligations of Lenders
hereunder shall be several and not joint up to the amount of the Commitments. 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 within
the Borrowing Base for Advances shall be made by Agent in its Permitted Discretion and is final and
binding upon Borrower. Unless otherwise permitted by Agent, each Advance shall be in an amount of
at least $100,000. Subject to the provisions of this Agreement, Borrower may request Advances
under the Revolving Facility up to and including the value, in Dollars, of 85% of the Borrowing
Base (such calculated amount being referred to herein as the “Availability”). Advances under the
Revolving Facility automatically shall be made for the payment of interest on the Loans and other
Obligations on the date when due to the extent available and as provided for herein.



          (b) Agent has established the above-referenced advance rate for Availability and, following an
audit and review of Borrower’s financial statements and with not less than three (3) Business Days
prior notice to Borrower (except that upon the occurrence, and during the continuance, of a Default
or Event of Default, such notice shall not be required), may further adjust the Availability and
such advance rate by applying percentages (known as “liquidity factors”) to Eligible Receivables
based upon Borrower’s actual recent collection history all in a manner consistent with Agent’s
underwriting practices and procedures, including, without limitation, Agent’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 Agent, throughout the Term, subject to prior notice to Borrower, as warranted by
Agent’s underwriting practices and procedures in its Permitted Discretion. Also, Agent shall have
the right to establish and readjust from time to time, in its Permitted Discretion, 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 The Revolving Loans; Maturity




          All amounts outstanding under the Revolving Loans and other Obligations under the Revolving
Facility shall be due and payable in full, if not earlier in accordance with this Agreement, upon
the earliest of (i) any automatic acceleration upon an Event of Default as provided for herein;
(ii) Agent’s acceleration and demand for payment following an Event of Default, and (iii) the last
day of the Term (such earlier date being the “Maturity Date”).



     2.3 Interest on the Revolving Facility




          Interest on outstanding Advances under the Revolving Loans shall be payable monthly in arrears
on the first day of each calendar month at an annual rate of LIBOR plus 2.0%, calculated on the
basis of a 360-day year and for the actual number of calendar days elapsed in each interest
calculation period. Notwithstanding the foregoing (and without affecting Agent’s rights under
Section 3.5 hereof),



2









 







during the continuance of an Event of Default and at any other time when Agent has determined
that LIBOR cannot be readily determined or is otherwise unavailable, 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 the Prime Rate; provided, however, that,
notwithstanding any provision of any Loan Document, for the purpose of calculating interest at any
time hereunder, LIBOR shall be not less than 3.14%, 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. Interest accrued on each Advance under the Revolving Loans shall be payable in accordance
with the procedures provided for in Section 2.5 and Section 2.6, commencing August
1, 2009 and continuing until the later of the expiration of the Term and the full performance and
irrevocable payment in full in cash of the Obligations and termination of this Agreement. Interest
on outstanding Advances under the Revolving Loans shall accrue from the respective funding dates of
the Advances.



     2.4 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 Agent irrevocable written notice requesting an Advance under the Revolving Facility by
notifying Agent not later than 12:00 p.m. (New York City 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”), and delivering to Agent by noon (New York City time) on the date of the proposed borrowing,
a completed Borrowing Certificate and relevant supporting documentation satisfactory to Agent in
its Permitted Discretion (which shall only include an Accounts re-aging once each month, as
specified below), which shall (a) specify the proposed Borrowing Date of such Advance which shall
be a Business Day, (b) specify the principal amount of such requested Advance, (c) certify the
matters contained in Section 4.2, and (d) specify the amount of any known recoupments or
setoffs by any third party payor being sought, requested or claimed, or, to Borrower’s knowledge,
threatened against Borrower to the extent not otherwise reflected in the calculation of
Availability. Each time a request for an Advance is made, and, in any event and regardless of
whether an Advance is being requested, each month during the Term until the Obligations are
indefeasibly paid in cash in full and this Agreement is terminated, Borrower shall deliver to Agent
a Borrowing Certificate accompanied by a separate detailed aging and categorization of Borrower’s
accounts receivable, and such other supporting documentation with respect to the figures and
information in the Borrowing Certificate as Agent shall request in its Permitted Discretion from a
credit or security perspective or otherwise. On each Borrowing Date, Borrower irrevocably
authorizes Agent to disburse the proceeds of the requested Advance to the Borrower’s account(s) as
set forth on Schedule 2.4, in all cases for credit to the Borrower (or to such other
account as to which the Borrower shall instruct Agent) via Federal funds wire transfer no later
than 4:00 p.m. Eastern Time. If Borrower’s Borrowing Certificate does not request the same dollar
amount as that which Borrower estimated in its notification to Agent, Borrower agrees to pay any
interest cost incurred by Agent in connection with such estimated funds.



     2.5 Collections; Repayment; Borrowing Availability and Lockbox




          Borrower shall maintain a lockbox together with a blocked account (individually and
collectively, the “Blocked Account”) with one or more banks acceptable to Agent (each, a “Lockbox
Bank”), and shall execute with each Lockbox Bank one or more agreements acceptable to Agent in its
Permitted Discretion (individually and collectively, the “Lockbox Agreement”), and such other
agreements related thereto as Agent may require in its Permitted Discretion. Borrower shall ensure
that all collections of its Accounts and all other cash payments received by Borrower are paid and
delivered directly from Account Debtors and other Persons into the Blocked Account. The Lockbox
Agreements shall provide that the Lockbox Banks on each Business Day will promptly transfer all
funds paid into the Blocked Accounts into a depository account or accounts maintained by Agent or
an Affiliate of Agent at



3









 







such bank as Agent may communicate to Borrower from time to time (the “Concentration
Account”). Notwithstanding and without limiting any other provision of any Loan Document, Agent
shall apply to the Obligations, on a daily basis, all funds transferred into the Concentration
Account pursuant to the Lockbox Agreement and this Section 2.5 in such order and manner as
determined by Agent. To the extent that any Accounts collections of Borrower or any other cash
payments received by Borrower are not sent directly to the Blocked Account but are received by
Borrower or any of its Affiliates, such collections and proceeds shall be held in trust for the
benefit of Agent and Lenders and promptly remitted (and in any event within two (2) Business Days),
to the Blocked Account for transfer to the Concentration Account. Borrower acknowledges and agrees
that compliance with the terms of this Section 2.5 is an essential term of this Agreement,
and that, in addition to and notwithstanding any other rights Agent may have hereunder, under any
other Loan Document, under applicable law or at equity, upon each material failure by Borrower to
comply with any such terms which is not promptly remedied, Agent 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 Agent from considering any failure to
comply with the terms of this Section 2.5 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,
only for purposes of calculating interest hereunder, shall be subject to a two (2) Business Day
clearance period unless the net Advance balance is zero or a credit at the end of the day in which
case collection swept to the Concentration Account for such day will not be subject to the two (2)
Business Day clearance period. If as the result of collections of Accounts and/or any other cash
payments received by Borrower pursuant to this Section 2.5 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 demand therefor. If applicable, at
any time prior to the execution of all or any of the Lockbox Agreements and operation of the
Blocked Account, Borrower and its Subsidiaries shall direct all collections or proceeds it receives
on Accounts or from other Collateral to the accounts(s) and in the manner specified by Agent in its
sole discretion.



     2.6 Manner of Payment; Promise to Pay




          (a) Any payments made by Borrower (other than payments automatically paid through Advances
under the Revolving Facility as provided herein), shall be made only by ACH or wire transfer on the
date when due, without offset or counterclaim, in Dollars, in immediately available funds to such
account as may be indicated in writing by Agent to Borrower from time to time. Any such payment
received after 4:00 p.m. Eastern Time on any date 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. Agent will provide detailed monthly
invoices of such charges and payments.



          (b) Borrower absolutely and unconditionally promises to pay the Obligations hereunder in
accordance with the manner and terms hereof, without any deduction whatsoever, without setoff,
recoupment or counterclaim, each of which claim or defense hereby is waived.



     2.7 Repayment of Excess Advances




          If at any time the sum of outstanding Advances under the Revolving Facility plus any Unfunded
L/C Exposure exceeds the lesser of the Facility Cap or the Availability, such excess amount shall
be immediately due and payable by Borrower without the necessity of any demand, at the Payment



4









 







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 2.6.



     2.8 Payments by Agent




          Should any amount required to be paid under any Loan Document remain unpaid for ten (10)
Business Days from the date due, such amount may be paid by Agent, for the account of Lenders,
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 Agent,
for the benefit of Lenders, by way of direct payment of the relevant amount, interest or
Obligations. No payment or prepayment of any amount by Agent, Lenders or any other Person shall
entitle any Person to be subrogated to the rights of Agent and/or Lenders 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 Agent and/or Lenders as a result of 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.



     2.9 Grant of Security Interest; Collateral




          (a) To secure the payment and performance of the Obligations, each Borrower hereby grants to
Agent, for the benefit of itself and the Lenders, a continuing first priority security interest in
and Lien upon, and pledges to Agent, for the benefit of itself and the Lenders, all of its right,
title and interest in and to the following, together with property of a similar nature which each
such Borrower owns or in which each such Borrower hereafter acquires any right, title or interest
(collectively and each individually, the “Collateral”):



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



               (ii) all of such Borrower’s intangible personal property, including without limitation all
present and future Accounts, securities, contract rights, Permits, General Intangibles, Chattel
Paper, Investment Property, Intellectual Property including goodwill, Documents, Instruments and
Deposit Accounts, Letter of Credit Rights and supporting obligations rights to the payment of money
or other forms of consideration of any kind, tax refunds, insurance proceeds (including, without
limitation, proceeds of any life insurance policy), 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 Agent shall not have a Lien in any rights under
any Government Contract of such Borrower or in the related Government Account where the taking of
such security interest would be prohibited by applicable law (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); 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.



5









 





          (b) Notwithstanding the foregoing provisions of this Section 2.9, such grant of a
security interest shall not extend to, and the term “Collateral” shall not include, any General
Intangibles of Borrower to the extent that (but only 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 theretofor have been
excluded from such grant of a security interest and from the term “Collateral.”



          (c) In addition to the foregoing, to secure the payment and performance of the Obligations,
ASG has pledged to Agent, for the benefit of the Lenders, all of the securities of its Subsidiaries
pursuant to the Stock Pledge Agreement.



          (d) Each Borrower has full right and power to grant to Agent a perfected, first priority
security interest and Lien in the Collateral pursuant to this Agreement. Upon the execution and
delivery of this Agreement, and upon the filing of the necessary financing statements, which
Borrower hereby authorizes Agent to file, and delivery of any necessary stock certificates, without
any further action, Agent 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 will be, on the Closing Date, on file in any public office except those (a) on
behalf of Agent, and (b) in connection with Permitted Liens. Borrower is not a party to any
agreement, document or instrument that conflicts with this Section 2.9 or that otherwise
relates to a security interest in, assignment of, or Lien upon the Collateral.



     2.10 Collateral Administration




          (a) Except as permitted pursuant to Sections 7.8(a) and 7.8(b), all Collateral
(except Deposit Accounts and Collateral having an aggregate value of $50,000 or less at any one
location) will at all times be kept by Borrower at the locations set forth on Schedule 5.4
hereto, which may be amended from time to time, and shall not, without thirty (30) calendar days
prior written notice to Agent, be moved therefrom, and in any case shall not be moved outside the
continental United States. Whether or not an Event of Default has occurred, any of the Agent’s
officers, employees, representatives or agents shall have the right, at any time during normal
business hours, in the name of Agent, any designee of Agent, or Borrower, to verify the validity,
amount or any other matter relating to the Collateral. Borrower shall cooperate fully with Agent
in an effort to facilitate and promptly conclude such verification process. Notwithstanding
anything in this subsection to the contrary, Agent shall have the right at all times after the
occurrence and during the continuation of an Event of Default to notify Persons owing Accounts to
Borrower that their Accounts have been assigned to Agent and to collect such Accounts directly in
its own name and to charge collection costs and expenses, including reasonable attorney’s fees, to
Borrower.



          (b) As and when determined by Agent in its Permitted Discretion, Agent will perform the
searches described in clauses (i) and (ii) below against Borrower or any Guarantor (the results



6









 







of which are to be consistent with Borrower’s representations and warranties under this
Agreement), on a quarterly basis at Borrower’s expense, unless an Event of Default has occurred and
is continuing in which case such searches shall be conducted as often as Agent deems reasonably
appropriate at Borrower’s expense: (i) UCC searches with the Secretary of State and local filing
offices of each jurisdiction where Borrower and/or any Guarantors are organized; and (ii) judgment,
federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched
under clause (i) above, and in any jurisdiction where Borrower or Guarantors maintain their
respective offices or place of business or material assets to the extent that the UCC would permit
a filing in such jurisdiction to attach a security interest in or Lien upon any Collateral. Agent
will (i) upon Borrower’s request and at Borrower’s expense, provide copies of any such searches to
Borrower and (ii) will use a search service with which Agent has a discount arrangement in an
effort to minimize the expense of such searches.



          (c) Upon Agent’s request, Borrower shall immediately deliver to Agent all items for which
Lender must receive possession to obtain a perfected Lien and all notes, certificates, and
documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar
instruments constituting Collateral.



          (d) Borrower shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit such records to Agent on such periodic bases as Agent may
request in its Permitted Discretion. In addition, if Accounts of Borrower in an aggregate face
amount in excess of $500,000 become ineligible because they fall within one of the specified
categories of ineligibility set forth in the definition of Eligible Billed Receivables or Eligible
Unbilled Receivables, Borrower shall notify Agent of such occurrence within two (2) Business Days
following its discovery of such occurrence and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence. After the occurrence and during the continuation of an Event of Default,
and upon Agent’s request, Borrower shall execute and deliver to Agent formal written assignments of
all of its Accounts weekly or daily as Agent 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.



          (e) Borrower (i) shall provide prompt written notice to its current bank to transfer all
items, collections and remittances to the Concentration Account, and to any Account Debtor not
remitting to the Blocked Account, to do so promptly, (ii) after the occurrence and during the
continuation of an Event of Default, and upon Agent’s request, shall provide prompt written notice
to each Account Debtor that Agent 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
directly to Lender’s Concentration Account; and (iii) shall do anything further that may be
lawfully required by Agent to secure Agent, for the benefit of itself and Lenders, and to
effectuate the intentions of the Loan Documents. Borrower hereby authorizes Agent, for purposes of
clause (i) hereof, upon any failure to send such notices and directions within twenty (20) calendar
days after the date of this Agreement (or twenty (20) calendar days after the Person becomes an
Account Debtor), and for purposes of clause (ii) hereof, promptly following the occurrence and
continuation of such Event of Default, to send any and all similar notices and directions to such
Account Debtors.



     2.11 Power of Attorney




          Agent hereby is irrevocably made, constituted and appointed the true and lawful attorney for
Borrower (without requiring Borrower to act as such) with full power of substitution, coupled with
an interest, to do the following: (i) upon the occurrence and during the continuance of an Event of
Default, 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 such Person’s Accounts; (ii) upon the occurrence and during the continuance of an
Event of Default, execute in the



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name of Borrower any financing statements, schedules, assignments, instruments, documents, and
statements that it is obligated to give Agent under any of the Loan Documents; and (iii) do such
other and further acts and deeds in the name of Borrower that Agent may deem necessary or desirable
to enforce or to perfect Agent’s security interest or lien or rights in any Collateral. In
addition, if the Borrower breaches its obligation hereunder to direct payments of Accounts within
the time periods specified herein to the Blocked Account, Agent, as the irrevocably made,
constituted and appointed true and lawful attorney for the Borrower pursuant to this paragraph,
may, by the signature or other act of any of Agent’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 Blocked Account.



     2.12 Letters of Credit




          (a) Subject to the terms and conditions of this Agreement, Agent agrees to cause an L/C Issuer
at any time and from time to time after the date hereof and prior to the Termination Date to issue
standby letters of credit which comply with the provisions of this Section 2.12 for the
account of Borrower (each such standby letter of credit, and each Existing Letter of Credit, a
“Letter of Credit”) or to purchase participations or execute indemnities or reimbursement
obligations (each such undertaking, an “L/C Undertaking”) with respect to Letters of Credit
issued by an Underlying Issuer for the account of Borrower (in which case, Agent agrees to cause
such Underlying Issuer to issue Letters of Credit which comply with the provisions of this
Section 2.12 for the account of Borrower; provided, however, that an L/C
Issuer will not be required to issue, purchase or execute a requested Letter of Credit, and Agent
will not be required to cause same, if any of the following would result after giving effect
thereto: the L/C Exposure would (i) exceed the L/C Sublimit or (ii) when taken together with the
outstanding Advances, would exceed the lesser of the Facility Cap or the Availability, without
duplication. As of the Closing Date, the Existing Letters of Credit will be deemed to be
outstanding under this Agreement and subject to the provisions herein.



          (b) Borrower may from time to time request L/C Issuer to assist Borrower in establishing or
opening a Letter of Credit by delivering to L/C Issuer, with a copy to Agent, the L/C Issuer’s
standard form of standby letter of credit application (the “Letter of Credit Application”)
completed to the satisfaction of the L/C Issuer (in the exercise of its sole discretion), and such
other certificates, documents and other papers and information as Agent or L/C Issuer may
reasonably request. If requested by Agent or L/C Issuer, Borrower also shall be an applicant under
the application with respect to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. Borrower acknowledges that the issuance of any Letter of Credit shall occur no sooner
than five (5) Business Days following the submission of a Letter of Credit Application to, and to
the satisfaction of, the L/C Issuer (in its sole discretion); provided, however, that Agent shall
use good faith efforts to cause the L/C Issuer to issue an Letter of Credit within ten (10)
Business Days following the submission of a Letter of Credit Application to, and to the
satisfaction of, the L/C Issuer (in its sole discretion).



          (c) Each Letter of Credit (and each corresponding Underlying Letter of Credit) shall, among
other things, (i) be for a standby letter of credit, (ii) be in form and substance acceptable to
the L/C Issuer (in the exercise of its Permitted Discretion), including the requirement that the
amounts payable thereunder must be payable in Dollars, (iii) subject to Section 2.12(e),
have an expiry date not later than twelve (12) months after such Letter of Credit’s date of
issuance and in no event later than 30 days prior to the Termination Date and (iv) be issued for
the purpose for which the Borrower has historically obtained letters of credit, or for such other
purpose as is reasonably acceptable to Agent, and, in all cases, for a purpose permitted for use of
proceeds hereunder. Each Letter of Credit Application and each Letter of Credit shall be subject
to the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber
of Commerce Publication No. 600, and any amendments or revisions thereof (“UCP”).



8









 





          (d) Borrower shall authorize and direct the L/C Issuer and each Underlying Issuer to name
Borrower as the “Account Party” therein and to accept and rely upon the Agent’s instructions and
agreements with respect to all matters arising in connection with the issuance of the Letters of
Credit and the applications therefor.



