exv10w1






Exhibit 10.1









General Electric Capital Corporation

GE Capital Markets, Inc.

299 Park Avenue

New York, New York 10171

(212) 370-8000




CONFIDENTIAL




June 26, 2011




Mr. Michael M. Earley

Chief Executive Officer

Metropolitan Health Networks, Inc.

777 Yamato Road, Suite 510

Boca Raton, Florida 33431




Metropolitan Health Networks, Inc.

$355,000,000 Credit Facilities

Commitment Letter




Ladies and Gentlemen:




General Electric Capital Corporation (“GECC”) is pleased to commit to provide (directly
and/or through an affiliate) (a) a $265,000,000 senior secured first lien credit facility, which
will be comprised of a $25,000,000 Senior Secured Revolving Credit Facility (“Revolver”)
and a $240,000,000 Senior Secured Term Loan (“Term Loan”, and collectively with the
Revolver, the “First Lien Credit Facilities”) and (b) a $90,000,000 senior secured second
lien term loan facility (the “Second Lien Credit Facility”, and collectively with the First
Lien Credit Facilities, the “Credit Facilities”) and to act as administrative agent for the
Credit Facilities. The Credit Facilities will be used in connection with the acquisition (the
“Acquisition”) by Metropolitan Healthcare Networks, Inc. (“Borrower”) of all of the
issued and outstanding capital stock of Continucare Corporation (the “Target”, and together
with its subsidiaries, the “Acquired Business”) (the transactions described above are
collectively referred to herein as the “Transaction”).




GECC’s commitment is subject to the terms and conditions set forth herein, in the Summary of Terms
attached as Exhibit A with respect to the First Lien Credit Facilities (the “First Lien
Term Sheet”), the Summary of Terms attached as Exhibit B with respect to the Second
Lien Credit Facility (the “Second Lien Term Sheet”, and together with the First Lien Term
Sheet, the “Term Sheets” and, collectively with this letter, the “Commitment
Letter”) and in the Fee Letter (as defined below). GE Capital Markets, Inc. (the “Lead Arranger” and, together with GECC, the
“Commitment Parties”) is pleased to act, on such terms and conditions, as the sole lead
arranger and sole bookrunner for the Credit Facilities. Capitalized terms used in the text of this
Commitment Letter without definition have the meanings assigned to such terms in the Term Sheets.




 









 








Syndication.




The Lead Arranger may syndicate, prior to and/or after the execution Credit Facilities
Documentation (as defined in Schedule I hereto) a portion of the loans and commitments to
one or more other lenders (together with GECC, the “Lenders”) pursuant to a syndication
managed by the Lead Arranger (the “Syndication Process”) on the terms set forth in this
Commitment Letter and in the Fee Letter. Any assignments of GECC’s commitments and/or loans to
complete the Syndication Process shall not be subject to the consent, minimum amounts and fee
provisions set forth in this Commitment Letter or the Credit Facilities Documentation.
Notwithstanding anything to the contrary in this Commitment Letter or the Fee Letter (except for
the provision of the last sentence of the third paragraph of this Syndication section), neither the
commencement nor the completion of the Syndication Process shall constitute a condition precedent
to the Closing Date.




The Lead Arranger will, in consultation with Borrower, control all aspects of the Syndication
Process, including timing, selection of prospective Lenders, the awarding of any titles and the
determination of allocations and the amount of fees. Borrower agrees that, without the prior
written consent of the Lead Arranger (i) no other administrative agents, syndication agents,
co-agents, lead arrangers or book runners will be appointed, no other titles will be awarded and
(ii) no Lender will be permitted to receive compensation of any kind for its participation in the
Credit Facilities, except as expressly provided for in this Commitment Letter or the Fee Letter.




Borrower agrees to actively assist (and use its commercially reasonable efforts to cause Target,
each of their respective affiliates and all other necessary persons to assist and cooperate) GECC
and the Lead Arranger with the Syndication Process including, without limitation, (i) participation
in meetings (including with ratings agencies), (ii) preparation of information including a
confidential information memorandum, presentations and other offering materials to be used in
connection with the Syndication Process, and (iii) confirmation of the completeness and accuracy
and, if applicable, “PUBLIC” nature of, and the signing of an authorization letter with respect to,
such materials and (iv) using commercially reasonable efforts to obtain public corporate credit and
corporate family ratings, respectively, and ratings for the Credit Facilities from each of Standard
& Poor’s Ratings Services (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”).
The commitment and agreements of GECC and the Lead Arranger are subject to the Lead Arranger being
afforded a period of at least 30 business days from the lender meeting to complete the Syndication
Process (excluding any appropriate and customary black-out periods).




There shall be no competing issues, offerings, placements or arrangements of debt securities or
commercial bank or other credit facilities by or on behalf of, Borrower, the Acquired Business or
any of its or their respective subsidiaries being offered, placed or arranged (other than the
Credit Facilities or any indebtedness of Borrower and its subsidiaries permitted to be incurred
pursuant to the Acquisition Agreement) without the prior written consent of the Lead Arranger, if
such issuance, offering, placement or arrangement would materially impair the primary syndication
of the Credit Facilities.




The Evaluation Material (as defined below) shall include a version of the confidential information
memorandum, presentation and other information materials consisting exclusively of information that
is either publicly available with respect to Borrower, Target and their respective subsidiaries, or
that is not material with respect to Borrower, Target and their respective securities for purposes
of U.S. federal and state securities laws. Borrower also hereby agrees that it will (a) identify
in writing (and use commercially reasonable efforts to cause Target to identify in writing) and (b)




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clearly and conspicuously mark such Evaluation Material that does not contain any such material
non-public information referred to in the prior sentence as “PUBLIC”. Borrower hereby agrees that
by identifying and/or marking such Evaluation Material pursuant to the preceding sentence and/or
publicly filing any Evaluation Material with the Securities and Exchange Commission, the Commitment
Parties, Lenders and prospective Lenders shall be entitled to treat such Evaluation Material as
PUBLIC with respect to Borrower, Target and their respective subsidiaries for purposes of U.S.
federal and state securities laws. Borrower further acknowledges and agrees that the following
documents and materials shall be deemed to be PUBLIC, whether or not so marked: term sheets with
respect to the Credit Facilities and the Transaction, and administrative materials of a customary
nature prepared by the Commitment Parties for prospective Lenders, such as a lender meeting
invitation, bank allocation, if any, and funding and closing memorandum.




Information.




Borrower hereby represents and warrants that to Borrower’s knowledge (a) all written information
other than projections (“Projections”) and general economic or specific industry
information developed by, and obtained from, third-party sources (the “Information”) that
has been or will be made available to the Commitment Parties and/or the Lenders by Borrower, Target
or any of their respective affiliates or representatives is or will be, when furnished, complete
and correct in all material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements contained therein when taken as a whole not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections that have been or will
be made available to the Commitment Parties by Borrower, Target or any of their respective
affiliates or representatives have been or will be prepared in good faith based upon assumptions
believed by Borrower to have been reasonable when made (it being understood and agreed
that financial projections are not a guarantee of financial performance and actual results may
differ from financial projections and such differences may be material). Borrower agrees that if
at any time prior to the closing of the Credit Facilities any of the representations in the
preceding sentence would be incorrect in any material respect if the Information or Projections
were being furnished, and such representations were being made, at such time, then Borrower will
promptly, before closing, supplement the Information or the Projections, as the case may be, so
that such representations will be correct in all material respects under those circumstances.
Borrower understands that in arranging and syndicating the Credit Facilities the Lead Arranger may
use and rely on the Information and Projections without independent verification thereof.