          (e) If a requested Letter of Credit is to have or is for the purpose of replacing an existing
Letter of Credit that has an expiry date which is after the Maturity Date, then Borrower shall, at
least 15 days prior to the Maturity Date, provide a “back-to-back” letter of credit to Agent in
form, and substance satisfactory to Agent in its sole discretion. Such back-to-back letter of
credit shall be issued by a bank satisfactory to Agent in its sole discretion, in an amount equal
to the Relevant Percentage of the then undrawn stated amount of all outstanding Letters of Credit.
In the alternative, Borrower may deposit cash in the Agent Collateral Account in an amount equal to
the Relevant Percentage of the then undrawn stated amount of each such outstanding Letter of Credit
with respect to which a “back-to-back” letter of credit has not been issued to Agent.
Notwithstanding the provision of such “back-to-back letter(s) of credit and/or the funding of such
Agent Collateral Account, Borrower shall remain liable pursuant to the terms of this Agreement for
all L/C Exposure until such time as (i) each such Letter of Credit (x) expires by its terms without
any draws being made in respect thereof or (y) has been returned to Agent undrawn and marked
“cancelled” and, (ii) all Funded L/C Exposure continued as Advances pursuant to Section
2.12(f) has been repaid in full in cash by Borrower. For this purpose “Relevant Percentage”
means, as of the Maturity Date and each date prior to the one-year anniversary thereof, 105%, and
from and after each one-year anniversary of the Maturity Date, two percent (2%) more than the
Relevant Percentage as of the preceding annual anniversary.



          (f) Any payment by Agent in respect of any Letter of Credit or L/C Undertaking shall
constitute for all purposes of this Agreement the making by Agent of an Advance in the amount of
such payment. All Funded L/C Exposure shall bear interest at a per annum rate equal to the
interest rate charged to other Advances. With respect to each Advance made pursuant to this
Section 2.12, the Borrower shall be deemed to have certified the statements contained in
Section V as of the date the payment constituting such Advance was made by Agent; provided,
however, that in the event any such statement was not true and correct as of such date,
such Advance shall be repayable on demand; provided, further, that upon any such
repayment on demand, the failure of any such statement to be true and correct as of such date shall
not constitute an Event of Default hereunder, unless the failure of any such statement to be true
and correct as of such date would have constituted an Event of Default hereunder even if such
repaid Advance had never been made.



          (g) The obligations of Borrower for Advances that arise as a result of payments in respect of
or draws under Letters of Credit or L/C Undertakings shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all circumstances, to
the extent permitted by law, including without limitation, (i) any lack of validity or
enforceability of any Letter of Credit or L/C Undertaking, (ii) the existence of any claim, setoff,
defense or other right which Borrower may have at any time against a beneficiary of any Letter of
Credit or L/C Undertaking or against Agent, any Lender, any L/C Issuer or Underlying Issuer; (iii)
the fact that, or any allegation that, any draft, demand, certificate or other document presented
under such Letter of Credit or L/C Undertaking is or was forged, fraudulent, invalid or
insufficient in any respect, or any statement therein is or was untrue or inaccurate in any
respect; (iv) any breach of contract or dispute among or between the Borrower, Agent, any Lender,
any L/C Issuer or any other Person; (v) payment by the Agent, any Lender or L/C Issuer under any
Letter of Credit or L/C Undertaking against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit or L/C Undertaking; (vi) any
other circumstance or happening whatsoever, which is similar to any of the foregoing; or (vii) the
fact that any Default or Event of Default shall have occurred and be continuing (it



9









 







being understood that any such payment by the Borrower of its Obligations in respect of any
such Advance shall be without prejudice to, and shall not constitute a waiver of any rights any
party hereto may have or might acquire against the beneficiary of any Letter of Credit or L/C
Undertaking or against any L/C Issuer).



          (h) On the first day of each month, commencing on the first such day following the Closing
Date and continuing thereafter until the date the Unfunded L/C Exposure has been reduced to zero,
including on the Termination Date, the Borrower shall pay to Agent, in arrears, for the account of
Agent and each other Lender in accordance with their respective participations in each Letter of
Credit, the Letter of Credit Fee.



          (i) The aggregate stated amount available for Letters of Credit and L/C Undertakings
guaranteed or issued by any L/C Issuer from time to time outstanding shall not exceed the L/C
Sublimit.



          (j) On demand by Agent at any time following the occurrence and during the continuance of an
Event of Default, Borrower will cause to be deposited and maintained in an account as directed by
Agent, cash collateral in an amount equal to one hundred five percent (105%) of the Unfunded L/C
Exposure, and Borrower hereby irrevocably authorizes Agent, in its discretion, on Borrower’s behalf
and in Borrower’s name, to open such an account and to make and maintain deposits therein, or in an
account opened by Borrower, in the amounts required to be maintained by Borrower, out of the
proceeds of Accounts or other Collateral or out of any funds of Borrower coming into Agent’s
possession at any time. Borrower may not withdraw amounts credited to any such account except upon
the earlier of (i) payment and performance in full of all Obligations (other than indemnity
obligations under the Loan Documents that are not then due and payable or for which any events or
claims that would give rise thereto are not then pending), termination of this Agreement and
termination, replacement or cash collateralization of all then outstanding Letters of Credit in
accordance with the terms of this Agreement, and (ii) at such time as such Event of Default no
longer exists.



          (k) In connection with the issuance of any Letter of Credit, Borrower shall indemnify, save
and hold Agent, each Lender and each L/C Issuer harmless from any loss, cost, expense or liability,
including, without limitation, payments made by Agent, any Lender or any L/C Issuer, and reasonable
out-of-pocket expenses and reasonable attorneys’ fees incurred by Agent, any Lender or any L/C
Issuer arising out of, or in connection with, any Letter of Credit to be issued for the account of
Borrower, except for any such losses, costs, expenses or liabilities arising out of Agent’s, such
Lender’s or such L/C Issuer’s gross negligence or willful misconduct. Borrower shall be bound by
the L/C Issuer’s regulations and reasonable good faith interpretations of any Letter of Credit
issued or created for Borrower’s account, although this interpretation may be different from
Borrower’s own; and neither Agent, any Lender nor any L/C Issuer, nor any of their respective
correspondents shall be liable for any error, negligence, or mistakes, whether of omission or
commission, in following Borrower’s instructions or those contained in any Letter of Credit or any
modifications, amendments or supplements thereto or in issuing or paying any Letter of Credit,
except for, and solely to the extent of, Agent’s, such Lender’s, such L/C Issuer’s or such
correspondents’ gross negligence or willful misconduct.



          (l) Any other lender hereafter participating in the Revolving Facility (a “Participant”) may
also participate in the issuance of Letters of Credit and L/C Undertakings contemplated by this
Section 2.12 pursuant to the terms hereof, at such percentage interest as is acceptable to
Agent and such Participant without any consent of any other party or any further amendment hereto.



10









 





          (m) If by reason of (i) any change in any applicable law, treaty, rule, or regulation or any
change in the interpretation or application thereof by any Governmental Authority, or (ii)
compliance by any L/C Issuer, Underlying Issuer, Agent or any Lender with any direction, request,
or requirement (irrespective of whether having the force of law) of any Governmental Authority or
monetary authority including Regulation D of the Federal Reserve Board as from time to time in
effect (and any successor thereto):




     (1) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letter of Credit issued hereunder, or




     (2) there shall be imposed on Lender, L/C Issuer or any Underlying Issuer any
other condition regarding any Letter of Credit issued pursuant hereto;


and the result of the foregoing is to increase, directly or indirectly, the cost to Agent, such
Lender, L/C Issuer or any Underlying Issuer of issuing, making, guaranteeing, or maintaining any
Letter of Credit or to reduce the amount receivable in respect thereof by Agent, such Lender, L/C
Issuer or any Underlying Issuer, then, and in any such case, Agent may, at any time within a
reasonable period after the additional cost is incurred or the amount received is reduced, notify
Borrower, and Borrower shall pay within two Business Days such amounts as Agent may specify to be
necessary to compensate Agent, such Lender L/C Issuer or Underlying Issuer, as the case may be, for
such additional cost or reduced receipt, together with interest on such amount from the date of
such demand until payment in full thereof at the Applicable Rate for Advances. The determination
by Agent of any amount due pursuant to this Section 2.12, as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or
demonstrable error, be final and conclusive and binding on all of the parties hereto.




     2.13 Evidence of Loans




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



          (b) The entries made in the electronic or written records maintained pursuant to this
Section 2.13 (the “Register”) shall be prima facie evidence of the existence and amounts of
the obligations and indebtedness therein recorded; provided, however, that the
failure of the Agent to maintain such records or any error therein shall not in any manner affect
the obligations of the Borrower to repay the Loans or Obligations in accordance with their terms.



          (c) Agent 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 Agent shall be deemed final, binding and conclusive
unless Agent is notified by Borrower in writing to the contrary within fifteen (15) calendar days
of Receipt of each accounting, which notice shall be deemed an objection only to items specifically
objected to therein.



          (d) The Borrower agrees that:



               (i) upon written notice by any Lender to the Borrower that a promissory note or other evidence
of indebtedness is requested by such Lender to evidence the Loans and other Obligations owing or
payable to, or to be made by, such Lender, the Borrower shall promptly (and in any event within
three (3) Business Days of any such request) execute and deliver to such Lender an



11









 







appropriate promissory note or notes in form and substance reasonably acceptable to such
Lender and Borrower, payable to the order of such Lender or in a principal amount equal to the
amount of the Loans owing or payable to such Lender;



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



               (iii) upon any Lender’s written request, and in any event within three (3) Business Days of
any such request, Borrower shall execute and deliver to such Lender new Notes and/or divide the
Notes in exchange for then existing Notes in such smaller amounts or denominations as such 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
the Borrower within a reasonable period of time after such Lender’s receipt of the replacement
Notes.



III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE




     3.1 Unused Line Fee



          Borrower shall pay to Agent, for the ratable benefit of Lenders, an unused line fee (the
“Unused Line Fee”) in an amount equal to 0.0375% per month of the difference derived by subtracting
(a) the daily average amount of the balances under the Revolving Facility (including any Unfunded
L/C Exposure under the L/C Sublimit) outstanding during the preceding month, from (b) the amount of
the Facility Cap on the last day of such month. The Unused Line Fee shall be payable monthly in
arrears on the first day of each successive calendar month (starting with August 1, 2009).



     3.2 Collateral Management Fee




          Borrower shall pay Agent a monthly collateral management fee (the “Collateral Management Fee”)
equal to 0.042% per month 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 (starting with August 1, 2009).



     3.3 Early Termination Fee




          If (i) Borrower terminates the Revolving Facility under Section 11.1 hereof, (ii)
Agent or any Lender accelerates any Revolving Loan or Borrower is otherwise required to make
payment in full of the Obligations relating to the Revolving Facility or Lender’s obligation to
make Advances pursuant to the Revolving Facility shall terminate in each case upon the occurrence
of an Event of Default, or (iii) a Change of Control or final payment of the Revolving Facility
pursuant to Section 11.1 occurs, any voluntary or involuntary termination of the Revolving
Facility and final prepayment of the Obligations relating to the Revolving Facility by Borrower or
any other Person occurs (other than reductions to zero of the outstanding balance of the Revolving
Facility resulting from the ordinary course operation of the provisions of Section 2.5),
whether by virtue of Agent’s exercising its right of set off or otherwise; or (iv) any payment in
full of the principal amount of any Revolving Loan or other satisfaction of the outstanding balance
of any Revolving Loan and/or the Revolving Facility is made during a bankruptcy, reorganization or
other proceeding or is made pursuant to any plan of reorganization or liquidation or any Debtor
Relief Law (each, a “Revolver Termination”), then, at the effective date of any such Revolver



12









 







Termination, Borrower shall pay Agent, for the account of Lenders (in addition to the then
outstanding principal, accrued interest and other Obligations pursuant to the terms of this
Agreement and any other Loan Document), as yield maintenance for the loss of bargain and not as a
penalty, an amount equal to the Termination Fee. Notwithstanding any other provision hereof, no
Termination Fee shall be due if Borrower merges or enters into a business combination with another
person and the surviving person becomes the Borrower hereunder, or enters into economically
similar, financing arrangements with Agent in which Agent remains, at least, a co-lead lender and
collateral agent.



     3.4 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 Agent, for the benefit of Lenders, 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 Agent or the Lenders 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, Agent and the Lenders
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 3.4
shall control to the extent any other provision of any Loan Document is inconsistent herewith.



     3.5 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”).



     3.6 Acknowledgement of Joint and Several Liability




          Each Borrower acknowledges that it is jointly and severally liable for all of the Obligations
under the Loan Documents. Each Borrower expressly understands, agrees and acknowledges that (i) it
is an Affiliated entity by common ownership of each other Borrower, (ii) it desires to have the
availability of one common credit facility instead of separate credit facilities, (iii) it has
requested that Agent and Lenders extend such a common credit facility on the terms herein provided,
(iv) Agent and Lenders will be lending against, and relying on a lien upon, all of Borrowers’
assets even though the proceeds of any particular loan made hereunder may not be advanced directly
to a particular Borrower, (v) it will nonetheless benefit by the making of all such loans by Agent
and Lenders and the availability of a single credit facility of a size greater than each could
independently warrant, and (vi) all of the representations, warranties, covenants, obligations,
conditions, agreements and other terms contained in the Loan Documents shall be applicable to and
shall be binding upon Borrower. Each Borrower, in the event it shall be held or deemed to be a
guarantor of the Obligations of any other Borrower hereby expressly waives any rights and defenses
that are or may become available to such Borrower by reason of Sections 2787 to 2855, inclusive,
and Sections 2899 and 3433 of the California Civil Code. As provided by Section 15.1, this
Agreement shall be governed by, and construed in accordance with, the laws of the State of New
York. The foregoing waivers and the provisions which pertain to California law are



13









 







included solely out of an abundance of caution, and shall not be construed to mean that any of
the above-referenced provisions of California law are in any way applicable to this Agreement or
the Obligations.



IV. CONDITIONS PRECEDENT




     4.1 Conditions to Effectiveness of Agreement and Closing



          This Agreement shall become effective upon the satisfaction, in the judgment of Agent in its
Permitted Discretion, of the following conditions:



          (a) Borrower shall have delivered to Agent the Loan Documents to which it is a party, 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 Permitted 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 in each jurisdiction determined by Agent
in its Permitted 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, in favor of Agent, for the benefit of Lenders, a perfected first
priority security interest upon the Collateral;



          (c) Agent shall have received (i) the Charter and Good Standing Documents, all in form and
substance reasonably acceptable to Agent, (ii) a certificate of the corporate secretary or
assistant secretary of Borrower dated the Closing Date, as to the incumbency and signature of the
Persons executing the Loan Documents, in form and substance acceptable to Agent, (iii) the written
legal opinion of counsel for Borrower, in form and substance satisfactory to Agent in its Permitted
Discretion, and (iv) a certificate executed by an authorized officer of Borrower, which shall
constitute a representation and warranty by Borrower as of the Closing Date that the conditions
contained in this Section 4.1 have been satisfied;



          (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 Borrower, in form and substance
satisfactory to Agent (each, a “Solvency Certificate”), certifying (i) the solvency of Borrower
after giving effect to the transactions and the Indebtedness contemplated by the Loan Documents,
and (ii) as to Borrower’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 Borrower;



          (e) Agent shall have completed or waived 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
Borrower shall have demonstrated to Agent’s satisfaction that (i) its operations comply, in all
respects reasonably deemed material by Agent, in its reasonable 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 reasonably
result in any Material Adverse Effect, and (iii) it has no liability (whether contingent or
otherwise) that could reasonably give rise to a Material Adverse Effect;



14









 





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



          (g) all in form and substance satisfactory to Agent in its Permitted Discretion, Agent shall
have received such consents, approvals and agreements, including, without limitation, Landlord
Waivers and Consents with respect to the leases for those locations specifically identified on
Schedule 5.18B where a complete set of books and records relating to Accounts or the
Borrower’s Inventory is kept, from such third parties as Agent and its counsel shall determine are
reasonably necessary or desirable with respect to (i) the Loan Documents and/or the transactions
contemplated thereby, and/or (ii) claims against Borrower or the Collateral;



          (h) Borrower shall be in compliance with Section 5.17 and Section 6.5, and
Agent shall have received (i) copies of all such insurance policies, and (ii) original certificates
of such insurance policies as Agent shall request in its Permitted Discretion confirming that they
are in effect and that the premiums due and owing with respect thereto have been paid in full and
naming Agent, for the benefit of itself and Lenders, as loss payee on Borrower’s property
insurance;



          (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 reasonably satisfactory to
Agent;



          (j) No default shall exist pursuant to any of Borrower’s obligations under any material
contract (including this Agreement, after giving effect to the terms hereof); Borrower shall be in
compliance with all applicable laws in all material respects;



          (k) Borrower shall have established a Lockbox and Blocked Account pursuant to Section
2.5;



          (l) Agent shall have received copies of all (i) material licenses and permits required for
Borrower to conduct the business in which it is currently engaged or is contemplated pursuant to
the Loan Documents, and (ii) all intercompany agreements, management agreements, documents related
to borrowed money, capital leases and other material contracts;



          (m) Agent shall have completed or waived its legal due diligence examinations of Borrower, the
results of which shall be satisfactory in form and substance to Agent, as evidenced by Agent’s
execution of the Loan Documents;



          (n) Agent shall have received evidence, in form and substance satisfactory to Agent, of the
release and termination of any and all Liens, security interest and/or Uniform Commercial Code
financing statements in, on, against or with respect to any of the Collateral (other than Permitted
Liens);



          (o) there shall not have occurred any Material Adverse Change or Material Adverse Effect from
that which was reflected on the financial statements dated May 31, 2009, and provided to Agent;



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



15









 





          (q) 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 in its Permitted Discretion.



     4.2 Conditions to Each Advance and Issuance of Each Letter of Credit




          The obligations of Lenders to make any Advance and to issue each Letter of Credit are subject
to the satisfaction, in the reasonable judgment of Agent, of the following 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, that the conditions contained in this Section 4.2 have
been satisfied; provided, however, that any determination as to whether to extend
credit shall be made by Agent in its Permitted Discretion;



          (b) each of the representation 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
requested Advance on such date; provided, however, that for any representation or
warranty limited to the date hereof, such limitation shall not apply, and the representation shall
be true as if made at the time of any request for an Advance or issuance of a Letter of Credit,
except with respect to representations that would be inconsistent with Section 6.15;



          (c) immediately after giving effect to the requested Advance, the sum of (i) the aggregate
outstanding principal amount of Advances under the Revolving Facility, including Advances in
connection with the Letters of Credit, and (ii) the Unfunded L/C Exposure, shall not exceed the
lesser of the Availability and the Facility Cap, and the Unfunded L/C Exposure shall not exceed the
L/C Sublimit;



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



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



          (f) there shall not have occurred any Material Adverse Change or Material Adverse Effect; and



          (g) 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 or the issuance of a Letter of Credit on
such date.



V. REPRESENTATIONS AND WARRANTIES




     Each Borrower, jointly and severally, represents and warrants as of the date hereof and,
except for such representations and warranties that are as a specified date, each Borrowing Date
and each date of issuance of a Letter of Credit as follows:



16









 





     5.1 Organization and Authority




          Borrower is a corporation, limited partnership or limited liability company duly organized,
validly existing and in good standing under the laws of its state of formation. Borrower (a) has
all requisite 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, (b) is duly qualified to do business
in every jurisdiction in which it is a party to a Government Contract, and, except as set forth on
Schedule 5.1, every other jurisdiction in which failure so to qualify could reasonably be
expected to have a Material Adverse Effect, and (c) has all requisite power and authority (i) to
execute, deliver and perform the Loan Documents to which it is a party, (ii) to borrow hereunder,
(iii) to consummate the transactions contemplated under the Loan Documents, and (iv) to grant the
Liens with regard to the Collateral pursuant to the Security Documents to which it is a party.
Borrower is not an “investment company” registered or required to be registered under the
Investment Company Act of 1940, as amended, and is not controlled by such an “investment company.”