Borrower hereby authorizes and agrees, on behalf of Borrower, Target and their respective
affiliates, that the Information, the Projections and all other information (including third party
reports) provided by or on behalf of Borrower, Target and their respective affiliates to the
Commitment Parties regarding Borrower, Target and their respective affiliates, the Transaction and
the other transactions contemplated hereby in connection with the Credit Facilities (collectively,
“Evaluation Material”) may be disseminated by or on behalf of the Commitment Parties, and
made available, to prospective Lenders and other persons, who have agreed to be bound by customary
confidentiality undertakings and, if applicable, ratings agencies (including, “click-through” agreements), all in accordance with the Lead Arranger’s standard loan syndication
practices (whether transmitted electronically by means of a website, e-mail or otherwise, or made
available orally or in writing, including at prospective Lender or other meetings). Borrower
hereby further authorizes the Lead Arranger to download copies of Borrower’s and Target’s logos
from their respective websites and post copies thereof on an IntraLinks® or similar
workspace and use such logos on any confidential information memoranda,




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presentations and other
marketing materials, but only to the extent prepared in connection with the Syndication Process.




Fees.




As consideration for the agreements and commitments of the Commitment Parties hereunder, Borrower
agrees to cause to be paid the non-refundable fees described in the Fee Letter dated the date
hereof and delivered herewith (the “Fee Letter”) on the terms and subject to conditions set
forth therein.




Expenses.




Regardless of whether the Credit Facilities close, Borrower hereby agrees to pay upon
demand to the Commitment Parties all fees and invoiced out-of-pocket expenses (including, but not
limited to, all reasonable costs and fees of external legal counsel, environmental consultants,
appraisers, auditors and other consultants and advisors, due diligence reports, escrow costs (if
applicable), recording and transfer fees and taxes, title charges and survey costs) incurred in
connection with this Commitment Letter, the Fee Letter, the Transaction, and the Credit Facilities
(and the negotiation, documentation, closing and syndication thereof).




Confidentiality.




Borrower agrees that it will not disclose the contents of this Commitment Letter, the Fee Letter or
the Commitment Parties’ involvement with, GECC’s commitment to provide or the Lead Arranger’s
agreement to arrange the Credit Facilities to any third party (including, without limitation, any
financial institution or intermediary) without GECC’s prior written consent other than to (a) those
individuals who are Borrower’s directors, officers, employees or advisors in connection with the
Credit Facilities; provided that this Commitment Letter (but not the Fee Letter) may also
be disclosed to Target’s directors, officers, employees and advisors and (b) as may be compelled in
a judicial or administrative proceeding or as otherwise required by law (in which case Borrower
agrees to inform GECC promptly thereof). Borrower agrees to inform all such persons who receive
information concerning the Commitment Parties, this Commitment Letter or the Fee Letter that such
information is confidential and may not be used for any purpose other than in connection with the
Transaction and may not be disclosed to any other person. The Commitment Parties reserve the right
to review and approve, in advance, all materials, press releases, advertisements and disclosures
that Borrower prepares or that is prepared on its behalf that contain GECC’s or any affiliate’s
name or describe GECC’s financing commitment or the Lead Arranger’s role and activities.




Indemnification.




Regardless of whether the Credit Facilities close, Borrower agrees to (a) indemnify, defend and
hold each of the Commitment Parties, each Lender, and their respective affiliates and the
principals, directors, officers, employees, representatives, agents and third party advisors of
each of them (each, an “Indemnified Person”), harmless from and against all losses,
disputes, claims, investigations, litigation, proceedings, expenses (including, but not limited to, reasonable
attorneys’ fees), damages, and liabilities of any kind (including, without limitation, any
environmental liabilities) which may be incurred by, or asserted against, any such Indemnified
Person in connection with, arising out of, or relating to, this Commitment Letter, the Fee Letter,
the Credit Facilities, the use or the proposed use of the proceeds thereof, the Transaction, any
other transaction contemplated by this Commitment Letter, any other transaction related thereto




4









 








and any claim, litigation, investigation or proceeding relating to any of the foregoing (each, a
“Claim”, and collectively, the “Claims”), regardless of whether such Indemnified
Person is a party thereto (and regardless of whether such matter is initiated by Borrower, Target
or any of their respective affiliates), and (b) reimburse each Indemnified Person upon demand for
all reasonable legal expenses and other expenses incurred by it in connection with investigating,
preparing to defend or defending, or providing evidence in or preparing to serve or serving as a
witness with respect to, any lawsuit, investigation, claim or other proceeding relating to any of
the foregoing (each, an “Expense”); provided that no Indemnified Person shall be
entitled to indemnity hereunder in respect of any Claim or Expense to the extent that the same is
found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted
from the gross negligence, bad faith or willful misconduct of such Indemnified Person. Under no
circumstances shall GECC, GECM or any of their respective affiliates be liable for any punitive,
exemplary, consequential or indirect damages that may be alleged to result in connection with,
arising out of, or relating to, any Claims, this Commitment Letter, the Fee Letter, the Credit
Facilities, the use or the proposed use of the proceeds thereof, the Transaction, any other
transaction contemplated by this Commitment Letter and any other transaction related thereto.




Furthermore, Borrower hereby acknowledges that information relating to the Credit Facilities may be
transmitted through IntraLinks®, internet, email or similar electronic transmission and
agrees that the use of electronic transmission is not necessarily secure and that there are risks
associated with such use, including risks of interception, disclosure and abuse. Borrower agrees
to assume and accept such risks and hereby authorizes the use of transmission of electronic
transmissions, and that none of the Commitment Parties nor any of their respective affiliates will
have any liability for any damages arising from the use of such electronic transmission systems.




Sharing Information; Absence of Fiduciary Relationship.




Borrower acknowledges that the Commitment Parties and their affiliates may be providing debt
financing, equity capital or other services to other companies with which Borrower may have
conflicting interests. Borrower further acknowledges and agrees that (a) no fiduciary, advisory or
agency relationship between Borrower and any of the Commitment Parties has been or will be created
in respect of any of the transactions contemplated by this Commitment Letter, irrespective of
whether the Commitment Parties and/or their respective affiliates have advised or are advising
Borrower on other matters and (b) Borrower will not assert any claim against any Commitment Party
for breach or alleged breach of fiduciary duty and agrees that no Commitment Party shall have any
direct or indirect liability to Borrower in respect of such a fiduciary duty claim or to any person
asserting a fiduciary duty claim on behalf of or in right of Borrower, including its stockholders,
employees or creditors.




Assignments and Amendments.




This Commitment Letter shall not be assignable by Borrower without the prior written consent of the
Commitment Parties (and any purported assignment without such consent shall be null and void), and
is solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or
create any rights in favor of, any person other than the parties hereto and the Indemnified
Persons. GECC may assign its commitment hereunder, in whole or in part, to any of its affiliates
or to any prospective Lender in connection with the Syndication Process or otherwise; provided that
notwithstanding such assignment, the commitment of GECC to provide the entire principal amount of
the Credit Facilities to be funded on the Closing Date on the terms and conditions set forth in
this Commitment Letter and the Fee Letter will be reduced solely to the extent such other Lenders
fund their commitments on the Closing Date. This Commitment Letter may not be




5









 








amended or waived except by an instrument in writing signed by Borrower and the Commitment Parties.




Counterparts and Governing Law.




This Commitment Letter may be executed in counterparts, each of which shall be deemed an original
and all of which counterparts shall constitute one and the same document. Delivery of an executed
signature page of this Commitment Letter by facsimile or electronic (including “PDF”) transmission
shall be effective as delivery of a manually executed counterpart hereof.




The laws of the State of New York shall govern all matters arising out of, in connection with or
relating to this Commitment Letter, including, without limitation, its validity, interpretation,
construction, performance and enforcement and any claims sounding in contract law or tort law
arising out of the subject matter hereof.