     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, (a) have been duly authorized
by all requisite action of Borrower and have been duly executed and delivered by or on behalf of
Borrower; (b) do not violate any provisions of (i) applicable law, statute, rule, regulation,
ordinance or tariff, (ii) any order of any Governmental Authority binding on Borrower or any of its
properties, or (iii) the certificate of incorporation or bylaws (or any other equivalent governing
agreement or document) of Borrower, or any agreement between Borrower and its shareholders,
members, partners or equity owners or among any such shareholders, members, partners or equity
owners; (c) 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 Borrower is a party, or by which the
properties or assets of Borrower are bound, the effect of which could reasonably be expected to
have a Material Adverse Effect; and (d) except as set forth therein, will not result in the
creation or imposition of any Lien of any nature upon any of the properties or assets of Borrower,
and (e) 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




          As of the date of this Agreement, Borrower has no Subsidiaries (other than EMSA Limited
Partnership) other than those Persons listed as Subsidiaries on Schedule 5.3, each of which
(other than EMSA Limited Partnership) either are other Borrowers or Guarantors of the Obligations
of Borrower herein. Schedule 5.3 also states the authorized and issued capitalization of
Borrower and each such Subsidiary, and the number and class of equity securities and/or ownership,
voting or partnership interests (except for ASG) issued and outstanding (including options,
warrants and other rights to acquire any of the foregoing). 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



17









 







not held in a securities account. Schedule 5.3 also lists the directors, members,
managers and/or partners of Borrower, as well as any beneficial or record holders of more than
twenty-five percent (25%) of the equity of ASG, and ASG owns, directly or indirectly, all of the
issued and outstanding equity securities and/or ownership or voting or partnership interests of
each other Borrower. The outstanding equity securities and/or ownership, voting or partnership
interests of each Borrower have been duly authorized and validly issued and are fully paid and
nonassessable. Except as listed on Schedule 5.3, Borrower does not own an interest or
participate or engage in any joint venture, partnership or similar arrangements with any Person.



     5.4 Properties




          Borrower (a) is the sole owner and has good, valid and marketable title to 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 (b) is in compliance in all
material respects with each lease to which it is a party or otherwise bound, except for such
noncompliance as would not reasonably be expected to have a Material Adverse Effect. Schedule
5.4 lists all real properties (and their locations) owned or leased or utilized in client owned
facilities by or to Borrower, and all assets or property that are leased pursuant to capital leases
or licensed by Borrower, and any other material leases. 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 are valid and subsisting and are in full force and effect.



     5.5 Other Agreements




          Except as set forth on Schedule 5.5, Borrower is not (a) a party to any judgment,
order or decree or any agreement, document or instrument, or subject to any restriction, which
would materially adversely affect its ability to execute and deliver, or perform under, any Loan
Document or to pay the Obligations, or (b) 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, could 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 could reasonably be expected to have a Material Adverse Effect.



     5.6 Litigation




          Except as set forth on Schedule 5.6, there is no action, suit, proceeding or
investigation pending or, to its knowledge, threatened against Borrower that (a) 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, (b) would reasonably be expected
to result in an outcome that would, either individually or in the aggregate, (i) have any material
adverse effect upon or change in the validity or enforceability of any Loan Document, (ii) be
material and adverse to the value of the Collateral taken as a whole or to the business,
operations, prospects, properties, assets, liabilities or condition of Borrower or any Guarantors,
taken as a whole, or (iii) materially impair or be reasonably expected to materially impair the
ability of Borrower or any Guarantor, taken as a whole, to perform the Obligations or to consummate
the transactions under the Loan Documents executed by such Person, or (c) would reasonably be
likely to result in any Change of Control or other change in the current ownership, control or
management of Borrower. Except as set forth on Schedule 5.6, as of the date hereof
Borrower is not a party or subject to any order, writ, injunction, judgment or decree of any
Governmental Authority. Except as set forth on Schedule 5.6, as of the date hereof there
is no action, suit or proceeding initiated by



18









 







Borrower currently pending, and Borrower has no existing accrued and/or unpaid Indebtedness to
any Governmental Authority or any other governmental payor, except for Permitted Indebtedness.



     5.7 Hazardous Materials




          Borrower is in compliance in all material respects with all applicable Environmental Laws.
Borrower has not been notified of any action, suit, proceeding or investigation (a) relating in any
way to compliance by or liability of Borrower under any Environmental Laws, (b) which otherwise
deals with any Hazardous Substance or any Environmental Law, or (c) 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 which, in any case, could have a Material Adverse
Effect.



     5.8 Tax Returns; Governmental Reports




          Borrower (a) has filed all material federal, state, foreign (if applicable) and local tax
returns and other reports which are required by law to be filed by Borrower, and (b) has paid all
material 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 and that are identified on Schedule
5.8.



     5.9 Financial Statements and Reports




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



     5.10 Compliance with Law




          (a) Borrower (a) 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, ERISA and HIPPA, as applicable, and (b) is not in
violation of any order of any Governmental Authority or other board or tribunal, except where such
noncompliance or violation would not reasonably be likely to have a Material Adverse Effect. There
is no event, fact, condition or circumstance known to Borrower 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 (i) 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, (ii) 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, (iii)
no knowledge 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,
(iv) 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 (v) not withdrawn,
completely or partially, from any multi-employer pension plans so as to incur



19









 







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.



          (b) Borrower is in compliance, in all material respects, with the
Patriot Act.



     5.11 Intellectual Property




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



     5.12 Licenses and Permits; Labor




          Borrower is in compliance with and has all Permits necessary or required by applicable law or
Governmental Authority for the operation of its businesses except where the failure to be in
compliance would not reasonably be likely 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, except as would
not reasonably be likely to have a Material Adverse Effect. Borrower (a) is not 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 likely to have a Material Adverse
Effect, and (b) has not been involved in any labor dispute, strike, walkout or union organization
activity which would reasonably be likely to have a Material Adverse Effect



     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
Agent 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 Agent in writing which reasonably would be likely to have a Material Adverse Effect.



     5.15 Existing Indebtedness; Investments, Guarantees and Certain Contracts




          Except as permitted by the Loan Documents, Borrower (a) has no outstanding Indebtedness (b) 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 (c) 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 other than with
respect to a Guarantor or another Borrower as set forth on Schedule 5.15. Borrower has
performed all material obligations required to be performed by Borrower under any document
evidencing such Indebtedness and



20









 







there has occurred no breach, default or event of default under any document evidencing any
such items 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.



     5.16 Other Agreements




          Except as described in the filings of ASG with the Securities and Exchange Commission, as of
the date hereof there are no existing or proposed material agreements, arrangements, understandings
or transactions between Borrower and any of Borrower’s officers, members, managers, directors,
stockholders, partners, other interest holders, employees or any members of their respective
immediate families.




     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 as in
force on the date of this Agreement 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 having a value in excess of $50,000, in such names are Borrower’s
sales, business and invoices. Borrower maintains its places of business and chief executive
offices only at the locations set forth on Schedule 5.18B or with respect to which notice
is provided to the Agent pursuant to Section 7.4(a), and all Accounts of Borrower arise,
originate and are located, and all of the Collateral and all books and records in connection
therewith or in any way relating thereto or evidence the Collateral are located and shall be only,
in and at such locations. All of the Collateral is located only in the 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




          In determining which Accounts are Eligible Receivables, Agent may rely on all statements and
representations made by Borrower with respect to any Account. Unless otherwise indicated in
writing to Agent, each Account of Borrower (a) is genuine and in all respects what it purports to
be and is not evidenced by a judgment, (b) 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 and
other documents relating thereto or forming a part of the contract between Borrower and the Account
Debtor, (c) 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 Agent, (d)
if included on a Borrowing Base Certificate, is not, subject to any known 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, (e) there are no known facts, events or
occurrences which in any way impair the validity or enforceability thereof or if included on a
Borrowing Base Certificate, reduce the amount payable thereunder from the face amount of the claim
or invoice and statements delivered to Agent with respect thereto, (f) to the best



21









 







of Borrower’s knowledge, there are no proceedings or actions which are threatened or pending
against any Account Debtor thereunder which in Borrower’s opinion is likely to result in any
Material Adverse Change in the collectability of any such Account, and (g) Borrower has obtained
and currently has all Permits necessary in the generation thereof except for any failure to obtain
a Permit which would not be reasonably likely to have a Material Adverse Effect. Unless otherwise
indicated in writing to Agent, to the best of Borrower’s knowledge, (i) 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 (ii) such Account Debtor is solvent.



     5.21 Survival




          Borrowers, jointly and severally, make the representations and warranties contained herein
with the knowledge and intention that Agent and Lenders are 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.



     5.22 Performance and Payment Bonds for Government Contracts




          Borrower has posted all bonds required by each Government Contract to which it is a party,
except as set forth on Schedule 5.22.



     5.23 OFAC and Anti-Terrorism Regulations




          (a) Neither Borrower nor any of its Subsidiaries (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 Section 2 of such executive order, or (iii) is a Person on
the list of Specially Designated Nationals and Blocked Persons or is in violation of the
limitations or prohibitions under any other OFAC regulation or executive order.



          (b) No part of the proceeds of the Loans will be used, directly or indirectly, for any
payments to any governmental official or employee, political party, official of a political party,
candidate for political office, or anyone else acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended.



          (c) Borrower acknowledges by executing this Agreement that Agent has notified Borrower that,
pursuant to the requirements of the Patriot Act, Agent is required to obtain, verify and record
such information as may be necessary to identify Borrower (including, without limitation) the name
and address of each Borrower) in accordance with the Patriot Act.



VI. AFFIRMATIVE COVENANTS




     Borrower 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, Reports and Other Information




22









 








          (a) Financial Reports. ASG shall furnish to Agent and each Lender (i) as soon as they
are prepared and in any event within ninety (90) calendar days after the end of each fiscal year of
ASG, audited annual consolidated financial statements of ASG 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, stockholders’ equity and cash flows for such completed fiscal
year, which financial statements shall be prepared by ASG and certified without qualification by an
independent certified public accounting firm reasonably satisfactory to Agent (which shall include
Deloitte) and accompanied by related management letters, if available, (ii) as soon as available
and in any event within forty-five (45) days after the end of the first three fiscal quarters of
the fiscal year of ASG, unaudited consolidated financial statements of ASG consisting of a balance
sheet and statements of income, stockholders’ equity and cash flows as of the end of the
immediately preceding fiscal quarter, and (iii) 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 ASG consisting of a balance sheet and a statement of income, and cash flows 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 (except that certain of the
financial statements do not have footnotes, are subject to year end adjustments in the case of
monthly and quarterly financial statements, including, without limitation, reserves for incurred
but not reported items and claims payable consistent with past practices). With each quarterly and
annual financial statement, ASG shall also deliver a certificate of its chief financial officer
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, and (C) ASG (on
a consolidated basis) is in compliance with all financial covenants attached as Annex I
hereto. Such certificate shall be accompanied by the calculations necessary to show compliance
with the financial covenants in a form reasonably satisfactory to the Agent.



          (b) Other Materials. ASG shall furnish to Agent and each 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 any pro forma financial statements and any other
notes, reports and other materials related thereto, (ii) any reports, returns, information, notices
and other materials that ASG shall send to its stockholders at any time, (iii) within thirty (30)
calendar days after the end of each calendar month for such month, an accounts payable detailed
aging and reconciliation of the accounts receivable and accounts payable to the general ledger and
financial statements, (iv) promptly upon receipt thereof, copies of any reports submitted to ASG by
its independent accountants in connection with any interim audit of the books of ASG or any future
Guarantor and copies of each management control letter provided by such independent accountants,
(v) within forty-five (45) days after the end each calendar month, a report detailing any
outstanding surety bonds and any letters of credit collateralizing such surety bonds, and (vi) such
additional information, documents, statements, reports and other materials as Agent may reasonably
request from a credit or security perspective from time to time.



          (c) Notices. Borrower shall promptly, and in any event within five (5) Business Days
after Borrower or any authorized officer of Borrower obtains knowledge thereof, notify Agent in
writing of (i) any pending or threatened litigation, suit, investigation, arbitration, dispute
resolution proceeding or administrative proceeding brought or initiated by Borrower or otherwise
affecting or involving or relating to Borrower or any of its property or assets to the extent (A)
the amount in controversy exceeds $2,000,000 (other than in lawsuits brought by or on behalf of
inmates or employees of Borrower that Borrower reasonably believes will not go to trial), (B) any
of the foregoing seeks injunctive relief (excluding such relief sought in law suits brought by or
on behalf of inmates), or (C) if against Borrower and not covered by insurance, (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



23









 







taken with respect thereto, (iii) any other development, event, fact, circumstance or
condition that could reasonably be expected 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 of $100,000 or more, (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 in existence at any one time, (vi)
any notice given by Borrower to any other lender of Borrower and shall furnish to Agent a copy of
such notice, (vii) receipt of any notice or request from any Governmental Authority regarding any
liability or claim of liability in an amount of $100,000 or more, (viii) receipt of any notice by
Borrower regarding termination of any real estate lease, and/or (ix) if any Account over $100,000
becomes evidenced or secured by an instrument or chattel paper.



          (d) Consents. Borrower shall obtain and deliver from time to time all consents,
approvals and agreements from such third parties as Agent shall determine are necessary or
desirable in its Permitted Discretion for the protection of its Collateral and that are reasonably
satisfactory to Agent with respect to the Loan Documents and the transactions contemplated thereby,
or the Collateral, including, without limitation, Landlord Waivers and Consents for each location
set forth on Schedule 5.18B, as amended from time to time.



          (e) Operating Budget. ASG shall furnish to Agent and each Lender on or prior to the
Closing Date and for each fiscal year of ASG thereafter on the date on which such operating budgets
are approved by ASG’s Board of Directors, and in any case no later than January 1 of each fiscal
year, consolidated month by month projected operating budgets, which shall include projected profit
and loss statements, balance sheets and cash flow reports of and for Borrower for such upcoming
fiscal year in each case prepared in accordance with GAAP consistently applied with prior periods
(except that such projections will not have footnotes and will be subject to year-end adjustments
in the case of monthly and quarterly projections, including, without limitation, reserves for
incurred but not reported items and claims payable consistent with past practices).



     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 (a) conduct its business in accordance with good business practices customary
to the industry, (b) engage principally in the same or similar lines of business substantially as
heretofore conducted, (c) collect its Accounts in the ordinary course of business, (d) 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), (e) from time
to time to make all necessary repairs, renewals and replacements of its material properties, assets
and equipment, and (f) 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 likely
to have a Material Adverse Effect; and (g) remain in good standing and maintain operations in all
jurisdictions reasonably necessary to conduct its business.



     6.4 Compliance with Legal and Other Obligations




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          Borrower shall (a) comply with all laws, statutes, rules, regulations, ordinances and tariffs
of all Governmental Authorities applicable to it or its business, assets or operations, (b) 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, (c) 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, including, but not limited to, any accreditation and survey requirements, and
(d) maintain and comply with all Permits necessary to conduct its business and comply with any new
or additional requirements that may be imposed on it or its business, except where failure to
comply, pay, maintain or perform would not reasonably be likely to have a Material Adverse Effect.
Borrower shall give Agent prompt notice and a copy of (a) any new material Government Contract, and
(b) any communication from a Governmental Authority concerning nonperformance (including
nonperformance in connection with Hazardous Substances), default, set-off or bonding issues under
any Governmental Contract.



     6.5 Insurance




          Borrower shall (a) keep all of its insurable properties and assets adequately insured in all
material respects against losses, damages and hazards as are customarily insured against by
businesses engaging in similar activities or owning similar assets or properties in at least the
minimum amount required by applicable law and any agreement to which Borrower is a party,
including, without limitation, property insurance, automobile insurance and professional liability
insurance, as applicable, (b) maintain (i) general public liability insurance at all times against
liability on account of damage to persons and property having such limits, deductibles, exclusions
and co-insurance and other provisions as are customary for a business engaged in activities similar
to those of Borrower, and (ii) stop loss insurance with coverage in reasonable amounts as are
customary for a business engaged in activities similar to those of Borrower or as required by any
agreement to which Borrower is a party (i.e., at Closing, Borrower has coverage of 100% of exposure
for amounts in excess of $300,000 per patient with a per patient cap of $1,000,000); (c) maintain
insurance under all applicable workers’ compensation laws, and (d) require all of its healthcare
professional employees and independent contractors to maintain on behalf of or acquire professional
liability insurance; all of the foregoing insurance policies to be satisfactory in form and
substance to Agent in its Permitted Discretion.



     6.6 True Books




          Borrower shall (a) 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 (b) 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 Agent and Lenders from time to time during normal
business hours, upon reasonable notice and at the expense of Borrower, to (a) (once each quarter at
Borrower’s expense if no Default or Event of Default shall have occurred and be continuing, and
more often, at Agent’s Permitted Discretion, after the occurrence and during the continuance of any
Default or Event of Default) 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, and make copies and extracts therefrom, and (b)
discuss its business, operations, prospects, properties, assets, liabilities, condition and/or
Accounts with its officers and independent public



25









 







accountants (and by this provision such officers and accountants are authorized to discuss the
foregoing). Notwithstanding the foregoing, Borrower shall not be required to provide information
to Agent if doing so would require Borrower to waive any applicable attorney/client privilege or
accountant/client privilege existent in connection with any pending or threatened litigation.
Agent shall endeavor to minimize the expenses of any quarterly audits.



     6.8 Further Assurances; Post Closing




          At Borrower’s cost and expense, Borrower shall (a) within five (5) Business Days after Agent’s
demand, take such further actions, obtain such consents and approvals and duly execute and deliver
such further agreements, assignments, instructions or documents as Agent reasonably may request
with respect to the purposes, terms and conditions of the Loan Documents and the consummation of
the transactions contemplated thereby, whether before, at or after the performance and/or
consummation of the transactions contemplated hereby or the occurrence of a Default or Event of
Default, (b) 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, and (c) upon the exercise by Agent, any Lender or any of
their Affiliates of any power, right, privilege or remedy pursuant to any Loan Document or under
applicable law or at equity which requires any consent, approval, registration, qualification or
authorization of any Governmental Authority, execute and deliver, or cause the execution and
delivery of, within a reasonable time, all applications, certificates, instruments and other
documents that may be so required for such consent, approval, registration, qualification or
authorization. Without limiting the foregoing, upon the exercise by Agent, any Lender or any of
their Affiliates of any right or remedy under any Loan Document which requires any consent,
approval or registration with, consent, qualification or authorization by, any Person, Borrower
shall execute and deliver, or cause the execution and delivery of, all applications, certificates,
instruments and other documents that Agent, any Lender or such Affiliate may be required to obtain
for such consent, approval, registration, qualification or authorization.



     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 such reserves as Agent may deem proper and necessary in its sole
discretion shall have been made therefor.



     6.10 Lien Terminations




          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
the recitals to this Agreement.



     6.12 Collateral Documents; Security Interest in Collateral




          On reasonable request of Agent, Borrower shall make available to Agent copies of any and all
documents, instruments, materials and other items that relate to, secure, evidence, give rise to or



26









 







generate or otherwise involve Collateral, including, without limitation, Accounts of Borrower.
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 Agent to be executed,
filed, registered, obtained, delivered or recorded to create, maintain, perfect, preserve, validate
or otherwise protect the pledge of the Collateral to Agent and Agent’s perfected first priority
Lien on the Collateral (and Borrower irrevocably grants Agent the right, at Agent’s option, to file
any or all of the foregoing), (ii) maintain, or cause to be maintained, at all times, the pledge of
the Collateral to Agent and Agent’s perfected first priority Lien on the Collateral, (iii) promptly
upon learning thereof, report to Agent any reclamation, return or repossession of goods in excess
of $500,000 (individually or in the aggregate), and (iv) defend the Collateral and Agent’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 Agent, and pay all costs and expenses
(including, without limitation, reasonable in-house documentation, diligence fees and legal
expenses and other reasonable attorneys’ fees and expenses) in connection with such defense, which
shall be added to the Obligations.