Venue and Submission to Jurisdiction.




Borrower consents and agrees that the state or federal courts located in New York County, State of
New York, shall have exclusive jurisdiction to hear and determine any claims or disputes between or
among any of the parties hereto pertaining to this Commitment Letter, the Fee Letter, the Credit
Facilities, the Transaction, any other transaction relating hereto or thereto, and any
investigation, litigation, or proceeding in connection with, related to or arising out of any such
matters, provided, that Borrower acknowledges that any appeal from those courts may have to
be heard by a court located outside of such jurisdiction. Borrower expressly submits and consents
in advance to such jurisdiction in any action or suit commenced in any such court, and hereby
waives any objection, which it may have based upon lack of personal jurisdiction, improper venue or
inconvenient forum.




Waiver of Jury Trial.




THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS COMMITMENT LETTER, THE
FEE LETTER, THE CREDIT FACILITIES, THE TRANSACTION AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY.
THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE.




Survival.




The provisions of this letter set forth under this heading and the headings “Syndication”,
“Information”, “Expenses”, “Confidentiality”, “Indemnification”, “Sharing Information; Absence of
Fiduciary Relationship”, “Assignments and Amendments”, “Counterparts and Governing Law”, “Venue and
Submission to Jurisdiction” and “Waiver of Jury Trial” shall survive the expiration or termination
of this Commitment Letter and the closing and/or funding of any or all
of the Credit Facilities, and shall remain in full force and effect regardless of whether the
Credit Facilities close or the Credit Facilities Documentation shall be executed and delivered;
provided that if the Credit Facilities close or the Credit Facilities Documentation shall
be executed and delivered, the provisions under the heading “Syndication” shall survive only until
the completion of the Syndication Process (as determined by Lead Arranger).





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Integration.




This Commitment Letter and the Fee Letter supersede any and all discussions, negotiations,
understandings or agreements, written or oral, express or implied, between or among the parties
hereto and their affiliates as to the subject matter hereof.




Patriot Act.




The Commitment Parties hereby notify Borrower that pursuant to the requirements of the USA PATRIOT
Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT Act”),
each Lender may be required to obtain, verify and record information that identifies Borrower and
each Guarantor, which information includes the name, address, tax identification number and other
information regarding Borrower that will allow such Lender to identify Borrower and each Guarantor
in accordance with the PATRIOT Act. This notice is given in accordance with the requirements of
the PATRIOT Act and is effective as to each Lender.




Please indicate Borrower’s acceptance of the terms hereof and of the Fee Letter by signing in the
appropriate space below and in the Fee Letter and returning to GECC on behalf of the Commitment
Parties such signature pages by 5:00 p.m., New York time on June 29, 2011. Unless extended in
writing by the Commitment Parties, the commitments and agreements contained herein shall
automatically expire on the first to occur of (a) the date and time referred to in the previous
sentence unless Borrower shall have executed and delivered a copy of this Commitment Letter and the
Fee Letter as provided above, (b) 5:00 p.m. New York time on November 1, 2011, (c) the closing of
the Acquisition without the use of the Credit Facilities, (d) the termination of the Acquisition
Agreement, and (e) execution and delivery of the Credit Facilities Documentation and funding of the
Credit Facilities.




[remainder of page intentionally left blank]







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Sincerely,




GENERAL ELECTRIC CAPITAL CORPORATION




	 	 	 	 	 

	By: 

Name:

	 	/s/ Jason Ricketts
 

Jason Ricketts
	 	 
	Title:

	 	Its Duly Authorized Signatory	 	 






GE CAPITAL MARKETS, INC.




	 	 	 	 	 

	By: 

Name:

	 	/s/ Joseph Lee
 

Joseph Lee
	 	 
	Title:

	 	Its Duly Authorized Signatory	 	 





 Commitment Letter











 






AGREED AND ACCEPTED

THIS 26TH DAY OF JUNE, 2011




METROPOLITAN HEALTH NETWORKS, INC.




	 	 	 	 	 

	By: 

Name:

	 	/s/ Michael M. Earley
 

Michael M. Earley
	 	 
	Title:

	 	CEO	 	 





 Commitment Letter














 





Exhibit A to Commitment Letter

$265,000,000 First Lien Credit Facilities




Summary of Terms

June 26, 2011


Capitalized terms used herein without definition shall have the meanings assigned to such terms in
the Commitment Letter to which this term sheet is attached.




	 	 	 

	Borrower:

	 	Metropolitan Health Networks, Inc. (“Borrower”).
	 
	 	 
	Guarantors:

	 	Each of Borrower’s existing and subsequently acquired or formed direct and indirect
subsidiaries (each, a “Guarantor” and collectively, the “Guarantors”).
	 
	 	 
	Administrative Agent:

	 	General Electric Capital Corporation (“GECC” and, in such
capacity, the “Agent”)
	 
	 	 
	Sole Lead Arranger
and Sole Bookrunner:

	 	GE Capital Markets, Inc. (“GECM” and, in such capacity, the
“Lead Arranger”)
	 
	 	 
	Lenders:

	 	GECC and/or one or more of its direct or indirect subsidiaries and a syndicate of
banks, financial institutions and other entities arranged by the Lead Arranger for the
portion not held by GECC and/or its subsidiaries.
	 
	 	 
	First Lien Credit Facilities:

	 	$265,000,000 in senior secured first lien credit facilities
(the “First Lien Credit Facilities”) consisting of the following:







Term Loan: A term loan of $240,000,000 (the “Term
Loan”) will be advanced in one drawing on the Closing
Date (as defined below) and have a term of five years, and
will be repayable in equal quarterly installments of 5.0%
per annum of the original principal amount of the Term Loan
commencing on the first day of the first full calendar
quarter beginning after the Closing Date with the balance
payable in full on the maturity date.




Amounts repaid on Term Loan may not be reborrowed.




Revolving Credit Facility: A revolving credit facility of
$25,000,000 (the “Revolving Credit Facility”) under
which borrowings may be made from time to time during the
period from the Closing Date until the fifth anniversary of
the Closing Date.




Letters of Credit. A sub-facility of $15,000,000 of the
Revolving Credit Facility will be available for the
issuance of



 









 







letters of credit (“Letters of Credit”) for the
account of Borrower and the Guarantors. Any such Letters of
Credit shall reduce availability under the Revolving Credit
Facility on a dollar-for-dollar basis.




Swing Line Loans. A sub-facility of $5,000,000 of the
Revolving Credit Facility will be available to Borrower for
swing line loans from GECC. Except for purposes of
calculating the Commitment Fee (as defined below), any such
swing line loans shall reduce availability under the
Revolving Credit Facility on a dollar-for-dollar basis.



	 	 	 

	Incremental Facility:

	 	Borrower shall have the right to increase the size of the Term Loan
and/or add one or more incremental term loan facilities to the First Lien Credit
Facilities (each, whether or not a separate tranche, an “Incremental Term Loan”)
and/or increase commitments under the Revolving Credit Facility (any such increase, an
“Incremental Revolving Facility”; each Incremental Term Loan and each Incremental
Revolving Facility are each sometimes referred to herein individually as an
“Incremental Facility” and collectively as the “Incremental Facilities”),
in an aggregate amount of up to $50,000,000 at any time and from time to time provided:







(a) no Lender will be required to increase its respective
commitment; provided that the Lenders will first be
afforded the opportunity to provide such Incremental
Facility;




(b) no default or event of default exists or would exist
after giving effect thereto;




(c) after giving pro forma effect to such Incremental
Facility and the use of proceeds thereof (and assuming, in
the case of an Incremental Revolving Facility, that the
entire amount of such increase is funded), as of the last
day of the most recent month for which financial statements
have been delivered, the senior leverage ratio shall not
exceed the maximum senior leverage ratio then permitted
under the First Lien Credit Agreement (as defined in
Schedule I), less 0.25;




(d) the final maturity date of any Incremental Term Loan
that is a separate tranche shall be no earlier than the
maturity date of the initial Term Loan and the weighted
average life to maturity of any such Incremental Term Loan
shall not be shorter than the weighted average life to
maturity of the initial Term Loan;




(e) the all-in yield (including interest rate margins, any
interest rate floors, original issue discount and upfront
fees (based on the lesser of a four-year average life to
maturity or the remaining life to maturity), but excluding
arrangement, structuring and underwriting fees paid or
payable to any



 









 







arranger or its affiliates with respect to any Incremental
Term Loan) applicable to any Incremental Term Loan will not
be more than 0.50% higher than the corresponding all-in
yield (determined on the same basis) applicable to the
initial Term Loan, the Revolving Credit Facility or any
prior Incremental Term Loan, unless the interest rate
margin with respect to the initial Term Loan, each prior
Incremental Term Loan and the Revolving Credit Facility, as
the case may be, is increased by an amount equal to the
difference between the all-in yield with respect to the
Incremental Term Loan and the all-in yield on the initial
Term Loan or any prior Incremental Term Loan, as the case
may be, minus, 0.50%;




(f) except as permitted above, any Incremental Term Loan
shall be on terms substantially consistent with the initial
Term Loan; and




(g) any Incremental Revolving Facility shall be on
substantially similar terms (including the pricing and
maturity date) as, and pursuant to documentation applicable
to, the Revolving Credit Facility.



	 	 	 

	Use of Proceeds:

	 	The proceeds of the First Lien Credit Facilities on the Closing Date and
advances under the Revolving Credit Facility made after the Closing Date (collectively,
the “Loans”) will be used together with the proceeds of the Second Lien Credit
Facility (as defined in Exhibit B) solely to, first, repay all amounts owing under
the Acquired Businesses’ existing senior secured credit facilities and all other
indebtedness (other than indebtedness to be agreed upon), and, thereafter, (a) to pay a
portion of the consideration under the Acquisition Agreement (as defined below), (b) to
pay fees and expenses incurred in connection with the foregoing and with the First Lien
Credit Facilities and (c) in the case of the Loans under the Revolving Credit Facility
made after the Closing Date, for working capital and general corporate purposes.
	 
	 	 
	Interest:

	 	Interest will be payable on the unpaid principal amount of all Loans at a rate per
annum equal to, at the option of Borrower, (a) the Base Rate (as defined below)
plus the Applicable Margin (as defined below), payable quarterly in arrears or (b)
LIBOR (as defined below) plus the Applicable Margin, payable at the end of the
relevant interest period, but in any event, at least quarterly.







“Base Rate” means a floating rate of interest per
annum equal to the greatest of (a) the rate last quoted by
The Wall Street Journal (or another national
publication selected by the Agent) as the U.S. “Prime
Rate,” (b) the federal funds rate plus 50 basis points and
(c) the sum of LIBOR for an interest period of one month
plus the



 









 







excess of the LIBOR Applicable Margin over the Base Rate
Applicable Margin.




“LIBOR” means, for each interest period, the
greater of (a) the offered rate for deposits in U.S.
dollars in the London interbank market for the relevant
interest period which appears on Reuters Screen LIBOR01
Page, as of 11:00 a.m. (London time) on the day which is
two (2) business days prior to the first day of such
interest period adjusted for reserve requirements and (b)
1.5% per annum. When selecting the LIBOR option, Borrower
will be entitled to choose 1, 2, 3 or 6 month (and, to the
extent available to all relevant Lenders, 9 or 12 month)
interest periods; provided that Borrower may not
select any interest period of more than one (1) month until
the earlier of (a) the date which is 90 days after the
Closing Date and (b) the completion of the Syndication
Process.




All interest will be calculated based on a 360-day year
(or, in the case of Base Rate Loans, a 365/366-day year)
and actual days elapsed. The First Lien Credit Agreement
will set forth appropriate detail describing the exact
method of calculation and relevant reserve requirements for
the interest rates referred to above as well as LIBOR
breakage provisions, LIBOR borrowing mechanics and other
provisions relating to LIBOR.




The “Applicable Margin” (on a per annum basis)
means:




(a) with respect to the Term Loan, 3.75%, in the case
of Base Rate Loans, and 4.75%, in the case of LIBOR Loans;
and




(b) with respect to Loans under the Revolving Credit
Facility, 3.75%, in the case of Base Rate Loans (which
shall include all Swing Line Loans), and 4.75%, in the case
of LIBOR Loans;



	 	 	 

	Default Rate:

	 	Automatically upon the occurrence of a bankruptcy or payment event of default
(unless waived) or at the election of the Required Lenders (as defined below) upon the
occurrence and during the continuance of any other event of default, the loans shall bear
interest at a default rate of interest (the “Default Rate”) equal to an additional
two percent (2%) per annum over the rate otherwise applicable and such interest will be
payable on demand.
	 
	 	 
	Interest Rate Protection:

	 	Borrower shall obtain, within 90 days following the Closing Date,
interest rate protection agreements on terms and with counterparties reasonably
satisfactory to Agent in effect for not less than a three-year term covering a notional
amount that equals at least 50% of the aggregate principal amount of Borrower’s
consolidated floating rate indebtedness (other than the Revolving Credit Facility).






 









 






	 	 	 

	Fees:

	 	In addition to the fees payable pursuant to the Fee Letter, Borrower shall pay the
following fees:
	 
	 

	 	A non-refundable fee of 0.50% per annum of the average
daily balance of the unused portion of the Revolving Credit
Facility to the Agent, for the account of the Lenders under
the Revolving Credit Facility, quarterly in arrears (the
“Commitment Fee”).
	 
	 	 
	 

	 	A non-refundable fee on the average daily issued but
undrawn face amount of all outstanding Letters of Credit at
a rate per annum equal to the Applicable Margin for Loans
under the Revolving Credit Facility bearing interest based
on LIBOR. Such fee may be increased upon the occurrence of
an event of default in the same manner as the Default Rate
is implemented. Such fee will be due and payable to Agent,
for the account of the respective Lenders under the
Revolving Credit Facility, quarterly in arrears.
	 
	 	 
	 

	 	Customary letter of credit fees to each issuing bank upon
the issuance, amendment or extension of letters of credit
at the prevailing rate. Such fees will be due and payable
to the Agent for the account of the issuing bank or issuing
banks, as the case may be, in respect of such letters of
credit.
	 
	 	 
	 

	 	All fees will be calculated based on a 360-day year and
actual days elapsed.
	 
	 	 
	Prepayments and Commitment
Reductions:

	 	Borrower shall make the following mandatory prepayments (subject to certain basket
amounts and exceptions to be negotiated in the First Lien Credit Agreement):
	 
	 	 
	 

	 	(a) Excess Cash Flow. Annual prepayments in an
amount equal to 50% of Excess Cash Flow (to be defined),
with a reduction to 25% based upon achievement and
maintenance of a total leverage ratio not exceeding 2.00x
as of the last day of each year commencing with the fiscal
year ending December 31, 2012.
	 
	 	 
	 

	 	(b) Equity and Debt Issuances. Prepayments (i) in
an amount equal to 50% of the net cash proceeds of
issuances of publicly offered equity by Borrower and its
subsidiaries with a reduction in such percentage upon
achievement of a senior leverage ratio to be agreed upon
and (ii) in an amount equal to 100% of the net cash
proceeds of issuances or incurrences of debt obligations of
Borrower and its subsidiaries (other than debt incurrences
expressly permitted by the First Lien Credit Agreement).