     6.13 Taxes and Other Charges




          All payments and reimbursements to Agent, for the benefit of Lenders, 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 each Lender’s net income. 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 Agent, for the benefit of Lenders, then the sum payable to Agent, for the benefit
of Lenders, shall be increased as may be necessary so that, after making all required deductions,
each 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
(a) any change in any existing law, regulation, treaty or directive or in the interpretation or
application thereof, (b) any new law, regulation, treaty or directive enacted or any interpretation
or application thereof, or (c) compliance by any Lender with any request or directive (whether or
not having the force of law) from any Governmental Authority: (i) subjects such 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 Agent, for the benefit of
Lenders, 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 each Lender), or (ii) imposes on Lenders 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 Lenders of making or continuing
any Loan hereunder or to reduce any amount receivable hereunder, then, in any such case, Borrower
shall promptly pay to Agent, for the benefit of Lenders, any additional amounts necessary to
compensate each Lender, on an after-tax basis, for such additional cost or reduced amount as
determined by such Lender. If any Lender becomes entitled to claim any additional amounts pursuant
to this Section 6.13 it shall promptly notify Borrower of the event by reason of which such
Lender has become so entitled, and each such notice of additional amounts payable pursuant to this
Section 6.13 submitted by such Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes. Without limiting or being limited by any other provision
of any Loan Document, Borrower at all times shall retain and use a commercially known and
professional payroll company to process, manage and pay its payroll taxes.




     6.14 New Subsidiaries




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          Within thirty (30) calendar days of any Person becoming a Subsidiary after the Closing Date,
Borrower shall (a) deliver to Agent a joinder to this Agreement and to each other Loan Document to
which the Borrower is a party duly executed by such Person, which joinder shall be in form and
substance satisfactory to the Agent in its Permitted Discretion, (b) provide Agent with copies of
such Person’s organizational documents, material contracts, financial information, and any other
information requested by Agent, on behalf of the Lenders, in order to perform legal and financial
diligence and Uniform Commercial Code, tax and judgment lien searches, and (c) cause such Person to
duly execute and deliver such further agreements, assignments, instructions or documents as Agent
may request in its Permitted Discretion with respect to the purposes, terms and conditions of the
Loan Documents.




     6.15 Schedules to the Loan Agreement




          Notwithstanding any other provision in any Loan Document, or any date limitation set forth in
any representation or warranty referencing such schedules, Borrower shall keep all schedules
current in all material respects and shall provide amended schedules to ensure to Agent as
necessary to comply herewith. Article VI and Article VII schedules may not be amended without
Agent’s prior consent. Notwithstanding the foregoing, the following schedules shall be updated
only to the extent specified hereby:




          (a) the disclosure of directors, members, managers and/or partners of Borrower, as well as any
beneficial or record holders of more than twenty-five percent (25%) of the equity of ASG in
Schedule 5.3 shall be updated as reasonably requested by Agent;




          (b) the disclosure of any order, writ, injunction, judgment or decree of any Governmental
Authority to which Borrower is a party or otherwise subject to in Schedule 5.6, and the
disclosure of any action, suit, proceeding or investigation initiated by Borrower in Schedule
5.6 shall be updated only if any such information would be reasonably likely to result in a
Material Adverse Effect;




          (c) all disclosures in Schedule 5.8 shall be updated only if any such information
would reasonably be likely to result in a Material Adverse Effect; and




          (d) all disclosures of property and business interruption insurance policies in Schedule
5.17 shall be updated for any material change to the policy or the addition of any business
interruption policy, all other disclosures of insurance in Schedule 5.17 shall be updated
only if any such information would reasonably be likely to result in a Material Adverse Effect.




     6.16 New Government Contracts




          Within thirty (30) calendar days of any Borrower entering into a Government Contract with a
Governmental Authority, Borrower shall deliver to Agent a full copy of such Government Contract so
that Agent can determine whether such contract contains Eligible Receivables and whether it shall
be included on the Borrowing Base.




VII. NEGATIVE COVENANTS




     Borrower 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:




     7.1 Financial Covenants





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          Borrower shall not violate the financial covenants set forth on Annex I to this
Agreement, which annex is incorporated herein and made a part hereof.




     7.2 Permitted Indebtedness




          Borrower shall not create, incur, assume or suffer to exist any Indebtedness, except the
following (collectively, “Permitted Indebtedness”): (a) Indebtedness under the Loan Documents, (b)
any Indebtedness set forth on Schedule 7.2 or arising after the date hereof pursuant to
commitments set forth in Schedule 7.2 and any refunding or renewals thereof which do not
increase the principal amount of such Indebtedness; (c) Capitalized Lease Obligations incurred
after the Closing Date and Indebtedness incurred pursuant to purchase money Liens permitted by
Section 7.3(e); provided, that the aggregate amount thereof outstanding at any time
shall not exceed $1,000,000, (d) current liabilities (other than for borrowed money) to the extent
(i) incurred in the ordinary course of business consistent with past practices and (ii) discharged
or satisfied at or before the due date for payment (subject to ordinary course payment practices),
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, (e) borrowings incurred in the
ordinary course of business, (f) other indebtedness in an amount not exceeding $1,000,000
individually or in the aggregate outstanding at any one time; (g) indemnities under Government
Contracts, (h) Subordinated Debt in an amount not to exceed $10,000,000 at any one time
outstanding, (i) Indebtedness with respect to financed insurance premiums to the extent not past
due, (j) Contingent Obligations undertaken by any Borrower with respect to the Indebtedness of any
other Borrower, to the extent such Indebtedness is permitted hereunder as set forth on Schedule
7.2, (k) intercompany debt between or among Borrowers hereto and (l) reimbursement obligations
with respect to letters of credit that are secured by cash collateral accounts, provided,
however, that in each case under this Section 7.2, all such Indebtedness shall be
on an unsecured basis, except for Permitted Liens relating to money borrowed which shall be
subordinated in right of repayment and remedies to all of the Obligations and to all of the
Lenders’ rights in form and substance satisfactory to Agent. Borrower shall not make prepayments
on any existing or future Indebtedness to any Person other than to Agent, for the benefit of
Lenders, or to the extent specifically permitted by this Agreement or any subsequent agreement
between Borrower, Agent and Lenders.




     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 shares,
securities or other equity or ownership or partnership interests, whether now owned or hereafter
acquired, except the following (collectively, “Permitted Liens”): (a) Liens under the Loan
Documents or otherwise arising in favor of Agent, for the benefit of itself and Lenders, (b) Liens
imposed by law for 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, (c) (i) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen,
and (ii) other Liens imposed by law or that arise by operation of law in the ordinary course of
business, 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 Agent in its
Permitted Discretion, (d) Liens 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, (e) purchase money Liens (i) securing
Indebtedness



29









 






permitted under Section 7.2(c), or (ii) in connection with the purchase by
such Person of equipment in the normal course of business; provided, that such secured Indebtedness shall not exceed
any limits on Indebtedness provided for herein and shall otherwise be Permitted Indebtedness
hereunder, (f) Liens necessary and desirable for the operation of such Person’s business;
provided, that Agent has consented to such Liens in writing before their creation and
existence and the priority of such Liens and the debt secured thereby are both subject and
subordinate in all respects to the Liens securing the Collateral and to the Obligations and all of
the rights and remedies of Agent and each Lender, all in form and substance satisfactory to Agent
in its Permitted Discretion, (g) Liens disclosed on Schedule 7.3, (h) easements,
reservations, exceptions, rights-of-way, covenants, conditions, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the aggregate, are not
substantial in amount and that do not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of business by the Borrower, (i) liens in
respect of any writ of execution, attachment, garnishment, judgment or award in an amount less than
$100,000, if (x) the time for appeal or petition for rehearing has not expired, an appeal or
appropriate proceeding for review is being prosecuted in good faith and a stay of execution pending
such appeal or proceeding for review has been secured, or (y) the underlying claim is fully covered
by insurance, the insurer has acknowledged in writing its responsibility to pay such claim and no
action has been taken to enforce such execution, attachment, garnishment, judgment or award, (j)
liens of lessors (except liens on Accounts are not permitted under any circumstances) under or in
connection with operating leases, and (k) liens on cash collateral accounts established to secure
Borrower’s reimbursement obligations with respect to letters of credit.




     7.4 Investments; New Facilities or Collateral; Subsidiaries




          (a) Except as set forth on Schedule 7.4 and except for any Borrower’s ownership on the
date of this Agreement of the equity interests of another Borrower, Borrower, directly or
indirectly, shall not (i) merge with, purchase, own, hold, invest in or otherwise acquire
obligations or stock or securities of, or any other interest in all or substantially all of the
assets of, any Person or any joint venture unless such Person is or becomes a Borrower in the
manner provided in Section 6.14, or (ii) make or permit to exist any loans, advances or
guarantees to or for the benefit of any Person other than to or for the benefit of a person who is
or becomes a Borrower under the Loan Documents in the manner provided in Section 6.14,
except for ordinary course of business investments of the type historically made by Borrower, or
assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon
or incur any obligation of any Person (other than those created by the Loan Documents, Permitted
Indebtedness, and other than (x) trade credit extended in the ordinary course of business, (y)
advances for business travel and similar temporary advances made in the ordinary course of business
to officers, directors and employees, and (z) 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 property or
assets or any Collateral having a value of $50,000 or more that is not located at the locations set
forth on Schedule 5.18B, unless Borrower shall provide to Agent contemporaneous written
notice. Furthermore, Borrower shall update Schedule 5.18B any time books and records
related to Account Collateral and any Inventory are located at any place other than the places
specifically identified on Schedule 5.18B.




          (b) Borrower shall not redirect any Accounts or the proceeds thereof to or through any
subsidiary that is inactive or that is not a party to the Loan Documents. If any inactive
Subsidiary commences business activity Borrower shall cause it to become a party to the Loan
Documents.




     7.5 Dividends; Redemptions; Equity




30









 








          Borrower shall not (a) declare, pay or make any cash dividend or distribution on any shares of
capital stock or other securities or interests, or 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 (collectively, the
“Distributions”), or (b) other than ASG, issue or create any capital stock or other equity
securities; except, that (i) ASG may declare, pay or make cash dividends on any shares of its
capital stock, provided, that, no Default or Event of Default shall have occurred
and be continuing as of the effective date of any such transaction or would result from any such
transaction, (ii) Borrower may make Distributions or issue capital stock or other equity securities
to or for the benefit of another Borrower; (iii) ASG may pay cash in lieu of issuing fractional
shares upon the exercise of options or warrants to purchase shares of its common stock; and (iv)
ASG may repurchase shares of its common stock in any single transaction or series of transactions
pursuant to a Stock Repurchase Authorization (defined below), provided, that, (x)
the aggregate dollar amount of cash paid by ASG in connection therewith does not exceed
$15,000,000, (y) no Default or Event of Default shall have occurred and be continuing as of the
effective date of any such transaction or would result from any such transaction, and (z) not less
than three (3) Business Days prior to giving effect to the initial stock repurchase contemplated by
this clause (iv), ASG shall have provided Agent with a copy of the resolutions duly authorized by
the board of directors of ASG to give effect to the stock repurchase contemplated by this clause
(iv) (the “Stock Repurchase Authorization”), together with an officer’s compliance certificate
demonstrating compliance with the terms of the preceding subclauses (x) and (y).




     7.6 Transactions with Affiliates




          Borrower shall not enter into or consummate any transaction of any kind with any of its
Affiliates (except any Guarantor or another Borrower) other than: (a) salary, bonus, employee stock
option and other compensation and employment arrangements with directors or officers in the
ordinary course of business; provided, that no payments of any bonus or otherwise (except
normal salaries, consistent with past practices) 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, (b)
Distributions and dividends permitted pursuant to Section 7.5, (c) 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, (d) payments permitted under and pursuant to written
agreements entered into by and between Borrower and one or more of its Affiliates that both (i)
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
(ii) are subject to such terms and conditions as determined by Agent in its sole discretion,
provided, that notwithstanding the foregoing 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 an agreement for any
Indebtedness of any such Affiliate in the ordinary course of business, except that Borrower may
enter into such transaction with another Borrower or Guarantor so long as any and all material
transactions are set forth on Schedule 7.6, or (Z) make any payment to an Affiliate (except
another Borrower or Guarantor in the ordinary course of business) if a Default or Event of Default
has occurred and remains in effect or would be caused by or result from such payment, and (e)
payments by Borrower to EMSA Limited Partnership, provided that (i) such payments do not
exceed $50,000 individually or in the aggregate and (ii) no such payments shall be permitted if a
Default or Event of Default has occurred and is continuing or would be caused by or result from
such payment.




     7.7 Charter Documents; Fiscal Year; Dissolution; Collateral Assignment




          Borrower shall not (a) change its state of organization, or amend, modify, restate or change
its certificate of incorporation or bylaws or similar charter documents in a manner that would be



31









 






adverse to Agent or any Lender, (b) change its fiscal year, (c) amend, alter or suspend or
terminate or make provisional, any material Permit, (d) wind up, liquidate or dissolve (except for
mergers into another party hereto) (voluntarily or involuntarily) or commence or suffer any proceedings seeking or
that would result in any of the foregoing, except that Borrower shall be permitted to dissolve SPP
and PHS Indiana, provided that (i) the dissolution of SPP and PHS Indiana is in accordance
with all applicable laws, (ii) Borrower promptly delivers to Agent written evidence of such
dissolution (including, but not limited to, a certified copy of the articles or certificate of
dissolution and resolutions by the members and managers of SPP and PHS Indiana (as applicable)
authorizing the dissolution), (iii) the Eligible Receivables of SPP shall have been removed from
the Borrowing Base, and (iv) to the extent that either SPP or PHS Indiana has assets, such assets
shall have been contributed to PHS prior to the dissolution, or (e) use any proceeds of any Loans
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 Transfer of Assets




          Borrower shall not sell, lease, transfer, assign or otherwise dispose of any interest in any
properties or assets, or agree to do any of the foregoing, except that:




          (a) Borrower may lease (other than by a sale-leaseback transaction) 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, if books and
records regarding Collateral or Inventory if included on any Borrowing Base Certificate, are to be
kept at any new leased location, a Landlord Waiver is executed, satisfactory in form and substance
to Agent;




          (b) Borrower may sell obsolete or replaced equipment or excess equipment no longer needed in
the ordinary course of business; and




          (c) Borrower may sell Inventory in the ordinary course of business.




     7.9 Contingent Obligations




          Borrower shall not enter into any Contingent Obligations or assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable for or upon or incur any obligation of
any Person, except for (i) indemnification obligations in the ordinary course of Borrower’s
business, (ii) Contingent Obligations permitted pursuant to Section 7.2, and (iii) such
other obligations as are set forth on Schedule 7.9 hereto.




     7.10 Truth of Statements




          Borrower shall not furnish to Agent or any 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.




     7.11 Payment on Subordinated Debt




          Borrower shall not (a) make any prepayment of any part or all of any Subordinated Debt, (b)
repurchase, redeem or retire any instrument evidencing any such Subordinated Debt prior to
maturity, or (c) 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 Subordinated Debt.





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     7.12 IRS Form 8821




          Borrower shall not alter, amend, restate or otherwise modify, or withdraw, terminate or refile
the IRS Form 8821 required to be filed pursuant to Section 4.1 hereof.




VIII. 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, including any Funded L/C
Exposure, or otherwise provided for in any Loan Document when due (whether on any payment date, at
maturity, by reason of acceleration, 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 Agent or any 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(a), 6.2, 6.3, 6.8, and 6.11 for
which there shall be no cure period), there shall be a thirty (30) 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 of
such Person knew or became aware, of such failure, violation, breach or default;




          (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, or Agent, for the benefit of itself and Lenders, ceases to have
a valid perfected first priority security interest in any of the Collateral or any securities
pledged to Agent, for the benefit of itself and Lenders, pursuant to the Security Documents;




          (e) one or more judgments or decrees is rendered against Borrower or Guarantor in an amount in
excess of $500,000, which is/are not satisfied, stayed, vacated or discharged of record within
thirty (30) calendar days of being rendered;




          (f) (i) any default occurs, which is not cured or waived, (x) in the payment of any amount
with respect to any Indebtedness (other than the Obligations) for borrowed money of Borrower or
Guarantor in excess of $500,000, or (y) in the performance or observance of any provision in any
agreement, document or instrument pursuant to which Borrower or any Guarantor issued, assumed or
guaranteed any Indebtedness in an amount in excess of $500,000 to which any Borrower or Guarantor
is a party, or any of their assets are subject and such default continues for more than any
applicable grace period or permits the holder of any Indebtedness to accelerate the maturity
thereof, or (ii) any Indebtedness of Borrower or Guarantor for borrowed money in an amount greater
than $500,000 individually or in the aggregate at any one time, 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 in an amount
greater than $500,000




33









 







individually or in the aggregate at any one time (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;




          (g) Borrower or Guarantor shall (i) be unable to pay its debts generally as they become due,
(ii) file a petition under any Debtor Relief Law, (iii) make a general assignment for the benefit
of its creditors, (iv) 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 (v) file a
petition seeking reorganization or liquidation or similar relief under any Debtor Relief Law;




          (h) (i) a court of competent jurisdiction shall (A) enter an order, judgment or decree
appointing a custodian, receiver, trustee, liquidator or conservator of 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 sixty (60) calendar days, (B) shall approve a petition filed against
Borrower or Guarantor seeking reorganization, liquidation or similar relief under the any Debtor
Relief Law or any other applicable law or statute, which is not dismissed within sixty (60)
calendar days or, (C) under the provisions of any Debtor Relief Law or other applicable law or
statute, assume custody or control of Borrower or Guarantor or of the whole or any substantial part
of any such Person’s properties, which is not irrevocably relinquished within sixty (60) calendar
days, or (ii) there is commenced against 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, which (A) is not unconditionally dismissed within sixty (60) calendar days after
the date of commencement, or (B) is with respect to which Borrower or Guarantor takes any action to
indicate its approval of or consent to;




          (i) (i) any Change of Control 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, or (iii) Borrower or Guarantor ceases
any material portion of its business operations as currently conducted;




          (j) an Event of Default occurs under any other Loan Document beyond applicable cure periods;




          (k) uninsured damage to, or loss, theft or destruction of, any portion of the Collateral
occurs that exceeds $500,000 in the aggregate (excluding deductibles);




          (l) Borrower or Guarantor or any of their respective directors or senior officers is convicted
under any law that could lead to a forfeiture of any material portion of the Collateral;




          (m) the issuance of any process for levy, attachment or garnishment or execution upon or prior
to any judgment seeking in any one instance or in the aggregate a recovery of $500,000 or more
against Borrower or Guarantor or any of their property or assets; or




          (n) 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);




then, and during the continuance of any such event, notwithstanding any other provision of any Loan
Document, (I) Agent may (and at the request of Requisite Lenders, shall), by notice to Borrower (i)
terminate Lenders’ obligations to make Loans hereunder, whereupon the same shall immediately
terminate, and (ii) declare all or any of the Notes, 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(d), (g) or (h), in



34









 






which event all of the foregoing shall automatically and
without further act by Agent or any 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(d), there shall be a ten (10)
Business Day 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, 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, and (II) effective immediately, without any
action of Agent or Lenders, no action permitted to be taken under Article VII hereof may be
taken.




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, Agent shall have the right to (and at the
request of Requisite Lenders, shall) exercise any and all rights, options and remedies provided for
in any Loan Document, under the UCC or at law or in equity, including, without limitation, the
right to (i) apply any property of Borrower held by Agent, for the benefit of Lenders, or Lenders
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 with or without
judicial process, (iv) exercise all rights and powers with respect to the Collateral as Borrower
might exercise, (v) collect and send notices regarding the Collateral, 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 Agent at any place designated by Agent, (viii) reduce or otherwise change the Facility Cap
and/or the Maximum Loan Amount, and/or (ix) relinquish or abandon any Collateral or securities
pledged or any Lien thereon. Notwithstanding any provision of any Loan Document, Agent, in its
sole discretion, 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; (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. Such expenses and advances shall be added to
the Obligations until reimbursed to Agent and shall be secured by the Collateral, and such payments
by Agent shall not be construed as a waiver by Agent or Lenders of any Event of Default or any
other rights or remedies of Agent and Lenders.




          (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 is to be made, shall be deemed to be reasonable notice of such sale or other
disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily
decline in value or which is sold on a recognized market may be sold immediately by Agent without
prior notice to Borrower. At any sale or disposition of Collateral or securities pledged, Agent
may (to the extent permitted by applicable law) purchase all or any part thereof free from any
right of redemption by 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 Agent’s exercise of its rights and remedies with respect to the Collateral. Agent, in
dealing with or disposing of the Collateral or



35









 






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 Agent and Lenders have 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 Agent or Lenders 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 Agent or Lenders 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 and as determined by Requisite Lenders; (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 Agent, the holder of a subordinate
security interest shall furnish reasonable proof of its interest, and unless it does so, Agent and
Lenders need not address their 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.




     9.3 Rights of Agent to Appoint Receiver




          Without limiting and in addition to any other rights, options and remedies Agent has under the
Loan Documents, the UCC, at law or in equity, upon the occurrence and continuation of an Event of
Default, Agent shall have the right to apply for and have a receiver appointed by a court of
competent jurisdiction in any action taken by Agent to enforce its and Lenders’ 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 and Remedies not Exclusive




          Agent shall have the right in its sole discretion to determine which rights, Liens and/or
remedies Agent or Lenders may at any time pursue, relinquish, subordinate or modify, and such
determination will not in any way modify or affect any of Agent’s or Lenders’ 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
Agent and Lenders described in any Loan Document are cumulative and are not alternative to or
exclusive of any other rights or remedies which Agent or Lenders 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




36









 








     10.1 Waivers



          (a) Except as expressly provided for herein, Borrower hereby waives 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 Agent or any Lender to obtain an order of court
recognizing the assignment of, or Lien of Agent, for the benefit of itself and Lenders, in and to,
any Collateral.




          (b) If it is at any time determined that any Borrower is liable as a guarantor of any portion
of the Obligations (and not as a co-obligor or co-borrower), the liability of each Borrower
hereunder shall be absolute and unconditional irrespective of (a) the insolvency of, or the
voluntary or involuntary bankruptcy, assignment for the benefit of creditors, reorganization or
other similar proceedings affecting any Borrower or any of its assets, or (b) any other
circumstance or claim which might otherwise constitute a defense available to, or a discharge of,
any Person that is a Borrower in respect of the Obligations. No payment made by any Borrower, or
received or collected by the Agent or any Lender from any Borrower by virtue of any action,
proceeding or set-off in reduction or in payment of the Obligations shall be deemed to modify,
release or otherwise affect the liability of any Borrower under the Loan Documents, and each
Borrower shall remain liable for the Obligations until all Obligations are paid in full.




     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
Agent’s or Lenders’ part in enforcing any such provision shall affect the liability of Borrower or
Guarantor or operate as a waiver of such provision or affect the liability of 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 completing
the Closing under this Agreement and/or by making Advances, neither Agent nor any Lender waives any
breach of any representation or warranty under any Loan Document, and all of Agent’s and Lenders’
claims and rights resulting from any such breach or misrepresentation are specifically reserved.




     10.3 Jury Waiver




          (a) EACH PARTY HEREBY (i) EXPRESSLY, KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE, AND (ii) 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 AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE
WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.




37









 








          (b) In the event any such Claim or cause of action is brought or filed in any United States
federal court sitting in the State of California or in any state court of the State of California,
and the waiver of jury trial set forth in Section 10.3(a) hereof is determined or held to be
ineffective or unenforceable, the parties agree that all Claims and causes of action shall be
resolved by reference to a private judge sitting without a jury, pursuant to California Code of
Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree,
a referee selected by the Presiding Judge of the Los Angeles County, California. Such proceeding
shall be conducted in Los Angeles County, California, with California rules of evidence and
discovery applicable to such proceeding. In the event Claims or causes of action are to be
resolved by judicial reference, any party may seek from any court having jurisdiction thereover any
prejudgment order, writ or other relief and have such prejudgment order, writ or other relief
enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise
subject to resolution by judicial reference.




     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 (a) 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), (b) any discovery deposition of any of them as if it were an evidence deposition,
and/or (c) using all commercially reasonable efforts to produce in any such dispute resolution
proceeding, at the time and in the manner requested by Agent, all Persons, documents (whether in
tangible, electronic or other form) and/or other things under its control and relating to the
dispute.




     10.5 Amendment and Waivers




          (a) Except as otherwise provided herein, no amendment, modification, termination, or waiver of
any provision of this Agreement or any Loan Document, or consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing and signed by the
Requisite Lenders; provided, that no amendment, modification, termination, or waiver shall,
unless in writing and signed by each Lender directly affected thereby, do any of the following: (i)
increase the Commitment of any Lender (which action shall be deemed to directly affect all
Lenders); (ii) reduce the principal of, rate of interest on or fees payable with respect to any
Loan; (iii) extend the scheduled due date or reduce the amount due on any scheduled due date, of
any installment of principal, interest, or fees payable with respect to any Loan, or waive,
forgive, extend, defer or postpone the payment thereof; (iv) change the percentage of the
Commitments, of the aggregate unpaid principal amount of the Loans, or of Lenders which shall be
required for Lenders or any of them to take any action hereunder (which action shall be deemed to
directly affect all Lenders); (v) except as otherwise permitted herein or in the other Loan
Documents, release any Guaranty or release any material portion of the Collateral (which action
shall be deemed to directly affect all Lenders) (provided, that consent to such release shall not
be required if such release is made after and during the continuance of an Event of Default in
connection with the sale or disposition of the Collateral by Agent); (vi) amend, modify or waive
this Section 10.5 or the definitions of the terms used in this Section 10.5 insofar
as the definitions affect the substance of this Section 10.5 (which action shall be deemed
to directly affect all Lenders); (vii) consent to the assignment or other transfer by Borrower or
any other party (other than any Lender) to any Loan Documents of any of their rights and
obligations under any Loan Document; or (viii) increase the Advance Rate or change the definition
of Eligible Billed Receivables, Eligible Unbilled Receivables or Borrowing Base; and,
provided, further, that no amendment, modification, termination or waiver affecting
the rights or duties of Agent under any Loan Document shall in any event be effective, unless in
writing and signed by Agent, in addition to Lenders required herein above to take such action.




38









 








          (b) Each amendment, modification, termination or waiver shall be effective only in the
specific instance and for the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral pursuant to any
Loan Document.




          (c) Any amendment, modification, termination, waiver or consent effected in accordance with
this Section 10.5 shall be binding upon each Lender and Borrower.




XI. EFFECTIVE DATE AND TERMINATION




     11.1 Effectiveness and Termination



          Subject to each Lender’s right to terminate and cease making Loans as set forth in this
Agreement, 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 the Revolving Facility or this Agreement at any time
prior to the last day of the Term, subject to Section 3.3, upon not less than thirty (30)
calendar days’ prior notice to Agent and upon full performance and indefeasible payment in full in
cash of all Obligations under the Loan Documents. Upon any termination of the Revolving Facility
or this Agreement by Borrower, the obligation of Lenders to make Advances under the Revolving
Facility shall terminate. 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 notice to terminate this Agreement
shall affect any Lender’s or Agent’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 and indefeasibly paid in cash in full. The Liens
granted to Agent, for the benefit of itself and Lenders, under the Security Documents and the
financing statements filed pursuant thereto and the rights and powers of Agent and Lenders 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
indefeasibly paid in full in cash.




     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 Loans 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 3.4, 10.1, 10.3, 11.1, 11.2, 12.4 and 12.7 and Article
XI-A shall survive termination of the Loan Documents and any payment, in full of the
Obligations.




XI-A. AGENCY PROVISIONS




     11-A.1 Agent



          (a) Appointment. Each Lender hereby designates and appoints CapitalSource as the
administrative agent and the collateral agent, under this Agreement and the other Loan Documents,
and each Lender hereby irrevocably authorizes CapitalSource, as the administrative agent and the
collateral agent for such Lender, to take such action or to refrain from taking such action on its
behalf under the provisions of this Agreement and the other Loan Documents and to exercise such
powers and perform




39









 







such duties as are delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto. Agent agrees to
act as such on the conditions contained in this Article. The provisions of this Article are solely
for the benefit of Agent and Lenders, and Borrower shall have no rights as a third-party
beneficiary of any of the provisions hereof. Agent may perform any of its duties hereunder, or
under the Loan Documents, by or through its agents or employees.




          (b) Nature of Duties. In performing its functions and duties under this Agreement, Agent is
acting solely on behalf of Lenders and its duties are administrative in nature and it does not
assume and shall not be deemed to have assumed any obligation toward or relationship of agency or
trust with or for Lenders, other than as expressly set forth herein and in the other Loan
Documents, or Borrower. Agent shall have no duties, obligations or responsibilities except those
expressly set forth in this Agreement or in the other Loan Documents. Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender. Except for
information, notices, reports, and other documents expressly required to be furnished to Lenders by
the Agent hereunder or given to the Agent for the account of or with copies for Lenders, each
Lender shall make its own independent investigation of the financial condition and affairs of
Borrower in connection with the extension of credit hereunder and shall make its own appraisal of
the creditworthiness of Borrower, and Agent shall have no duty or responsibility, either initially
or on a continuing basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the Closing Date or at any time or times
thereafter. If Agent seeks the consent or approval of any Lenders to the taking or refraining from
taking any action hereunder, then Agent shall send prior written notice thereof to each Lender.
Agent shall promptly notify (in writing) each Lender any time that the applicable percentage of
Lenders have instructed Agent to act or refrain from acting pursuant hereto.




          (c) Rights, Exculpation, Etc. Neither Agent nor any of its officers, directors, managers,
members, equity owners, employees or agents shall be liable to any Lender for any action lawfully
taken or omitted by them hereunder or under any of the other Loan Documents, or in connection
herewith or therewith. Notwithstanding the foregoing, Agent shall be obligated on the terms set
forth herein for performance of its express duties and obligations hereunder, and Agent shall be
liable with respect to its own gross negligence or willful misconduct. Agent shall not be liable
for any apportionment or distribution of payments made by it in good faith, and if any such
apportionment or distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made shall be to recover from other Lenders
any payment in excess of the amount to which they are determined to be entitled (and such other
Lenders hereby agree to return to such Lender any such erroneous payments received by them). In
performing its functions and duties hereunder, Agent shall exercise the same care which it would in
dealing with loans for its own account. Agent shall not be responsible to any Lender for any
recitals, statements, representations or warranties made by Borrower herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectability, or sufficiency of this
Agreement or any of the other Loan Documents or the transactions contemplated thereby, or for the
financial condition of Borrower. Agent shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions, or conditions of this Agreement or
any of the Loan Documents or the financial condition of Borrower, or the existence or possible
existence of any Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of
the other Loan Documents Agent is permitted or required to take or to grant, and Agent shall be
absolutely entitled to refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from taking any action or withholding
any approval under any of the Loan Documents until it shall have received such instructions from
the applicable percentage of Lenders. Without limiting the foregoing, no Lender shall have any
right of action whatsoever against Agent as a result of Agent acting or refraining from acting
under this Agreement or




40









 







any of the other Loan Documents in accordance with the instructions of the applicable
percentage of Lenders and notwithstanding the instructions of Lenders, Agent shall have no
obligation to take any action if it, in good faith believes that such action exposes Agent or any
of its officers, directors, managers, members, equity owners, employees or agents to any personal
liability unless Agent receives an indemnification reasonably satisfactory to it from Lenders with
respect to such action.




          (d) Reliance. Agent shall be entitled to rely upon any written notices, statements,
certificates, orders or other documents or any telephone message or other communication (including
any writing, telex, telecopy or telegram) believed by it in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the other Loan Documents and its duties hereunder or
thereunder, upon advice of legal counsel, independent accountants, and other experts selected by
Agent in its sole discretion.




          (e) Indemnification. Each Lender, severally and not jointly, agrees to reimburse and
indemnify Agent and its officers, directors, managers, members, equity owners, employees and agents
(to the extent not reimbursed by Borrower or the Guarantors), ratably according to their respective
Pro Rata Share in effect on the date on which indemnification is sought under this subsection of
the total outstanding obligations (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance
with their Pro Rata Share immediately prior to such date of the total outstanding obligations),
from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances, or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against Agent or any of its officers, directors,
managers, members, equity owners, employees or agents in any way relating to or arising out of this
Agreement or any of the other Loan Documents or any action taken or omitted by Agent under this
Agreement or any of the other Loan Documents; provided, however, that no Lender shall be liable for
the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements resulting from Agent’s gross
negligence or willful misconduct. The obligations of Lenders under this Article XI-A shall survive
the payment in full of the Obligations and the termination of this Agreement.




          (f) CapitalSource Individually. With respect to the Loans made by it, and the Notes issued to
it, CapitalSource shall have and may exercise the same rights and powers hereunder and under the
other Loan Documents and is subject to the same obligations and liabilities as and to the extent
set forth herein and the other Loan Documents as any other Lender. The terms “Lenders” or
“Requisite Lenders” or any similar terms shall, unless the context clearly otherwise indicates,
include CapitalSource in its individual capacity as a Lender or one of the Requisite Lenders.
CapitalSource may lend money to, and generally engage in any kind of banking, trust or other
business with Borrower or any subsidiary of Borrower as if it were not acting as Agent pursuant
hereto.




          (g) Successor Agent.




               (i) Resignation. Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least thirty (30) days’ prior written notice to Borrower
and Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (ii) below or as otherwise provided below.



               (ii) Appointment of Successor. Upon any such notice of resignation pursuant to
clause (g)(i) above, Requisite Lenders shall appoint a successor Agent. If a successor
Agent shall not have been so appointed within said thirty (30) day period, the retiring Agent, upon
notice to Borrower, may, on behalf of Lenders, then appoint a successor Agent who shall serve as
Agent until such time, as Requisite Lenders, appoint a successor Agent as provided above. If no
successor Agent has been



41









 







appointed pursuant to the foregoing within said thirty (30) day period, the resignation shall
become effective and Requisite Lenders shall thereafter perform all the duties of Agent hereunder,
until such time, if any, as Requisite Lenders appoint a successor Agent as provided above.



               (iii) Successor Agent. Upon the acceptance of any appointment as Agent under the Loan
Documents by a successor Agent, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and, upon the earlier of
such acceptance or the effective date of the retiring Agent’s resignation, the retiring Agent shall
be discharged from its duties and obligations under the Loan Documents, except that any indemnity
rights or other rights in favor of such retiring Agent shall continue. After any retiring Agent’s
resignation as Agent under the Loan Documents, the provisions of this Article XI-A shall
inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under
the Loan Documents.



          (h) Collateral Matters.




               (i) Collateral. Each Lender agrees that any action taken by the Agent or the
Requisite Lenders (or, where required by the express terms of this Agreement, a greater proportion
of Lenders) in accordance with the provisions of this Agreement or of the other Loan Documents
relating to the Collateral, and the exercise by the Agent or the Requisite Lenders (or, where so
required, such greater proportion) of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be authorized and binding upon all of
Lenders and the Agent. Without limiting the generality of the foregoing, the Agent shall have the
sole and exclusive right and authority to (i) act as the disbursing and collecting agent for
Lenders with respect to all payments and collections arising in connection herewith and with the
Loan Documents in connection with the Collateral; (ii) execute and deliver each Loan Document
relating to the Collateral and accept delivery of each such agreement delivered by Borrower or any
of its Subsidiaries; (iii) act as collateral agent for Lenders for purposes of the perfection of
all security interests and Liens created by such agreements and all other purposes stated therein;
(iv) manage, supervise and otherwise deal with the Collateral; (v) take such action as is necessary
or desirable to maintain the perfection and priority of the security interests and Liens created or
purported to be created by the Loan Documents relating to the Collateral, and (vi) except as may be
otherwise specifically restricted by the terms hereof or of any other Loan Document, exercise all
remedies given to such Agent and Lenders with respect to the Collateral under the Loan Documents
relating thereto, applicable law or otherwise.



               (ii) Release of Collateral. Lenders hereby irrevocably authorize Agent, at its option
and in its discretion, to release any Lien granted to or held by Agent for the benefit of Lenders
upon any property covered by this Agreement or the Loan Documents (A) upon termination of this
Agreement and payment and satisfaction in full of all Obligations; or (B) constituting property
being sold or disposed of outside of Borrowers’ ordinary course of business if Borrower certifies
to Agent that the sale or disposition is made in compliance with the provisions of this Agreement
(and Agent may rely in good faith conclusively on any such certificate, without further inquiry).



               (iii) Confirmation of Authority; Execution of Releases. Without in any manner
limiting Agent’s authority to act without any specific or further authorization or consent by
Lenders (as set forth in Section 11-A.1(h)(i) and (ii)), each Lender agrees to confirm in
writing, upon request by Borrower, the authority to release any property covered by this Agreement
or the Loan Documents conferred upon Agent under Section 11-A.1(h)(ii). So long as no
Event of Default is then continuing, upon receipt by Agent of confirmation from the Requisite
Lenders, of its authority to release any particular item or types of property covered by this
Agreement or the Loan Documents, and upon at least five (5) Business Days prior written request by
Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents
as may be necessary to evidence the release of the



42









 







Liens granted to Agent for the benefit of Lenders herein or pursuant hereto upon such
Collateral; provided, however, that (A) Agent shall not be required to execute any
such document on terms which, in Agent’s opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Liens without recourse or
warranty, and (B) such release shall not in any manner discharge, affect or impair the Obligations
or any Liens upon (or obligations of Borrower or any subsidiary of Borrower, in respect of), all
interests retained by Borrower or any subsidiary of Borrower, including, without limitation, the
proceeds of any sale, all of which shall continue to constitute part of the property covered by
this Agreement or the Loan Documents.



               (iv) Absence of Duty. Agent shall have no obligation whatsoever to any Lender or any
other Person to assure that the property covered by this Agreement or the Loan Documents exists or
is owned by Borrower or is cared for, protected or insured or has been encumbered or that the Liens
granted to Agent on behalf of Lenders herein or pursuant hereto have been properly or sufficiently
or lawfully created, perfected, protected or enforced or are entitled to any particular priority,
or to exercise at all or in any particular manner or under any duty of care, disclosure, or
fidelity, or to continue exercising, any of the rights, authorities and powers granted or available
to Agent in this Section 11-A.1(h) or in any of the Loan Documents, it being understood and
agreed that in respect of the property covered by this Agreement or the Loan Documents or any act,
omission, or event related thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given Agent’s own interest in property covered by this Agreement or the Loan Documents
as one of Lenders and that Agent shall have no duty or liability whatsoever to any of the other
Lenders; provided, that Agent shall exercise the same care which it would in dealing with
loans for its own account. Notwithstanding the foregoing, Agent shall be liable with respect to
its own gross negligence or willful misconduct.