 









 







(c) Asset Sales. Prepayments in an amount equal
to 100% of the net cash proceeds of the sale or other
disposition of any property or assets of Borrower or its
subsidiaries (including insurance and condemnation
proceeds), subject to thresholds and reinvestment
provisions to be agreed.




(d) Extraordinary Receipts. Prepayments in an
amount equal to 100% of the net cash proceeds from
Extraordinary Receipts (to be defined to include
extraordinary receipts such as casualty and indemnity
payments, and certain insurance proceeds and to exclude
cash receipts in the ordinary course of business) subject
to reinvestment rights to be agreed.




Mandatory prepayments will be applied to the outstanding
Loans: first, to the next four installments of the Term
Loan in direct order of maturity and thereafter ratably to
the remaining installments of the Term Loan, next to the
outstanding principal balance of the Revolving Credit
Facility, which shall not effect a permanent reduction to
the Revolving Credit Facility, next to cash collateralize
Letters of Credit and then to the outstanding principal
balance of the Second Lien Credit Facility to the extent
required thereby. Mandatory prepayments shall be
accompanied by any breakage costs in connection with any
prepayments of LIBOR Loans.




Voluntary prepayments of the Loans and voluntary
reductions of the unutilized portion of the commitments
under the Revolving Credit Facility will be permitted at
any time without penalty or premium provided that
Borrower’s voluntary prepayments are accompanied by any
breakage costs in connection with any voluntary prepayments
of LIBOR Loans.




Voluntary prepayments shall be applied as directed by
Borrower.



	 	 	 

	Collateral:

	 	Subject to the Funds Certain Provisions and to exceptions to be agreed on for
property below a certain value, all obligations of Borrower under the First Lien Credit
Facilities and under any interest rate protection, or certain other hedging arrangements
to be agreed, entered into with or arranged by Agent or an entity that is a Lender at the
time such arrangements are entered into (or any affiliate of the foregoing) and of the
Guarantors under the guarantees will be secured by a first priority perfected security
interests in substantially all existing and after-acquired real and personal property of
Borrower and each Guarantor, including, without limitation, 100% of all outstanding equity
interests in their subsidiaries (the “Collateral”).
	 
	 	 
	 

	 	Borrower and the Guarantors shall be required to maintain
springing account control agreements with respect to all






 









 






	 	 	 

	 

	 	material deposit and securities accounts, excluding zero
balance payroll, withholding and trust accounts and petty
cash accounts containing less than a to be determined
amount, and subject to customary carve outs for Medicare
and Medicaid proceeds in accordance with a cash management
system reasonably satisfactory to the Agent.
	 
	 	 
	 

	 	Notwithstanding the foregoing, Borrower and Guarantors will
not be required to take any action to perfect a security
interest in any asset where Agent and Borrower agree the
cost of perfection is excessive in relation to the benefit
afforded thereby.
	 
	 	 
	 

	 	All of the above-described pledges, security interests and
mortgages shall be created on terms, and pursuant to
documentation reasonably satisfactory to the Agent
(including, in the case of real property, by customary
items such as satisfactory title insurance and surveys),
and none of the Collateral shall be subject to any other
liens, claims or encumbrances, except second priority liens
securing the Second Lien Credit Facility and other
permitted liens and encumbrances reasonably acceptable to
Agent to be set forth in the First Lien Credit Facilities
Documentation.






	 	 	 

	Conditions Precedent to Closing:

	 	Solely as set forth in Schedule I hereto (the date upon which
all such conditions precedent shall be satisfied and the initial funding under the Credit
Facilities shall take place, the “Closing Date”).
	 
	 	 
	Conditions Precedent to each
Subsequent Extension of Credit
under the First Lien Credit
Facilities:

	 	All of the representations and warranties in the First Lien Credit Facilities
Documentation shall be true and correct in all material respects (but in all respects if
such representation or warranty is qualified by “material” or “Material Adverse Effect”);
no default or event of default shall be continuing; and delivery of any relevant borrowing
notices or letter of credit requests.
	 
	 	 
	Representations and Warranties:

	 	The First Lien Credit Agreement will contain, without
limitation, the following representations and warranties with materiality and other
exceptions, qualifications and thresholds as are customary in transactions of this type to
be mutually agreed upon:
	 
	 	 
	 

	 	Valid existence, power and authority, foreign
qualifications, compliance with law, no conflict,
governmental authorization, enforceability, absence of
litigation, no default or event of default, ERISA
compliance, use of proceeds, margin






 









 






	 	 	 

	 

	 	regulations, title to properties, taxes, financial
condition (including as to projections and no material
adverse change), environmental matters, investment company
and other regulated entities, solvency, labor relations,
intellectual property, broker’s and investment banker’s
fees, insurance matters, capitalization, capital structure
and investments, jurisdiction of organization, location of
assets and chief executive office, deposit and other
accounts, acquisition agreement, status of First Lien
Credit Facilities as senior debt, healthcare and other
regulatory matters, compliance with OFAC, money laundering,
Patriot Act and other anti-terrorism laws and accuracy of
all information provided.






	 	 	 

	Affirmative Covenants:

	 	The First Lien Credit Agreement will contain, without limitation, the
following affirmative covenants with materiality and other exceptions, qualifications and
thresholds as are customary in transactions of this type to be mutually agreed upon:
	 
	 	 
	 

	 	Preservation of corporate existence, licenses and
intellectual property, maintenance of property, insurance,
payment and performance of obligations, compliance with
laws, inspection of property and books and records, use of
proceeds, cash management systems, landlord agreements at
locations to be determined, healthcare and other regulatory
matters, further assurances (including provision of
additional collateral and guaranties consistent with the
paragraph above entitled “Collateral” and use of
commercially reasonable efforts to deliver required
landlord, mortgagee and bailee waivers), environmental
matters and maintenance of Moody’s and S&P ratings without
regard to the level of such ratings.
	 
	 	 
	Reporting Requirements:

	 	The First Lien Credit Agreement will contain, without limitation, the
following financial and other reporting requirements:
	 
	 	 
	 

	 	Delivery of quarterly financial statements together with an
MD&A report and of annual audited financial statements;
delivery of management letters; delivery of an annual
budget (including assumptions made in the build-up of such
budget); annual insurance reports; quarterly schedules of
intercompany loan balances; copies of certain reports sent
to other parties and with required notices with respect to
defaults, mandatory prepayment events, material litigation,
taxes, labor matters, ERISA or environmental events, owned
margin stock and other material information.
	 
	 	 
	Financial Performance Covenants:

	 	The First Lien Credit Agreement will contain the following
financial performance covenants, each with definitions and levels to be agreed upon but
which will have a 25% cushion below EBITDA in the financial model during the period from






 









 






	 	 	 

	 

	 	the Closing Date until the third anniversary of the Closing
Date and thereafter with a cushion to be agreed upon:







	 	•	 	minimum fixed charge coverage
	 
	 	•	 	maximum senior leverage
	 
	 	•	 	maximum total leverage





	 	 	 

	Negative Covenants:

	 	The First Lien Credit Agreement will contain, without limitation, the
following negative covenants with materiality and other exceptions, qualifications and
thresholds as are customary in transactions of this type to be mutually agreed upon:
	 
	 	 
	 

	 	Limitations on liens, acquisitions, disposition of assets,
consolidations and mergers, loans and investments,
indebtedness, capital expenditures, transactions with
affiliates, management fees and compensation, use of
proceeds, contingent obligations, compliance with ERISA,
restricted payments, change in business, change in
structure, changes in accounting, name and jurisdiction of
organization, amendments to related agreements and
subordinated indebtedness, no negative pledges, OFAC;
PATRIOT Act, healthcare and other regulatory matters,
sale-leasebacks, hazardous materials and restructuring
fees.
	 
	 	 
	Events of Default:

	 	The First Lien Credit Agreement will contain, without limitation, the
following events of default with notice provisions, grace periods and thresholds customary
in transactions of this type to be mutually agreed upon:
	 
	 	 
	 

	 	Failure to pay principal, interest or any other amount when
due; representations and warranties incorrect in any
material respect when made or deemed made; failure to
comply with covenants in the First Lien Credit Agreement;
cross-default to other material indebtedness and certain
contingent obligations; failure to satisfy or stay
execution of judgments; bankruptcy or insolvency; actual or
asserted invalidity or impairment of any part of the First
Lien Credit Facilities Documentation (including the failure
of any lien on a portion of Collateral having a value in
excess of an amount to be determined to remain perfected);
invalidity of subordination provisions; breach of a
material agreement; healthcare and regulatory matters; and
change of ownership or control.
	 
	 	 
	Voting

	 	Amendments, waivers and other modifications to the First Lien Credit Facilities
Documentation shall require the consent of Lenders holding more than 50% of total
commitments and/or Loans (the “Required Lenders”); provided that certain customary
amendments, waivers and other modifications to be agreed shall require class votes or the
consent of all Lenders;






 









 






	 	 	 

	 

	 	provided, further, that the First Lien Credit Facilities
Documentation shall provide the right for any individual
Lender to agree to extend the maturity date of its
outstanding Term Loan upon the request of Borrower without
the consent of Agent or any other Lender on
to-be-determined terms and conditions.






	 	 	 

	Miscellaneous:

	 	The First Lien Credit Facilities Documentation will include (a) standard yield
protection provisions (including, without limitation, provisions relating to compliance
with risk-based capital guidelines, increased costs, withholding taxes, illegality and
LIBOR breakage costs), (b) a waiver of consequential and punitive damages and right to a
jury trial, (c) customary agency, set-off and sharing language, (d) customary “defaulting
lender” and “yank-a-bank” provisions and (e) other provisions as are usual and customary
for facilities of this kind (including voting, indemnity and expense provisions).
	 
	 	 
	Assignments and Participations:

	 	Lenders will be permitted to make assignments in a minimum
amount of $1 million (unless such assignment is of a Lender’s entire interest in a
particular tranche of the First Lien Credit Facilities) to other financial institutions
with the consent of Agent and, so long as no event of default has occurred and is
continuing, the consent of Borrower, which consents shall not be unreasonably withheld or
delayed; provided however, that the consent of Borrower shall not be
required in connection with assignments to other Lenders (or to affiliates or approved
funds of Lenders) and the consent of Borrower will be deemed to have been given if
Borrower has not responded within five business days of a request for such consent. All
assignments of a Lender’s interest in the First Lien Credit Facilities will be made via an
electronic settlement system designated by Agent. An assignment fee of $3,500 shall be
payable to Agent upon the effectiveness of any such assignment. Agent may impose
restrictions on assignments to potential Lenders that hold subordinated or other junior
indebtedness.
	 
	 	 
	Governing Law and Submission
to Jurisdiction:

	 	New York
	 
	 	 
	Agent’s Counsel:

	 	Paul, Hastings, Janofsky & Walker LLP






 









 





Exhibit B to Commitment Letter

$90,000,00 Second Lien Credit Facility




Summary of Terms

June 26, 2011


Capitalized terms used herein without definition shall have the meanings assigned to such terms in
the Commitment Letter to which this term sheet is attached.




	 	 	 

	Borrower:

	 	Metropolitan Health Networks, Inc. (“Borrower”).
	 
	 	 
	Guarantors:

	 	Each of Borrower’s existing and subsequently acquired or formed direct and indirect
subsidiaries (each, a “Guarantor” and collectively, the “Guarantors”).
	 
	 	 
	Administrative Agent:

	 	General Electric Capital Corporation (“GECC” and, in such
capacity, the “Agent”)
	 
	 	 
	Sole Lead Arranger
and Sole Bookrunner:

	 	GE Capital Markets, Inc. (“GECM” and, in such capacity, the
“Lead Arranger”)
	 
	 	 
	Lenders:

	 	A syndicate of financial institutions arranged by GECM in consultation with Borrower.
	 
	 	 
	Credit Facility:

	 	$90,000,000 senior secured second lien term loan (the “Second Lien Term
Loan”) under a second lien credit facility (the “Second Lien Credit Facility”)
will be advanced in one drawing on the Closing Date (as defined below) and have a term of
six years. The Second Lien Term Loan will not amortize and will be paid in full on the
maturity date.
	 
	 	 
	Use of Proceeds:

	 	Same as for First Lien Credit Facilities.
	 
	 	 
	Interest:

	 	Interest will be payable on the unpaid principal amount of all Loans at a rate per
annum equal to, at the option of Borrower, (a) the Base Rate (as defined below)
plus the Applicable Margin (as defined below), payable quarterly in arrears or (b)
LIBOR (as defined below) plus the Applicable Margin, payable at the end of the
relevant interest period, but in any event, at least quarterly.
	 
	 	 
	 

	 	“LIBOR” means, for each interest period, the
greater of (a) the offered rate for deposits in U.S.
dollars in the London interbank market for the relevant
interest period which appears on Reuters Screen LIBOR01
Page, as of 11:00 a.m. (London time) on the day which is
two (2) business days prior to the first day of such
interest period adjusted for reserve requirements and (b)
1.75% per annum. When selecting the LIBOR option, Borrower
will be entitled to choose 1, 2, 3 or 6 month (and, to the
extent






Schedule I-1









 






	 	 	 

	 

	 	available to all relevant Lenders, 9 or 12 month) interest
periods; provided that Borrower may not select any
interest period of more than one (1) month until the
earlier of (a) the date which is 90 days after the Closing
Date and (b) the completion of the Syndication Process.
	 
	 	 
	 

	 	All interest will be calculated based on a 360-day year
(or, in the case of Base Rate Loans, a 365/366-day year)
and actual days elapsed. The Second Lien Credit Facility
will set forth appropriate detail describing the exact
method of calculation and relevant reserve requirements for
the interest rates referred to above as well as LIBOR
breakage provisions, LIBOR borrowing mechanics and other
provisions relating to LIBOR.
	 
	 	 
	 

	 	The “Applicable Margin” (on a per annum basis)
means with respect to the Term Loan, 7.50%, in the case of
Base Rate Loans, and 8.50%, in the case of LIBOR Loans; and






	 	 	 

	Default Rate: 

	 	Same as for First Lien Credit Facilities. 
	 
	 	 
	Fees :

	 	As provided in the Fee Letter.
	 
	 	 
	Prepayment Premiums:

	 	Upon any prepayment of the Second Lien Term Loan, or any mandatory
assignment of the Second Lien Term Loan pursuant to any “yank-a-bank” provisions
pertaining to non-consenting Lenders, Borrower shall pay a premium equal to (i) 3% of the
prepaid or assigned amount of the Second Lien Term Loan, if such prepayment or assignment
occurs on or prior to the first anniversary of the Closing Date, (ii) 2% of the prepaid or
assigned amount of the Second Lien Term Loan, if such prepayment or assignment occurs
after the first anniversary of the Closing Date but on or prior to the second anniversary
of the Closing Date and (iii) 1% of the prepaid or assigned amount of the Second Lien Term
Loan, if such prepayment or assignment occurs after the second anniversary of the Closing
Date but on or prior to the third anniversary of the Closing Date.
	 
	 	 
	Collateral:

	 	Same as for First Lien Credit Facilities, but with second priority lien.






	 	 	 

	Conditions Precedent to Closing:

	 	As set forth in Schedule I hereto (the date upon which all
such conditions precedent shall be satisfied and the initial funding under the Credit
Facilities shall take place, the “Closing Date”).
	 