          (i) Agency for Perfection. Each Lender hereby appoints Agent as agent for the purpose
of perfecting Lenders’ security interest in Collateral which, in accordance with Article 9 of the
UCC in any applicable jurisdiction, can be perfected only by possession. Should any Lender (other
than Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor, shall deliver such Collateral to Agent or in accordance
with Agent’s instructions.




          (j) Exercise of Remedies. Except as set forth in Section 11-A.3, each Lender
agrees that it will not have any right individually to enforce or seek to enforce this Agreement or
any Loan Document or to realize upon any collateral security for the Loans, it being understood and
agreed that such rights and remedies may be exercised only by Agent.




     11-A.2 Consents




          In the event Agent requests the consent of a Lender in a situation where such Lender’s consent
would be required and such consent is denied, then Agent may, at its option, require such Lender to
assign its interest in the Loans to Agent for a price equal to the then outstanding principal
amount thereof plus accrued and unpaid interest and fees due such Lender, which interest
and fees will be paid when collected from Borrower. In the event that Agent elects to require any
Lender to assign its interest to Agent pursuant to this Section 11-A.2, Agent will so
notify such Lender in writing within forty-five (45) days following such Lender’s denial, and such
Lender will assign its interest to Agent no later than five (5) days following receipt of such
notice.




     11-A.3 Set Off and Sharing of Payments




          In addition to any rights and remedies now or hereafter granted under applicable law and not
by way of limitation of any such rights, upon the occurrence and during the continuance of any
Event



43









 







of Default, each Lender is hereby authorized by Borrower at any time or from time to time, to
the fullest extent permitted by law, with reasonably prompt subsequent notice to Borrower or to any
other Person (any prior or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (a) balances (general or special, time or demand, provisional
or final) held by such Lender or such holder at any of its offices for the account of Borrower or
any of its Subsidiaries (regardless of whether such balances are then due to Borrower or its
Subsidiaries), and (b) other property at any time held or owing by such Lender or such holder to
or for the credit or for the account of Borrower or any of its Subsidiaries, against and on account
of any of the Obligations which are not paid when due; except that no Lender or any such holder
shall exercise any such right without the prior written notice to Agent; provided,
however, that the failure to give notice to Borrower or to any other Person shall not
affect the validity of such set-off and application. Any Lender which has exercised its right to
set off or otherwise has received any payment on account of the Obligations shall, to the extent
the amount of any such set off or payment exceeds its Pro Rata Share of payments obtained by all of
the Lenders on account of such Obligations, purchase for cash participations in each such other
Lender’s or holder’s Pro Rata Share of Obligations as would be necessary to cause such Lender to
share such excess with each other Lender or holder in accordance with their respective Pro Rata
Shares; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such purchasing Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of such recovery. Borrower agrees, to the
fullest extent permitted by law, that (a) any Lender or holder may exercise its right to set off
with respect to amounts in excess of its Pro Rata Share of the Obligations and may sell
participations in such excess to other Lenders and holders, and (b) any Lender or holder so
purchasing a participation in the Loans made or other Obligations held by other Lenders or holders
may exercise all rights of set-off, bankers’ lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender or holder were a direct holder of Loans and other
Obligations in the amount of such participation.



     11-A.4 Disbursement of Funds




          Agent may, on behalf of Lenders, disburse funds to Borrower for Advances requested. Each
Lender shall reimburse Agent on demand for its Pro Rata Share of all funds disbursed on its behalf
by Agent, or if Agent so requests, each Lender will remit to Agent its Pro Rata Share of any
Advance before Agent disburses same to Borrower. If Agent elects to require that funds be made
available prior to disbursement to Borrower, Agent shall advise each Lender by telephone, telex or
telecopy of the amount of such Lender’s Pro Rata Share of such requested Advance no later than one
(1) Business Day prior to the funding date applicable thereto, and each such Lender shall pay Agent
such Lender’s Pro Rata Share of such requested Loan, in same day funds, by wire transfer to Agent’s
account not later than 3:00 p.m. (Eastern Time) on the day prior to the funding date. If any
Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent’s demand, Agent shall
promptly notify Borrower, and Borrower shall immediately repay such amount to Agent. Any repayment
required pursuant to this Section 11-A.4 shall be without premium or penalty. Nothing in
this Section 11-A.4 or elsewhere in this Agreement or the other Loan Documents, including
without limitation the provisions of Section 11-A.5, shall be deemed to require Agent to
advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its
commitments hereunder or to prejudice any rights that Agent or Borrower may have against any Lender
as a result of any default by such Lender hereunder.




     11-A.5 Settlements; Payments and Information




          (a) Advances and Payments; Interest and Fee Payments.




               (i) The amount outstanding pursuant to Advances may fluctuate from day to day through Agent’s
disbursement of funds to, and receipt of funds from, Borrower. In order to minimize



44









 







the frequency of transfers of funds between Agent and each Lender notwithstanding terms to the
contrary set forth in Section 11-A.4, Advances and repayments may be settled according to
the procedures described in Sections 11-A.5(a)(ii) and 11-A.5(a)(iii) of this
Agreement. Payments of principal, interest and fees in respect of the Loans will be settled, in
accordance with each Lender’s Pro Rata Share on the first Business Day after such payments are
received. Notwithstanding these procedures, each Lender’s obligation to fund its Pro Rata Share of
any advances made by Agent to Borrower will commence on the date such advances are made by Agent.
Such payments will be made by such Lender without set-off, counterclaim or reduction of any kind.



               (ii) Once each week, or more frequently (including daily), if Agent so elects (each such day
being a “Settlement Date”), Agent will advise each Lender by 1 p.m. (Eastern Time) by telephone,
telex, or telecopy of the amount of each such Lender’s Pro Rata Share of the outstanding Advances.
In the event payments are necessary to adjust the amount of such Lender’s share of the Advances to
such Lender’s Pro Rata Share of the Advances, the party from which such payment is due will pay the
other, in same day funds, by wire transfer to the other’s account not later than 3:00 p.m. (Eastern
Time) on the Business Day following the Settlement Date.



               (iii) On the first Business Day of each month (“Interest Settlement Date”), Agent will advise
each Lender by telephone, telefax or telecopy of the amount of interest and fees charged to and
collected from Borrower for the proceeding month in respect of the Advances. Provided that such
Lender has made all payments required to be made by it under this Agreement, Agent will pay to such
Lender, by wire transfer to such Lender’s account (as specified by such Lender on Schedule
1 of this Agreement as amended by such Lender from time to time after the date hereof pursuant
to the notice provisions contained herein or in the applicable Lender Addition Agreement) not later
than 3 p.m. (Eastern Time) on the next Business Day following the Interest Settlement Date such
Lender’s share of such interest and fees.



          (b) Availability of Lenders’ Pro Rata Share.




               (i) Unless Agent has been notified by a Lender prior to any proposed funding date of such
Lender’s intention not to fund its Pro Rata Share of the Advance amount requested by Borrower,
Agent may assume that such Lender will make such amount available to Agent on the proposed funding
date or the Business Day following the next Settlement Date, as applicable. If such amount is not,
in fact, made available to Agent by such Lender when due, Agent will be entitled to recover such
amount on demand from such Lender without set-off, counterclaim, or deduction of any kind.



               (ii) Nothing contained in this Section 11-A.5(b) will be deemed to relieve a Lender of
its obligation to fulfill its commitments or to prejudice any rights Agent or Borrower may have
against such Lender as a result of any default by such Lender under this Agreement.



          (c) Return of Payments.




               (i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that
a related payment has been or will be received by Agent from Borrower and such related payment is
not received by Agent, then Agent will be entitled to recover such amount from such Lender without
set-off, counterclaim or deduction of any kind.



               (ii) If Agent determines at any time that any amount received by Agent under this Agreement
must be returned to Borrower or paid to any other person pursuant to any solvency law or otherwise,
then, notwithstanding any other term or condition of this Agreement, Agent will not be



45









 







required to distribute any portion thereof to any Lender. In addition, each Lender will repay
to Agent on demand any portion of such amount that Agent has distributed to such Lender, together
with interest at such rate, if any, as Agent is required to pay to Borrower or such other Person,
without set-off, counterclaim or deduction of any kind.



     11-A.6 Dissemination of Information




          The Agent will distribute promptly to each Lender copies of all notices, schedules, reports,
projections, financial statements, agreements and other material and other information, including,
but not limited to, Borrower’s requests for Advances and financial and reporting information
received from Borrower or its Subsidiaries or generated by a third party (and excluding only
internal information generated by CapitalSource for its own use as a Lender or as Agent), as
provided for in this Agreement and the other Loan Documents as received by the Agent. The Agent
shall promptly give notice to Lenders of the receipt or sending of any notice, schedule, report,
projection, financial statement or other document or information pursuant to this Agreement or any
of the other Loan Documents and shall promptly forward a copy thereof to each Lender. Agent shall
request information from Borrower or its Subsidiaries as Lenders may request from time to time.
Agent shall not be liable to Lenders for any failure to comply with its obligations under this
Section 11-A.6, except to the extent that such failure is attributable to Agent’s gross
negligence or willful misconduct.




XI-B. BORROWING AGENCY




     11-B.1 Borrowing Agency Provisions



          (a) Each Borrower hereby irrevocably designates ASG to be its attorney and agent and in such
capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents,
writings and further assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in
accordance with the request of ASG.




          (b) The handling of this credit facility as a co-borrowing facility and the designation by
each Borrower of ASG as its borrowing agent in the manner set forth in this Agreement is solely as
an accommodation to Borrowers and at their request. None of Agent, any L/C Bank or any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and Lenders to do so and
in consideration thereof, each Borrower hereby indemnifies Agent, each L/C Bank and each Lender and
holds Agent, each L/C Bank and each Lender harmless from and against any and all liabilities,
expenses, losses, damages and claims of damage or injury asserted against Agent, any L/C Bank or
any Lender by any Person arising from or incurred by reason of the handling of the financing
arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or
instruction from ASG or any other action taken by Agent or any Lender with respect to this
Section 11-B except due to willful misconduct or gross negligence by the indemnified party.




          (c) All Obligations shall be joint and several, and each Borrower shall make payment upon the
maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the
part of each Borrower shall in no way be affected by any extensions, renewals and forbearance
granted by Agent or any Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to pursue or preserve
its rights against any Borrower, the release by Agent or any Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each Borrower to pay upon any notice
issued pursuant thereto is unconditional and unaffected by prior recourse by Agent or any Lender to
the other Borrowers or any Collateral for such Borrower’s Obligations or the lack thereof.




46









 








     11-B.2 Waiver of Subrogation




          Each Borrower expressly waives any and all rights of subrogation, reimbursement, indemnity,
exoneration, contribution of any other claim which such Borrower may now or hereafter have against
the other Borrowers or other Person directly or contingently liable for the Obligations hereunder,
or against or with respect to the other Borrowers’ property (including, without limitation, any
property which is Collateral for the Obligations), arising from the existence or performance of
this Agreement, until termination of this Agreement and repayment in full of the Obligations.




XII. MISCELLANEOUS




     12.1 Governing Law; Jurisdiction; Service of Process; Venue



          (a) The Loan Documents, pursuant to New York General Obligations Law Section 5-1401, shall be
governed by and construed in accordance with the laws of the State of New York without giving
effect to its choice of law provisions that would result in the application of the laws of a
different jurisdiction.




          (b) By execution and delivery of each Loan Document to which it is a party, each of the
parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County
and of the United States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating to this Agreement,
or for recognition or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding
may be heard and determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement shall affect any right that the
Agent or the Lenders may otherwise have to bring any action or proceeding relating to this
Agreement against Borrower or its properties in the courts of any jurisdiction.




          (c) Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (a) of this Section 12.1. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.




          (d) Each of the parties hereto waives personal service of process and irrevocably consents to
service of process in the manner provided for notices in Section 12.5 hereof. Nothing in
this Agreement will affect the right of any party to this Agreement to serve process in any other
manner permitted by law.




     12.2 Successors and Assigns; Assignments and Participation; New Lenders




          (a) Each Lender may at any time assign all or a portion of its rights and delegate all or a
portion of its obligations under this Agreement and the other Loan Documents (including all its
rights and obligations with respect to the Loans) to one or more Persons (a “Transferee”);
provided, that if CapitalSource, in its capacity as Agent or Lender is the assignor of such
rights and obligations, then such Transferee shall not be known to CapitalSource to be principally
engaged in the provision of medical services to inmates at correctional facilities (and
provided, further, that such restriction is binding upon



47









 







CapitalSource only and is not binding on any successor Agent or Lender), and such assigning
Lender shall execute and deliver to Agent for acceptance and recording in the Register, a Lender
Addition Agreement, satisfactory to Agent. Agent shall give Borrower notice if Agent sells or
assigns its rights and obligations hereunder. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such Lender Addition Agreement,
(i) the Transferee thereunder shall be a party hereto and, to the extent provided in such Lender
Addition Agreement, shall have the same rights, benefits and obligations as it would if it were a
Lender hereunder, and (ii) the assigning Lender shall be relieved of its obligations hereunder with
respect to its Commitment or assigned portion thereof, as the case may be, to the extent that such
obligations shall have been expressly assumed by the Transferee pursuant to such Lender Addition
Agreement. Borrower hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the Transferee and that the Transferee shall be considered to be a
“Lender” hereunder. Borrower may not sell, assign or transfer any interest in this Agreement, any
of the other Loan Documents, or any of the Obligations, or any portion thereof, including
Borrower’s rights, title, interests, remedies, powers, and duties hereunder or thereunder.



          (b) Each Lender may at any time sell participations in all or any part of its rights and
obligations under this Agreement and the other Loan Documents (including all its rights and
obligations with respect to the Loans) to one or more Persons (a “Participant”), provided that if
Agent is the seller of any such participation, then such Participant shall not be known to Agent to
be principally engaged in the provision of medical services to inmates at correctional facilities
(and provided, further, that such restriction is binding upon CapitalSource Bank as
Agent only and is not binding on any successor Agent). In the event of any such sale by a Lender of
a participation to a Participant, such Lender’s obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for
the performance thereof, such Lender shall remain the holder of any such Loan (and any Note
evidencing such Loan) for all purposes under this Agreement and the other Loan Documents and the
Borrower and the Agent shall continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under this Agreement and the other Loan Documents. Any
agreement pursuant to which any Lender shall sell any such participation shall provide that such
Lender shall retain the sole right and responsibility to exercise such Lender’s rights and enforce
each of the Borrower’s obligations hereunder, including the right to consent to any amendment,
supplement, modification or waiver of any provision of this Agreement or any of the other Loan
Documents; provided, that such participation agreement may provide that such Lender will
not agree, without the consent of the Participant, to any amendment, supplement, modification or
waiver of: (i) any reduction in the principal amount, interest rate or fees payable with respect to
any Loan in which such holder participates; (ii) any extension of the termination date of this
Agreement or the date fixed for any payment of principal, interest or fees payable with respect to
any Loan in which such holder participates; and (iii) any release of all or substantially all of
the Collateral (other than in accordance with the terms of this Agreement or the Loan Documents).
Borrower hereby acknowledges and agrees that the Participant under each participation shall, solely
for the purposes of Sections 11-A.5 and 12.4 of this Agreement be considered to be
a “Lender” hereunder.




          (c) The Agent, on behalf of the Borrower, shall maintain at its address referred to in
Section 12.5 a copy of each Lender Addition Agreement delivered to it and a register (the
“Register”) for the recordation of the names and addresses of the Lenders and the Commitment of,
and the principal amount of the Loans owing to, and the Notes evidencing such Loans owned by, each
Lender from time to time. Notwithstanding anything in this Agreement to the contrary, each of the
Borrower, the Agent and the Lenders shall treat each Person whose name is recorded in the Register
as the owner of the Loan, the Notes and the Commitment recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.




48









 








          (d) Notwithstanding anything in this Agreement to the contrary, no assignment under
Subsection 12.2(a) of any rights or obligations under or in respect of the Loans or any
Notes evidencing such Loans shall be effective unless and until the Agent shall have recorded the
assignment pursuant to Subsection 12.2(c). Upon its receipt of a Lender Addition Agreement
executed by an assigning Lender and a Transferee, the Agent shall (i) promptly accept such Lender
Addition Agreement and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give prompt notice of such acceptance and
recordation to the Lenders and the Borrower. On or prior to such effective date, the assigning
Lender shall surrender any outstanding Notes held by it all or a portion of which are being
assigned, and the Borrower, at its own expense, shall, upon the request of the Agent by the
assigning Lender or the Transferee, as applicable, execute and deliver to the Agent new Notes to
reflect the interest held by the assigning Lender and its Transferee.




          (e) Except as otherwise provided in this Section 12.2 no Lender shall, as between
Borrower and that Lender, be relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or any part of the
Loans or other Obligations owed to such Lender. Each Lender may furnish any information concerning
Borrower and its Subsidiaries in the possession of that Lender from time to time to assignees and
participants (including prospective assignees and participants); provided, however, that prior to
the disclosure by a Lender of information known to the Lender to be confidential and proprietary
information of Borrower, Lender shall inform Borrower of such pending disclosure and shall afford
Borrower, to the extent possible under the circumstances, the opportunity to obtain a
confidentiality agreement from the Person to whom such disclosure is proposed to be made.




          (f) Notwithstanding any other provision set forth in this Agreement, any Lender may at any
time create a security interest in all or any portion of its rights under this Agreement,
including, without limitation, the Loans owing to it and any Notes held by it.




          (g) Borrower agrees to use its commercially reasonable best efforts to assist any Lender (at
Lender’s expense) in assigning or selling participations in all or any part of any Loans made by
such Lender to another Person identified by such Lender.




          (h) Borrower acknowledges and agrees that each Lender at any time and from time to time may
divide and restate any Note.




          (i) Notwithstanding anything in this Agreement to the contrary, (i) CapitalSource and its
Affiliates shall not be required to execute and deliver a Lender Addition Agreement in connection
with any transaction involving its Affiliates or lenders, (ii) no lender to or funding source of
CapitalSource or its Affiliates shall be considered a Transferee and (iii) there shall be no
limitation or restriction on CapitalSource’s ability to assign or otherwise transfer any Loan
Document to any such Affiliate or lender; provided, however, CapitalSource shall
continue to be liable as a “Lender” under the Loan Documents unless such Affiliate or lender
executes a Lender Addition Agreement and thereby becomes a “Lender.”




     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 Agent or any



49









 






Lender. Any payments with respect to the Obligations received shall be credited and applied
in such manner and order as Agent shall decide in its sole discretion.




     12.4 Indemnity




          Borrowers jointly and severally shall indemnify Agent and each Lender, their Affiliates 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 reasonable in-house documentation and
diligence fees and reasonable 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 Borrower is responsible to pay or indemnify, 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; provided, however, that Borrower shall be
provided with a copy of such records of the hours spent in connection with such work as Lender
maintains in its ordinary course of business. Agent agrees to give Borrower reasonable notice of
any event of which Agent becomes aware for which indemnification may be required under this
Section 12.4, and Agent 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”), Agent
agrees not to exercise its right to select counsel to defend the event if that would cause
Borrower’s insurer to deny coverage; provided, however, that Agent 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 Agent or any Lender obtains recovery from a third party
other than an Indemnified Person of any of the amounts that Borrower has paid to Agent or any
Lender pursuant to the indemnity set forth in this Section 12.4, then Agent and/or Lender
shall promptly pay to Borrower the amount of such recovery. Without limiting any of the foregoing,
Borrowers jointly and severally indemnify the Indemnified Parties for all claims for brokerage fees
or commissions (other than claims of a broker with whom such Indemnified Party has directly
contracted in writing) which may be made in connection 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.




     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 such notice was received as indicated in such return
receipt, (ii) delivery by a nationally recognized overnight courier, one (1) Business Day after
deposit with such courier (costs prepaid), or (iii)



50









 






facsimile or electronic transmission, in each case upon telephone or further electronic
communication from the recipient acknowledging receipt (whether automatic or manual from
recipient), as applicable.




     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 costs and expenses incurred by
Lenders and/or their Affiliates, including, without limitation, documentation and diligence fees
and expenses, all search, audit, appraisal, recording, reasonable professional and filing fees and
expenses and all other actual 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 or the taking or refraining from taking by Agent of any action requested by Borrower,
(iv) in connection with instituting, maintaining, preserving, enforcing and/or foreclosing on
Agent’s or the benefit of itself and Lenders, 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 Agent’s and Lenders’
transactions with Borrower, (vi) in seeking, obtaining or receiving any advice with respect to
enforcing its rights and obligations under any Loan Document and any related agreement, document or
instrument, (vii) arising out of or relating to any Default or Event of Default, (viii) in
connection with all actions, visits, audits and inspections undertaken by Agent or its Affiliates
pursuant to the Loan Documents, and/or (ix) in connection with any modification, restatement,
supplement, amendment, waiver or extension of any Loan Document and/or any related agreement,
document or instrument. All of the foregoing shall be charged to Borrower’s account and shall be
part of the Obligations. If Agent or any Lender uses in-house counsel for any purpose under any
Loan Document which Borrower is responsible to pay or indemnify, Borrower expressly agrees that its
Obligations include reasonable charges for such work commensurate with 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 each 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, Agent and Lenders 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



51









 






hereinafter made shall have no force and effect unless in writing signed by Borrower, Agent
and such Lenders. 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 Borrower, Agent and Lenders (or
Requisite Lenders, as appropriate). 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.




     12.9 Agent Approvals




          Unless expressly provided herein to the contrary, any approval, consent, waiver or
satisfaction of Agent or Lenders with respect to any matter that is subject of any Loan Document
may be granted or withheld by Agent or Lenders, as applicable, in their Permitted 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) 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 Agent and Lenders, and Agent and Lenders reserve
the right to review and approve all press releases and other written materials for similar
publication purposes that Borrower or any of its Affiliates prepares that contain Agent’s or
Lenders’ names or describe or refer to any Loan Document, any of the terms thereof or any of the
transactions contemplated thereby. Borrower shall not, and shall not permit any of its Affiliates
to, use Agent or Lenders’ names (or the name of any of Agent or Lenders’ Affiliates) in connection
with any of its business operations, including without limitation, advertising, marketing or press
releases or such other similar purposes, without Agent or Lenders’ (as applicable) prior written
consent. Nothing contained in any Loan Document is intended to permit or authorize Borrower or any
of its Affiliates to contract on behalf of Agent or Lenders.




          (b) Borrower hereby agrees that Agent and Lenders or any Affiliate of Agent and Lenders may
(i) disclose a general description of transactions arising under the Loan Documents for
advertising, marketing or other similar purposes and (ii) use Borrower’s or Guarantor’s name, logo
or other indicia germane to such party in connection with such advertising, marketing or other
similar purposes.




     12.11 Release of Agent and Lenders




          (a) 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, it
managers, members, directors, officers, employees, shareholders, 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 date of the Closing. Borrower acknowledges that the foregoing release is a
material inducement to Agent’s and each Lender’s decision to extend to



52









 






Borrower the financial accommodations hereunder and has been relied upon by Agent and each
Lender in agreeing to make the Loans.




          (b) Borrower hereby further specifically waives any rights that it may have under Section 1542
of the California Civil Code (to the extent applicable), which provides as follows: “A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR,” and further waives any similar rights under applicable laws.




     12.12 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.




     12.13 Patriot Act




          Agent 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 Agent to identify
Borrower in accordance with the Patriot Act.




[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]




53









 








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




	 	 	 	 	 
	 	BORROWER:



AMERICA SERVICE GROUP INC.

 	 
	 	By:  	/s/ Michael W. Taylor
 	 
	 	 	Name:  	Mr. Michael Taylor 	 
	 	 	Title:  	Chief Financial Officer and Executive Vice President


105 Westpark Drive, Suite 200

Brentwood, TN  37027

Phone:  615-376-1376

Fax:   615-376-1309

E-mail:  Taylor@asgr.com 	 
	 
	 	PRISON HEALTH SERVICES, INC.

 	 
	 	By:  	/s/ Michael W. Taylor
 	 
	 	 	Name:  	Mr. Michael Taylor 	 
	 	 	Title:  	Executive Vice President


105 Westpark Drive, Suite 200

Brentwood, TN  37027

Phone:  615-376-1376

Fax:   615-376-1309

E-mail:  Taylor@asgr.com 	 
	 
	 	PRISON HEALTH SERVICES OF INDIANA, LLC

 	 
	 	By:  	PRISON HEALTH SERVICES, INC., its General 
Manager
 	 
	 	 	 
	 	By:  	      /s/ Michael W. Taylor
 	 
	 	 	Name:  	Mr. Michael Taylor 	 
	 	 	Title:  	Executive Vice President


105 Westpark Drive, Suite 200

Brentwood, TN  37027

Phone:  615-376-1376

Fax:   615-376-1309

E-mail:  Taylor@asgr.com 	 



54









 






	 	 	 	 	 



	 	 	 	 	 
	 	CORRECTIONAL HEALTH SERVICES, LLC

 	 
	 	By:  	PRISON HEALTH SERVICES, INC., its General
Manager
 	 
	 	 	 
	 	By:  	     /s/ Michael W. Taylor
 	 
	 	 	Name:  	Mr. Michael Taylor 	 
	 	 	Title:  	Executive Vice President


105 Westpark Drive, Suite 200

Brentwood, TN  37027

Phone:  615-376-1376

Fax:   615-376-1309

E-mail:  Taylor@asgr.com 	 
	 
	 	SECURE PHARMACY PLUS, LLC

 	 
	 	By:  	PRISON HEALTH SERVICES, INC., its General
Manager
 	 
	 	 	 
	 	By:  	     /s/ Michael W. Taylor
 	 
	 	 	Name:  	Mr. Michael Taylor
 	 
	 	 	Title:  	Executive Vice President


105 Westpark Drive, Suite 200

Brentwood, TN  37027

Phone:  615-376-1376

Fax:   615-376-1309

E-mail:  Taylor@asgr.com 	 



55









 






	 	 	 	 	 



	 	 	 	 	 
	 	AGENT AND LENDER:



CAPITALSOURCE BANK

 	 
	 	By:  	/s/ Humberto Espada
 	 
	 	 	Name:  	Humberto Espada 	 
	 	 	Title:  	Bank Officer


CapitalSource Bank

4445 Willard Avenue, 12th Floor

Chevy Chase, MD  20815

Attention:  Credit Administration

Telephone:  (301) 841-2700

FAX:  (301) 841-2340

E-MAIL: 	 



56









 






	 	 	 	 	 



EXHIBITS




	 	 	 
	A

	 	Borrowing Certificate






SCHEDULES




	 	 	 
	1

	 	Lenders/Commitments
	2.4

	 	Borrower’s Accounts for Revolving Facility
	2.12

	 	Existing Letters of Credit
	5.2

	 	Required Consents
	5.3

	 	Subsidiaries; Authorized and Issued Capital Stock; Capitalization; Directors, Members,
Managers and/or Partners; Joint Venture and Partnership Arrangements
	5.4

	 	Owned or Leased Real Properties; Other Leased or Licensed Assets
	5.5

	 	Other Agreements
	5.6

	 	Litigation
	5.8

	 	Taxes Contested in Good Faith
	5.11

	 	Intellectual Property
	5.15

	 	Existing Indebtedness
	5.17

	 	Insurance Policies
	5.18A

	 	Corporate Names
	5.18B

	 	Place of Business/Chief Executive Office
	5.22

	 	Performance and Payment Bonds
	6.8

	 	Post Closing Obligations
	7.2

	 	Permitted Indebtedness
	7.3

	 	Permitted Liens
	7.4

	 	Investments; New Facilities or Collateral; Subsidiaries
	7.6

	 	Transactions with Affiliates
	7.9

	 	Contingent Obligations







 









 








ANNEX I




FINANCIAL COVENANTS




1) Minimum EBITDA




     As of the end of each calendar quarter, ASG (on a consolidated basis) shall not permit its
EBITDA for the Test Period ending on the date of such determination to be less than $8,000,000.



2) Pre-Distribution Fixed Charge Coverage Ratio (EBITDA/Adjusted Fixed Charges)




     As of the end of each calendar quarter, the Adjusted Fixed Charge Ratio as measured for the
Test Period shall not be less than 1.75 to 1.0.



3) Post-Distribution Fixed Charge Coverage Ratio (EBITDA/Fixed Charges)




     (a) If, as of the end of each calendar quarter, the average unused Availability for such
calendar quarter plus the average Net Cash for such calendar quarter is greater than or
equal to $20,000,000, then the Fixed Charge Coverage Ratio as measured for the Test Period shall
not be less than 1.25 to 1.0.



     (b) If, as of the end of each calendar quarter, the average unused Availability for such
calendar quarter plus the average Net Cash for such calendar quarter is less than
$20,000,000, then the Fixed Charge Coverage Ratio as measured for the Test Period shall not be less
than 1.50 to 1.0.



     For purposes of the covenants set forth in this Annex I, the terms listed below shall
have the following meanings:



     “Adjusted Fixed Charge Coverage Ratio” shall mean, for Borrower on a consolidated
basis, the ratio of (a) EBITDA for the Test Period, to (b) Adjusted Fixed Charges for the Test
Period.



     “Adjusted Fixed Charges” shall mean the sum of the following: (a) Total Debt Service,
(b) Capital Expenditures, and (c) cash income taxes paid or accrued. For the avoidance of doubt,
the definition of “Adjusted Fixed Charges” shall not include cash dividends paid or accrued or
declared.



     “Capital Expenditures” shall mean, for any Test Period, the sum (without duplication)
of all expenditures (whether paid in cash or accrued as liabilities) during the Test Period that
are or should be treated as capital expenditures under GAAP.



     “EBITDA” shall mean, for any Test Period, the sum, without duplication, of the
following for Borrower, on a consolidated basis: Net Income determined in accordance with GAAP,
plus, (a) Interest Expense, (b) any provision for taxes based on income or profit that was
deducted in computing Net Income, (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 (a)
gains from any sale of assets, other than sales in the ordinary course of business and (b) other
extraordinary or non-recurring gains.



     “Fixed Charge Coverage Ratio” shall mean, for Borrower on a consolidated basis, the
ratio of (a) EBITDA for the Test Period, to (b) Fixed Charges for the Test Period.



Annex I-1









 





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



     “Interest Expense” shall mean, for any Test Period, total interest expense (including
expense attributable to Capital Leases in accordance with GAAP) with respect to all outstanding
Indebtedness including capitalized interest net of interest income.



     “Net Cash” shall mean unrestricted cash on hand minus the outstanding balance
under the Revolving Facility.



     “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 any Borrower) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to a Borrower by such Person, (ii) the income (or
loss) of any Person accrued prior to the date it becomes a Borrower or is merged into or
consolidated with a Borrower or that Person’s assets are acquired by a Borrower, (iii) the income
of any Subsidiary of Borrower 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 issued to former or current
employees, including officers, of a Borrower, 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 a Borrower 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.



     “Test Period” shall mean the twelve most recent calendar months then ended (taken as
one accounting period), or such other period as specified in the Agreement or any Annex thereto.



     “Total Debt Service” shall mean the sum of (i) scheduled or other required payments of
principal on Indebtedness, and (ii) Interest Expense (less amortization of loan arrangement fees
and all other non-cash charges to the extent included in Interest Expense for GAAP purposes), in
each case for such period.




Annex I-2









 








APPENDIX A




DEFINITIONS




     “Account Debtor” shall mean any Person who is obligated under an Account.



     “Accounts” shall mean all “accounts” (as defined in the UCC) of Borrower (or, if
referring to another Person, of such other Person), including without limitation, accounts,
accounts receivables, monies due or to become due and obligations in any form (whether arising in
connection with contracts, contract rights, instruments, general intangibles or chattel paper), in
each case whether arising out of goods sold or services rendered or from any other transaction and
whether or not earned by performance, now or hereafter in existence, and all documents of title or
other documents representing any of the foregoing, and all collateral security and guaranties of
any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.



     “Advances” shall mean a borrowing under the Revolving Facility, including without
limitation all Funded L/C Exposure, any other borrowings under the Revolving Facility (including,
but not limited to, Automatic Advances), or any amounts paid by Agent or any Lender on behalf of
Borrower or any Guarantor under any Loan Document.



     “Affiliate” shall mean, as to any Person, any other Person (a) that, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with such Person, (b) who is a director or an executive officer (i) of such Person, (ii) of
any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to
such Person, or (c) which directly or indirectly through one or more intermediaries, is the
beneficial or record holder of twenty-five percent (25%) or more of any class of the outstanding
voting stock, securities or other equity or ownership interests of such Person. For purposes of
this definition, the term “control” (and the correlative term, “controlled by”) shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the management
or policies, whether through ownership of securities or other interests, by contract or otherwise.



     “Agent Collateral Account” means a general interest bearing deposit account
established at and maintained by Agent in the name of and for the benefit of the Agent on behalf of
the Lenders and under the exclusive dominion and control of the Agent, into which Collateral in the
form of cash shall be deposited for purposes of collateralizing Letter of Credit obligations as set
forth herein, and as to which the Administrative Agent has “control” pursuant to Section 9-104 of
the UCC.



     “Applicable Rate” shall mean the interest rates applicable from time to time to Loans
under the Agreement.



     “Availability” shall have the meaning assigned to it in Section 2.1(a) hereof.



     “Borrowing Base” shall mean, as of any date of determination, the value of Eligible
Receivables, after applying liquidity factors, reserves permitted under this Agreement, and the
advance rate, as determined with reference to the most recent Borrowing Certificate and otherwise
in accordance with the Agreement; provided, however, that if as of such date the
most recent Borrowing Certificate is of a date more than four (4) Business Days before or after
such date, the Borrowing Base shall be determined by Agent consistent with this Agreement.



     “Borrowing Certificate” shall mean a Borrowing Certificate substantially in the form
of Exhibit A hereto.



Appendix A-1









 





     “Business Day” shall mean any day other than a Saturday, Sunday or other day on which
the Federal Reserve or Agent is closed.



     “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.



     “Capitalized Lease Obligations” shall mean all obligations of any Person under Capital
Leases, in each case, taken at the amount thereof accounted for as a liability in accordance with
GAAP.



     “Change of Control” shall mean, with respect to any Person, the occurrence of any of
the following: (i) a merger, consolidation, reorganization, recapitalization or share or interest
exchange, sale or transfer or any other transaction or series of transactions (other than with
another Borrower or Guarantor) in which its stockholders, managers, partners or interest holders
immediately prior to such transaction or series of transactions receive, in exchange for the stock
or interests owned by them, cash, property or securities of the resulting or surviving entity or
any Affiliate thereof, and, as a result thereof, Persons who, individually or in the aggregate,
were holders of 50% or more of its voting stock, securities or equity, partnership or ownership
interests immediately prior to such transaction or series of transactions hold less than 50% of the
voting stock, securities or other equity, partnership or ownership interests of the resulting or
surviving entity or such Affiliate thereof, calculated on a fully diluted basis, or (ii) a direct
or indirect sale, transfer or other conveyance or disposition, in any single transaction or series
of transactions, of all or substantially all of its assets to any Person other than a Borrower or
Guarantor.



     “Charter and Good Standing Documents” shall mean, for each Borrower (i) a copy of the
certificate of incorporation or formation (or other charter document) certified as of a date not
more than thirty (30) Calendar Days before the Closing Date by the applicable Governmental
Authority of the jurisdiction of incorporation or organization of Borrower, (ii) a copy of the
bylaws or similar organizational documents of Borrower certified as of a date not more than three
(3) Business Days before the Closing Date by the corporate secretary or assistant secretary of
Borrower, (iii) an original certificate of good standing as of a date not more than 30 Calendar
Days prior to the Closing Date issued by the applicable Governmental Authority of the jurisdiction
of incorporation or organization of Borrower and of every other jurisdiction in which Borrower is
otherwise required to be in good standing, and (iv) copies of the resolutions of the Board of
Directors or managers (or other applicable governing body) and, if required, stockholders, members
or other equity owners authorizing the execution, delivery and performance of the Loan Documents to
which Borrower is a party, certified by an authorized officer of such Person as of the Closing
Date.



     “Claims” shall mean any and all liabilities, obligations, losses, damages, penalties,
claims, actions, litigation, proceedings, investigations, judgments, suits, fees, costs, expenses,
charges, advances and disbursements of any kind (including, without limitation, fees, costs,
expenses and charges of counsel (including in-house counsel)).



     “Closing” shall mean the satisfaction, or written waiver by Agent and Lenders, of all
of the conditions precedent set forth in the Agreement required to be satisfied prior to the
consummation of the transactions contemplated hereby.



     “Closing Date” shall mean the date hereof.



     “Collateral” shall mean, collectively and each individually, all collateral and/or
security granted to Agent, for the benefit of itself and Lenders, by Borrower and/or Guarantors
pursuant to the Loan Documents.



Appendix A-2









 





     “Commitment” or “Commitments” shall mean (a) as to any Lender, the aggregate
commitment of such Lender to make Advances and draws, as set forth on Schedule 1 or in the
most recent Lender Addition Agreement executed by such Lender, and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Advances and draws.



     “Contingent Obligations” shall mean, as to any Person, any obligation of such Person
guaranteeing or intending to guaranty any Indebtedness, leases, dividends or other obligations
(“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly
or indirectly, including, without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or to hold harmless the owner of such primary obligation
against loss in respect thereof, provided, however, that the term “Contingent
Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary
course of business.



     “Debtor Relief Law” shall mean, collectively, the Bankruptcy Code of the United States
of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to
time in effect affecting the rights of creditors generally, as amended from time to time.



     “Default” shall mean any event, fact, circumstance or condition that, with the giving
of applicable notice or passage of time or both, would constitute or be or result in an Event of
Default.



     “Deposit Account” shall mean, collectively, any Lockbox Account, Blocked Account and
all bank or other depository accounts of Borrower.