	 	 
	Representations and Warranties:

	 	Same as for First Lien Credit Facilities.
	 
	 	 
	Affirmative Covenants:

	 	Same as for First Lien Credit Facilities.
	 
	 	 
	Reporting Requirements:

	 	Same as for First Lien Credit Facilities.






 









 






	 	 	 

	Financial Performance Covenants:

	 	The Second Lien Credit Facility will contain the following
financial performance covenants, each with definitions and levels to be agreed upon:







	 	•	 	minimum fixed charge coverage
	 
	 	•	 	maximum total leverage;





	 	 	 

	 

	 	provided that the covenant levels will be set at
amounts that provide a 10% cushion to the corresponding
covenants in the First Lien Credit Facilities.
	 
	 	 
	Negative Covenants:

	 	Same as for First Lien Credit Facilities, subject to increased baskets to
be agreed upon.
	 
	 	 
	Events of Default:

	 	Same as for First Lien Credit Facilities, subject to increased thresholds to
be agreed upon and provided that there shall be a cross acceleration but not a cross
default to the First Lien Credit Facilities.






	 	 	 

	Voting:

	 	Same as for First Lien Credit Facilities.
	 
	 	 
	Miscellaneous:

	 	Same as for First Lien Credit Facilities.
	 
	 	 
	Assignments and Participations:

	 	Same as for First Lien Credit Facilities.
	 
	 	 
	Governing Law and Submission
to Jurisdiction:

	 	Same as for First Lien Credit Facilities.
	 
	 	 
	Agent’s Counsel:

	 	Same as for First Lien Credit Facilities.






 









 






SCHEDULE I

to

Commitment Letter




Conditions to Closing




June 26, 2011


The availability of the Credit Facilities set forth in the Commitment Letter shall be subject
solely to the satisfaction of the following conditions:





	 	1.	 	Absence of Orders. No governmental authority shall have obtained, enacted,
issued, promulgated, enforced or entered any Applicable Law (as defined in the Acquisition
Agreement), arbitration award, finding or Order (as defined in the Acquisition Agreement)
(whether temporary, preliminary or permanent), in any case that is in effect and prevents
or prohibits consummation of the Transaction.
	 
	 	2.	 	Maximum Leverage. The consolidated total leverage multiple, which solely for
the purpose of this condition, shall exclude the Closing Date Letters of Credit (as defined
below), of Borrower and its subsidiaries on the Closing Date after giving effect to the
initial funding of the Credit Facilities and other transactions contemplated hereby shall
not exceed 3.60x assuming average working capital levels. For the purposes of this
calculation, EBITDA shall be calculated in accordance with Exhibit A attached hereto.
	 
	 	3.	 	Acquisition. The Acquisition shall have been consummated in accordance with
the terms of the merger agreement (the “Acquisition Agreement”) substantially
concurrent with the initial funding of the Credit Facilities, without any amendment,
modification or waiver of any of the provisions thereof that would be materially adverse to
the Lenders without the consent of Agent (it being understood that any amendment or waiver
to the definition of Material Adverse Effect (as defined in the Acquisition Agreement) or
that results in a reduction of the cash portion of the purchase price, unless the
commitments under the First Lien Credit Facilities and the Second Lien Credit Facility are
reduced by a like amount with such reduction to be applied to the First Lien Credit
Facilities and Second Lien Credit facility in GECC’s discretion, will be deemed to be
materially adverse to the Lenders) and all requirements of law.
	 
	 	4.	 	No Combined Material Adverse Effect. Except as disclosed in the Company SEC
Reports (as defined in the Acquisition Agreement) or in the schedules to the Acquisition
Agreement, from March 31, 2011, to the date of the Acquisition Agreement there shall not
have occurred a Combined Material Adverse Effect and since the date of the Acquisition
Agreement, there shall not have occurred and be continuing, a Combined Material Adverse
Effect. For purposes hereof, “Combined Material Adverse Effect” means any event,
development, change or effect, that, individually or in the aggregate, has had, or would
reasonably be likely to have (i) a material adverse effect on the financial condition,
business, assets, liabilities, or results of operations of Borrower, Target and their
respective subsidiaries, taken as a whole, or (ii) would prevent or materially impair the
ability of Borrower and Target to consummate the Transaction; provided, however,
that no event, development, change or effect (by itself or when aggregated or taken
together with any and all other events, developments, changes or effects) to the extent
resulting from, arising out of, or attributable to, any of the following shall be deemed to
constitute or be taken into account when determining whether a “Combined Material Adverse
Effect” has occurred or may, would or could occur: (A) any changes, effects, developments
or events in the economy or the financial, credit or securities markets in general
(including changes





 









 






	 	 	 	in interest or exchange rates), (B) any changes, effects, developments or events in the
industries in which Borrower and Target operate, (C) any changes, effects, developments or
events resulting from the announcement or pendency of the transactions contemplated by the
Acquisition Agreement, the identity of Borrower or Target or the performance or compliance
with the terms of the Acquisition Agreement (including in each case (i) any actions,
challenges or investigations relating to the Acquisition Agreement or the Transaction made
or brought by any current or former stockholders of Borrower or Target and (ii) any loss of
customers, suppliers or employees or any disruption in business relationships resulting
therefrom), (D) any changes, effects, developments or events resulting from the failure of
Borrower or Target to meet internal or published forecasts, budgets, earnings or financial
projections for any period or fluctuations in the trading price or volume of Borrower or
Target’s common stock (but not, in each case, the underlying cause of such failure or
fluctuations, unless such underlying cause would otherwise be excepted from this
definition), (E) acts of God, natural disasters, calamities, national or international
political or social conditions, including the engagement by any country in hostility
(whether commenced before, on or after the date hereof, and whether or not pursuant to the
declaration of a national emergency or war), or the occurrence of a military or terrorist
attack, or (F) any adoption, implementation, promulgation, repeal, modification,
reinterpretation or proposal of any Applicable Law or GAAP (as defined in the Acquisition
Agreement) (or any interpretation thereof), except to the extent such changes, effects,
developments or events resulting from or arising out of the matters described in clauses
(A), (B) and (F) disproportionately affect Borrower and Target taken as a whole as compared
to other for profit companies operating in the industries in which Borrower and Target
operate (after taking into account the size of the Borrower and Target taken as a whole,
relative to such other for profit companies).
	 
	 	5.	 	Documentation and Other Customary Deliveries. The preparation, execution and
delivery of a definitive first lien credit agreement (the “First Lien Credit
Agreement”), intercreditor, and other documents executed in connection therewith
(collectively, with the First Lien Credit Agreement, the “First Lien Credit Facilities
Documentation”) shall be mutually acceptable to Borrower and Agent, incorporating
substantially the terms and conditions as outlined herein and in the Commitment Letter to
which this Schedule is attached and the delivery of other customary closing documents and
for any other provisions not addressed herein, to be negotiated in good faith, customary
for transactions of this type and mutually satisfactory. The preparation, execution and
delivery of a definitive second lien credit agreement (the “Second Lien Credit
Agreement”) and other documents executed in connection therewith (collectively, with
the Second Lien Credit Agreement, the “Second Lien Credit Facility Documentation”;
and together with the First Lien Credit Facilities Documentation, the “Credit
Facilities Documentation”) shall be mutually acceptable to Borrower and Agent,
incorporating substantially the terms and conditions as outlined herein and in the
Commitment Letter to which this Schedule is attached and the delivery of other customary
closing documents and for any other provisions not addressed herein, to be negotiated in
good faith, customary for transactions of this type and mutually satisfactory.
	 