     “Eligible Billed Receivables” shall mean each Account (other than Eligible Unbilled
Receivables) arising in the ordinary course of Borrower’s business from the sale of goods or
rendering of services which Agent, in its Permitted Discretion, deems an Eligible Billed Receivable
unless:



          (a) it is not subject to a valid perfected first priority security interest in favor of Agent,
for the benefit of itself and Lenders, subject to no other Lien of equal or higher priority;



          (b) it is not evidenced by an invoice, statement or other documentary evidence satisfactory to
Agent; provided, that Agent in its Permitted Discretion may from time to time include as
Accounts that are not evidenced by an invoice, statement or other documentary evidence satisfactory
to Agent as Eligible Billed Receivables and determine the advance rate, liquidity factors and
reserves applicable to Advances made on any such Accounts;



          (c) it arises out of services rendered or a sale made to, or out of any other transaction
between with, one or more Affiliates of Borrower;



          (d) it remains unpaid for longer than the earlier of (i) 120 calendar days after the original
invoice date, and (ii) 150 calendar days after the applicable services were rendered;



          (e) with respect to all Accounts owed by any particular Account Debtor or its Affiliates, if
more than 50% of the aggregate balance of all such Accounts owing from such Account



Appendix A-3









 







Debtor or its Affiliates remains unpaid for longer than the earlier of (i) 120 calendar days
after the original invoice date, and (ii) 150 calendar days after the applicable services were
rendered;



          (f) with respect to all Accounts owed by any particular Account Debtor and/or its Affiliates,
50% or more of all such Accounts are not deemed Eligible Receivables for any reason hereunder;



          (g) with respect to all Accounts owed by any particular Account Debtor and/or its Affiliates,
if such Accounts exceed 50%, (such percentage or any other percentage hereafter established by
Lender for any particular Account Debtor, a “Concentration Limit”) of all Accounts at any
one time;



          (h) any covenant, agreement, representation or warranty contained in any Loan Document with
respect to such Account has been breached and remains uncured;



          (i) the Account Debtor for such Account has commenced a voluntary case under any Debtor Relief
Law or has made an assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in respect of such Account Debtor in an involuntary
case under any Debtor Relief Law, or any other petition or application for relief under any Debtor
Relief Law has been filed against such Account Debtor, or such Account Debtor has failed, suspended
business, ceased to be solvent, called a meeting of its creditors, or has consented to or suffered
a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant
portion of its assets or affairs;



          (j) it arises from the sale of property or services rendered to one or more Account Debtors
outside the continental United States or Canada or that have their principal place of business or
chief executive offices outside the continental United States or Canada;



          (k) it represents the sale of goods to an Account Debtor on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper or an instrument of any kind or has been reduced to judgment;



          (l) (A) the applicable Account Debtor for such Account is any Governmental Authority, and the
rights to payment of such Account may not be assigned to Agent by operation of law, (B) any
required consent from or notice to the relevant Governmental Authority has not been obtained, or in
the case of notice, delivered, and (C) Agent has not otherwise agreed to its inclusion in the
Borrowing Base;



          (m) it is subject to any known offset, credit (including any resource or other income credit
or offset), deduction, defense, discount, chargeback, freight claim, allowance, adjustment, dispute
or counterclaim, or is contingent in any respect or for any reason, but only to such extent;



          (n) there is any agreement with an Account Debtor for any deduction from such Account, except
for discounts or allowances made in the ordinary course of business for prompt payment, all of
which discounts or allowances are reflected in the calculation of the face value of each invoice
related thereto, such that only the discounted amount of such Account after giving effect to such
discounts and allowances shall be considered an Eligible Billed Receivable;



          (o) any return, rejection or repossession of goods or services related to it has occurred, but
only to such extent;



          (p) it is not payable to Borrower;



Appendix A-4









 





          (q) Borrower has agreed to accept or has accepted any non-cash payment for such Account;



          (r) it constitutes a re-billing of an amount previously billed, if the amount previously
billed was treated as an Eligible Billed Receivable;



          (s) the Account is subject to any known reduction, offset or recoupment on account of staffing
deficiencies under any Government Contract (“Accrued Paybacks”) but only to such extent;



          (t) the Account is subject to known reduction, offset or recoupment on account of lower than
expected costs (“Risk Sharing Adjustment”) but only to such extent;



          (u) the Account is subject to known reduction, offset or recoupment on account of adjustments
due to failure to earn any amounts prepaid (“Deferred Revenue”) but only to such extent; and



          (v) it fails to meet such other specifications and requirements which may from time to time be
established by Agent or is not otherwise satisfactory to Agent, as determined in Agent’s sole
discretion, and with respect to Accounts arising under contracts with Governmental Authorities that
have enacted anti-assignment laws, including the State of New York and the U.S. Government, and
until Borrower complies with the applicable laws of such Governmental Authority regarding the
assignment of such Government Contracts, such determination shall be in Agent’s sole discretion.



     “Eligible Receivables” shall mean Eligible Billed Receivables plus Eligible Unbilled
Receivables plus the Rikers Receivables.



     “Eligible Unbilled Receivables” shall mean each Account meeting the criteria of
Eligible Billed Receivables, except:




	 	(i)	 	clause (b) shall not apply;
	 
	 	(ii)	 	clause (d) shall be restated as follows: “if more than 75% of the aggregate
balance of any unbilled Account remains unbilled for longer than the thirtieth
(30th) day following the latest date services were rendered in any thirty
(30) day billing cycle;”
	 
	 	(iii)	 	clause (e) shall be restated as follows: “with respect to all Accounts owed
by any particular Account Debtor and/or its Affiliates if more than 50% of the
aggregate balance of all such Accounts owing from such Account Debtor or its Affiliates
remains unbilled for longer than the thirtieth (30th) day following the
latest date services were rendered in any thirty (30) day billing cycle;” and




the eligible unbilled portion of any such Account shall include, with respect to each Government
Contract, revenue earned on each day prior to issuance of an invoice in an amount equal to the
amount of revenue under such Government Contract in the month most recently closed on Borrower’s
accounting system or, in the case of a Government Contract that is in the first month of its term,
the estimated amount of revenue for such month, in each case divided by 30, provided
that, Agent in its sole discretion may from time to time determine the liquidity factors
and reserves applicable to Advances made on any such Accounts.




     “Environmental Laws” shall mean, collectively and each individually, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendment and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances
Control



Appendix A-5









 







Act, the Clean Air Act, the Clean Water Act, any other “Superfund” or “Superlien” law and all
other federal, state and local and foreign environmental, land use, zoning, health, chemical use,
safety and sanitation laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances, in each case, as amended, and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and directives of
Governmental Authorities with respect thereto.



     “Equipment” has the meaning given such term in the UCC.



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.



     “Event of Default” shall mean the occurrence of any event set forth in Article
VIII.



     “Existing Letters of Credit” shall mean the existing letters of credit having an
aggregate face value of Six Million Eight Hundred Fifty Thousand One Hundred Forty-Five Dollars
($6,850,145.00) which were issued under the Revolving Credit and Security Agreement dated October
31, 2005 between CapitalSource Finance LLC and Borrower, as amended, and which are described in
more detail on Schedule 2.12.



     “Fair Valuation” shall mean the determination of the value of the consolidated assets
of a Person on the basis of the amount which may be realized by a willing seller within a
reasonable time through collection or sale of such assets at market value on a going concern basis
to an interested buyer who is willing to purchase under ordinary selling conditions in an arm’s
length transaction.



     “Fixtures” has the meaning given such term in the UCC.



     “Funded L/C Exposure” means the aggregate principal amount, as of any date of
determination, of all payments that were made by an L/C Issuer under any Letter of Credit or L/C
Undertaking, but which have not been reimbursed to such L/C Issuer by the Borrower.



     “GAAP” shall mean generally accepted accounting principles in the United States of
America in effect from time to time as applied by nationally recognized accounting firms.



     “General Intangibles” has the meaning given such term in the UCC.



     “Governmental Authority” shall mean any federal, state, municipal, national, local or
other governmental department, court, commission, board, bureau, agency or instrumentality or
political subdivision thereof, or any entity or officer exercising executive, legislative or
judicial, regulatory or administrative functions of or pertaining to any government or any court,
in each case, whether of the United States or a state, territory or possession thereof, a foreign
sovereign entity or country or jurisdiction or the District of Columbia.



     “Government Account” shall be defined to mean all Accounts arising out of or with
respect to any Government Contract.



     “Government Contracts” shall mean all contracts with the United States or any state
government or any other Governmental Authority or any agency of any of the foregoing, and all
amendments, modifications and supplements thereto.



Appendix A-6









 





     “Guarantor” shall mean, collectively and each individually, all guarantors of the
Obligations or any part thereof.



     “Guaranty” shall mean, collectively and each individually, all guarantees executed by
any Guarantors.



     “Hazardous Substances” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials as defined in or subject to any applicable
Environmental Law.



     “Indebtedness” of any Person shall mean, without duplication, (a) all items which, in
accordance with GAAP, would be included in determining total liabilities as shown on the liability
side of the balance sheet of such Person as of the date as of which Indebtedness is to be
determined, including any Capital Leases, (b) all indebtedness secured by any mortgage, pledge,
security, Lien or conditional sale or other title retention agreement to which any property or
asset owned or held by such Person is subject, whether or not the indebtedness secured thereby
shall have been assumed by such Person, and (c) all indebtedness of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business), discounted or sold with recourse or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has
agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership
interest purchase, capital contribution or otherwise) or otherwise to become directly or indirectly
liable.



     “Landlord Waiver and Consent” shall mean a waiver/consent in form and substance
reasonably satisfactory to Agent from the owner/lessor of any premises not owned by Borrower at
which any of the Collateral is now or hereafter located for the purpose of providing Agent access
to such Collateral, in each case as such may be modified, amended or supplemented from time to
time.



     “L/C Disbursement” shall mean a payment by an L/C Issuer pursuant to a Letter of
Credit.



     “L/C Exposure” means the sum, as of any date of determination, of the Unfunded L/C
Exposure and the Funded L/C Exposure.



     “L/C Fee Rate” shall mean 2.0% per annum.



     “L/C Issuer” means Agent, or any financial institution that, at the request of Agent
agrees, in such financial institution’s sole discretion, to become an L/C Issuer for the purpose of
issuing Letters of Credit or L/C Undertakings pursuant to Section 2.12.



     “L/C Undertaking” shall have the meaning assigned to it in Section 2.12
hereof.



     “Lender Addition Agreement” shall mean an agreement among Agent, a Lender and such
Lender’s assignee regarding their respective rights and obligations with respect to assignments of
the Loans and other interests under this Agreement.



     “Lenders” shall mean the financial institutions, from time to time named on
Schedule 1 under the heading “Lenders”, their respective successors and permitted assigns
(but not, except as expressly set forth herein, any participant that is not otherwise a party to
this Agreement).



     “Letter of Credit” shall mean (i) a letter of credit issued under Section 2.12
hereof or (ii) an Existing Letter of Credit.



Appendix A-7









 





     “Letter of Credit Fee” shall mean a fee equal to the sum of (a) the then applicable
L/C Fee Rate multiplied by the Unfunded L/C Exposure, plus (b) any administrative charges, fees or
expenses actually incurred by Agent to provide Letters of Credit.



     “LIBOR” shall mean a variable per annum percentage rate, as of any date of
determination (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to (a) the rate of
interest which is identified and normally published by Bloomberg Professional Service Page BBAM 1
as the offered rate for loans in United States dollars for the period of one (1) month under the
caption British Bankers Association LIBOR Rates as of 11:00 a.m. (London time) as adjusted on a
daily basis and effective on the second full Business Day after each such day (unless such date is
not a Business Day, in which event, the next succeeding Business Day will be used); divided by (b)
the sum of one minus the daily average during the preceding month of the aggregate maximum reserve
requirement (expressed as a decimal) then imposed under Regulation D of the Board of Governors of
the Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities” (as defined
therein). If Bloomberg Professional Service (or another nationally-recognized rate reporting
source acceptable to Lender) no longer reports the LIBOR or Lender determines in good faith that
the rate so reported no longer accurately reflects the rate available to Lender in the London
Interbank Market or if such index no longer exists or if Page BBAM 1 no longer exists or accurately
reflects the rate available to Lender in the London Interbank Market, Lender may select a
replacement index or replacement page, as the case may be.



     “Lien” shall mean any mortgage, pledge, security interest, encumbrance, restriction,
lien or charge of any kind (including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement or any lease in the nature thereof), or any other
arrangement pursuant to which title to the property is retained by or vested in some other Person
for security purposes.



     “Loan” or “Loans” shall mean, individually and collectively, all Advances.



     “Loan Documents” shall mean, collectively and each individually, the Agreement, the
Notes, the Security Documents, the Stock Pledge Agreement, the Guarantees, the Uniform Commercial
Code Financing Statements, the Landlord Waiver and Consents, the Borrowing Certificates, and all
other agreements, documents, instruments and certificates heretofore or hereafter executed or
delivered to Agent or Lenders in connection with any of the foregoing or the Loans, as the same may
be amended, modified or supplemented from time to time.



     “Material Adverse Effect” or “Material Adverse Change” shall mean any event,
condition or circumstance or set of events, conditions or circumstances or any change(s) which (i)
has or could reasonably be expected to have any material adverse effect upon or change in the
validity or enforceability of any Loan Document, (ii) has been or could reasonably be expected to
be material and adverse to the value of the Collateral taken as a whole or to the business,
operations, prospects, properties, assets, liabilities or condition of Borrower or any Guarantors,
either individually or taken as a whole, or (iii) has materially impaired or could reasonably be
expected to materially impair the ability of Borrower or Guarantor to perform the Obligations or to
consummate the transactions under the Loan Documents executed by such Person.



     “Note or Notes” shall mean Notes issued pursuant to Section 2.13.



     “Obligations” shall mean all present and future obligations, Indebtedness and
liabilities of Borrower and/or Guarantors to Agent or Lenders at any time and from time to time of
every kind, nature and description, direct or indirect, secured or unsecured, joint and several,
absolute or contingent, due or to become due, matured or unmatured, now existing or hereafter
arising, contractual or tortious, liquidated or unliquidated, under any of the Loan Documents or
otherwise relating to Notes and/or Loans, including,



Appendix A-8









 







without limitation, all applicable fees, charges and expenses and/or all amounts paid or
advanced by Agent or Lenders on behalf of or for the benefit of Borrower and/or Guarantor for any
reason at any time, including in each case obligations of performance as well as obligations of
payment and interest that accrue after the commencement of any proceeding under any Debtor Relief
Law by or against any such Person.



     “OFAC” shall mean the U.S. Department of Treasury’s Office of Foreign Assets Control.



     “Payment Office” shall mean initially the address set forth beneath the Agent’s name
on the signature page of the Agreement, and thereafter, such other office of Agent, if any, which
it may designate by notice to Borrower to be the Payment Office.



     “Permit” shall mean collectively all licenses, leases, powers, permits, franchises,
certificates, authorizations, approvals, certificates of need, provider numbers and other rights
necessary to the conduct of Borrowers’ business.



     “Permitted Discretion” shall mean a determination or judgment made in good faith in
the exercise of reasonable (from the perspective of a secured lender) credit or business judgment.



     “Person” shall mean an individual, a partnership, a corporation, a limited liability
company, a business trust, a joint stock company, a trust, an unincorporated association, a joint
venture, a Governmental Authority or any other entity of whatever nature.



     “Prime Rate” shall mean a variable per annum percentage rate, as of any date of
determination, equal to the rate of interest which is identified and normally published by
Bloomberg Professional Service as the Bloomberg Prime Rate, PRIMBB Index, as the “Prime Rate” (or,
if more than one rate is published as the Prime Rate, then the highest of such rates). The Prime
Rate is rounded upwards to the nearest 1/1000th of 1% (5 decimal places). Any change in Prime Rate
will become effective as of the date the rate of interest which is so identified as the “Prime
Rate” is different from that published on the preceding Business Day. If Bloomberg Professional
Service no longer reports the Prime Rate, or if such Page Prime no longer exists, or Lender
determines in good faith that the rate so reported no longer accurately reflects an accurate
determination of the prevailing Prime Rate, Lender may select a reasonably comparable index or
source to use as the basis for the Prime Rate.



     “Pro Rata Share” shall mean with respect to matters relating to a particular
Commitment of a Lender, the percentage obtained by dividing (i) such Commitment of that Lender by
(ii) all such Commitments of all Lenders; provided, however, that if any Commitment
is terminated pursuant to the terms hereof, then “Pro Rata Share” means the percentage obtained by
dividing (x) the aggregate amount of such Lender’s outstanding Loans related to such Commitment by
(y) the aggregate amount of all outstanding Loans related to such Commitment; in any case as such
percentage may be adjusted by assignments permitted pursuant to Section 12.2.



     “Requisite Lenders” shall mean Lenders holding or being responsible for (i) 100%, if
there are only two Lenders, and (ii) at least 66-2/3% if there are more than two Lenders, in each
case, of the sum of (a) all outstanding Loans and (b) all unutilized Commitments, including
Unfunded L/C Exposure.



     “Rikers Receivables” shall mean each Account meeting the criteria of Eligible Billed
Receivables, provided that the following terms and conditions are satisfied:



          (a) such Account was acquired by PHS pursuant to a receivables purchase agreement among PHS,
PHS Medical Services, PC and PHS Dental Services, PC (the “Rikers Acquisition”) which



Appendix A-9









 







Rikers Acquisition shall be on terms and conditions and otherwise in form and substance
satisfactory to Agent in its Permitted Discretion; and



          (b) Borrower shall have (i) collaterally assigned (or caused to be assigned) to Agent the
agreement evidencing the Rikers Acquisition and any other agreements, instruments or documents in
connection therewith and (ii) executed such agreements, instruments or documents and granted such
liens and security interests as may be reasonably required by Agent and its legal counsel.



     “Security Documents” shall mean the Notes, this Agreement, Stock Pledge Agreement,
Guarantees, Lockbox Agreements, Uniform Commercial Code Financing Statements and all other
documents or instruments necessary to create or perfect the Liens in the Collateral, as such may be
modified, amended or supplemented from time to time.



     “Stock Pledge Agreement” shall mean, collectively and each individually, (i) that
certain Stock Pledge Agreement, by and between Agent and ASG executed in connection herewith, and
(ii) if applicable, all stock pledge agreements executed by and between Agent and any Guarantors in
each case as such may be modified, amended or supplemented from time to time.



     “Subordinated Debt” shall mean any Indebtedness of Borrower, which Indebtedness is
unsecured, subordinated in right of repayment and remedies to all of the Obligations and to all of
Agent’s and Lenders’ rights, Liens and remedies and in form and substance satisfactory to the
Requisite Lenders in their Permitted Discretion.



     “Subsidiary” shall mean, (i) as to Borrower, any Person in which more than 50% of all
equity, membership, partnership or other ownership interests is owned directly or indirectly by
Borrower or one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which
more than 50% of all equity, membership, partnership or other ownership interests is owned directly
or indirectly by such Person or by one or more of such Person’s Subsidiaries.



     “Term” shall mean the period, commencing on the Closing Date and ending on October 31,
2011.



     “Termination Fee” shall mean (for the time period indicated) the amount equal to (i)
3% of the Facility Cap, if the date of such Revolver Termination is after the Closing Date but
before October 31, 2009, (ii) 2% of the Facility Cap, if the date of such Revolver Termination is
on or after October 31, 2009 but prior to October 31, 2010 and (iii) 1% of the Facility Cap, if the
date of such Revolver Termination is on or after October 31, 2010 but prior to July 31, 2011.



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



     “Underlying Issuer” shall mean a Person that is the beneficiary of a L/C Undertaking
and that has issued a letter of credit at the request of the L/C Issuer for the benefit of
Borrower.



     “Underlying Letter of Credit” shall mean a letter of credit that has been issued by an
Underlying Issuer.



Appendix A-10









 





     “Unfunded L/C Exposure” shall mean the maximum amount which all L/C Issuers may be
required, under all Letters of Credit or L/C Undertakings outstanding as of any date of
determination, to pay on such date or at any future time. Unfunded L/C Exposure shall not include
any amounts outstanding within the meaning of Funded L/C Exposure.




Appendix A-11