	 	6.	 	Agent shall have received (a) customary opinions of counsel to Borrower and the
Guarantors (which shall cover, among other things, authority, legality, validity, binding
effect and enforceability of the Credit Facilities Documentation, no conflicts with other
material agreements, creation and perfection of the liens granted thereunder on the
Collateral) and of appropriate local counsel and customary evidence of authorization,
customary officer’s certificates and good standing certificates (to the extent applicable),
(b) a solvency certificate of Borrower’s chief financial officer (certifying that, after
giving effect to the Transaction, Borrower and its subsidiaries on a consolidated basis are
solvent), and (c) customary





 









 






	 	 	 	endorsements naming the Agent, on behalf of the Lenders, as an additional insured or loss
payee, as the case may be, under all insurance policies to be maintained with respect to
the properties of Borrower and its subsidiaries forming part of the Collateral. Reliance
letters with respect to any legal opinions given by counsel to Borrower or Target in
connection with the Acquisition.
	 
	 	7.	 	Subject in all respects to the Funds Certain Provisions, all documents and instruments
required to create and perfect Agent’s security interest in the Collateral shall have been
executed and delivered and, if applicable, be in proper form for filing.
	 
	 	8.	 	Agent shall have received all documentation and other information about Borrower and
the Guarantors as has been reasonably requested in writing by Agent or Lead Arranger at
least 10 days prior to the Closing Date and that they reasonably determine is required by
regulatory authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including without limitation the PATRIOT Act.
	 
	 	9.	 	Agent shall have received (a) unaudited consolidated balance sheets and related
statements of income, changes in equity and cash flows of Borrower for each subsequent
fiscal quarter after December 31, 2010 ended at least 45 days before the Closing Date and
(b) unaudited consolidated balance sheets and related statements of income, changes in
equity and cash flows of Borrower and the Acquired Business, respectively, for each
subsequent month after April 30, 2011 ended at least 30 days before the Closing Date.
	 
	 	10.	 	Agent shall have received (a) a pro forma consolidated balance sheet and related pro
forma consolidated statement of income of Borrower and its subsidiaries as of and for the
twelve-month period ending on the last day of the most recently completed four-fiscal
quarter period ended at least 45 days prior to the Closing Date; (b) the combined estimated
pro forma financial statements for Borrower and the Acquired Business for the year 2011,
including revenue and EBITDA for Borrower and the Acquired Business by quarter for 2011;
and (c) the Borrower’s consolidated financial projections for the six year period
commencing for the calendar year following the Closing Date, in each case prepared after
giving effect to the Transaction as if the Transaction had occurred as of such date (in the
case of such balance sheet) or at the beginning of such period (in the case of such other
financial statements); provided that such pro forma financial statements shall meet the
requirements of Regulation S-X under the Securities Act of 1933, as amended, and all other
accounting rules and regulations of the SEC promulgated thereunder applicable to a
registration statement under such Act on FormS-1; provided, further, that the pro forma
financial statements delivered pursuant to clauses (a) and (b) above were prepared in good
faith on the basis of the assumptions stated therein, which assumptions are reasonable in
light of the then existing conditions, and, in the case of each of this and the immediately
preceding provisos, the chief financial officer of Borrower shall have provided to Agent a
written certification to that effect.
	 
	 	11.	 	All fees required to be paid pursuant to the Fee Letter and reasonable out-of-pocket
expenses required to be paid on the Closing Date pursuant to the Commitment Letter and the
Fee Letter shall, upon the initial borrowing under the Credit Facilities, have been paid on
the Closing Date (which amounts may be offset against the proceeds of the Credit
Facilities).
	 
	 	12.	 	After giving effect to the consummation of the Transaction, Borrower and its
subsidiaries shall have no outstanding preferred equity, debt for borrowed money or
capitalized lease obligations, except for (a) 5,000 shares of Series A preferred stock, par
value $.001 per share; stated value $100 per share of Borrower, (b) debt for borrowed money
incurred pursuant to the Credit




 









 






	 	 	 	Facilities, (c) outstanding letters of credit with an aggregate face amount of not more
than $4,660,000 (the “Closing Date Letters of Credit”) and (d) such other existing
debt for borrowed money and capitalized lease obligations in an aggregate amount not to
exceed $1,500,000.






Notwithstanding anything in the Fee Letter, the Commitment Letter or the Credit Facilities
Documentation to the contrary, (i) the only representations and warranties related to Borrower,
Target and their respective subsidiaries in the Credit Facilities Documentation the accuracy of
which will be a condition to the availability of the Credit Facilities on the Closing Date will
be (A) such representations and warranties regarding the Acquired Business in the Acquisition
Agreement as are material to the interests of Agent and the Lenders, but only to the extent that
you or your affiliates have the right to terminate your or your affiliates’ obligations under
the Acquisition Agreement (or the right not to consummate the Acquisition pursuant to the
Acquisition Agreement) as a result of a failure of such representations and warranties to be
true and correct and (B) the Specified Representations (as defined below) made by Borrower and
its subsidiaries in the Credit Facilities Documentation which shall be accurate in all material
respects; and (ii) the terms of the Credit Facilities Documentation will not impair availability
of the Credit Facilities on the Closing Date if the conditions expressly set forth in this
Schedule I and the obligations set forth in the Fee Letter and the Syndication and Information
provisions of the Commitment Letter are satisfied (it being understood that, to the extent a
perfected security interest in any Collateral (the security interest in respect of which cannot
be perfected by means of the filing of a UCC financing statement, the making of a federal
intellectual property filing or delivery of possession of capital stock or other certificated
security) is not able to be provided on the Closing Date after Borrower’s use of commercially
reasonable efforts to do so, the perfection of such security interest in such Collateral will
not constitute a condition precedent to the availability of the Credit Facilities on the Closing
Date, but a security interest in such Collateral will be required to be perfected after the
Closing Date pursuant to arrangements to be mutually agreed between Borrower and Agent);
provided that nothing herein shall limit the applicability of the individual conditions to
closing expressly set forth herein except to the extent expressly stated to be subject to this
paragraph. For purposes hereof, “Specified Representations” mean the representations
and warranties set forth in the Credit Facilities Documentation relating to legal existence,
corporate power and authority; the authorization, execution and delivery, and legality, validity
and enforceability, of the Credit Facilities Documentation; the creation, perfection and
priority of liens (subject to the limitations on perfection set forth above); Federal Reserve
margin regulations; the Investment Company Act; Patriot Act, OFAC and other anti-terrorism laws;
the status of the Credit Facilities as senior debt; solvency as of the Closing Date (after
giving effect to the Transaction) of Borrower and its Subsidiaries on a consolidated basis; use
of proceeds; governmental and third party approvals for Borrower required to consummate the
Transaction other than those the failure of which to obtain would not reasonably be expected to
give rise to a Combined Material Adverse Effect and with respect to Target, as referenced in
Schedule 8.02(d) of the Acquisition Agreement required to be obtained in connection with the
Closing (as defined in the Acquisition Agreement) of the Merger (as defined in the Acquisition
Agreement); and no violation of, or conflict with, (i) charter documents, (ii) applicable law or
(iii) material agreements as it relates to the Credit Facilities Documentation, solely with
respect to clause (ii) and (iii) in a manner which could reasonably be expected to give rise to
a Combined Material Adverse Effect. For the avoidance of doubt, the foregoing provisions of
this paragraph are sometimes referred to as the “Funds Certain Provisions”.








 









 








EXHIBIT A




EBITDA CALCULATION


Solely for the purpose of the Maximum Leverage condition to closing, EBITDA will be defined
generally as (i) operating income from continuing operations, plus (ii) non-cash expenses, plus
(iii) one-time expenses incurred as a result of the Transaction, plus (iv) estimated cost savings
to be achieved during the 12 month period following the Closing Date, as set forth on Annex
A attached hereto, in an aggregate principal amount not to exceed $5,000,000.