**Exhibit10.4**

 

**CONFIDENTIAL**

 

 

October 1, 2003

 

 

Mr. Jon B. SchandlerPresident and CEOWhite Plains Hospital CenterDavis Avenue at East Post RoadWhite Plains, NY 10601

 

 

Re:  FCG Loan Agreement

 

Dear Schandler,

 

Inan effort to provide working capital in the event of a potential increase inthe number of days that White Plains Hospital Center’s (***“WP” or the “Hospital”***)****patient accounts receivableare outstanding (the ***“A/R Days Outstanding”***) and the corresponding increasein the dollar amount of patient accounts receivable outstanding (the ***“Actual A/R”***) as aresult of the implementation of the Meditech software system, First ConsultingGroup, Inc. (***“FCG”***)is pleased to confirm its commitment to make a series of loans to WP in anaggregate principal amount at any one time outstanding****not to exceed $4,080,000, on the terms andsubject to the conditions set forth in this letter agreement (the ***“FCG Loan Agreement”***).  Each loan will be evidenced by a promissorynote (each, a ***“Note”***)in the form of Exhibit A hereto, duly completed and executed by WP anddelivered to FCG prior to FCG’s release of any funds pursuant to this FCG LoanAgreement.  WP’s ability to borrow underthis FCG Loan Agreement is subject to the following terms and conditions:

 

## Commencement Date:                           WP may only borrow under this FCG LoanAgreement after the Commencement Date (defined below) and upon the satisfactionof each “Condition to Borrow” (set forth below).  WP’s Commencement Date shall be within 90 days after the “golive” date of the “Billing Accounts Receivables” software systems in connectionwith the Meditech software implementation by FCG (the ***“Commencement Date”***).  WP must designate a month end date as itsCommencement Date within such 90 day period. For example, if WP’s “go live” date occurs on June 15th,it must designate a Commencement Date of June 30, July 31 orAugust 31.

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## Maturity Dates:                                                          WP may borrow against this FCG Loan Agreementon each of the Borrowing Dates (set forth below).  Any amount borrowed on a Borrowing Date will be treated as a“term loan” and, consistent with the terms of the Notes, will be due andpayable upon the 90th day after such Borrowing Date (each, a ***“Maturity Date”***).  For example, if WP borrows $500,000 on theFirst Borrowing Date then such $500,000 amount will be due and payable on the90th day following the First Borrowing Date.  Further, if WP is able to borrow $300,000 onthe Second Borrowing Date, then such amount would not be due and payable untilthe 90th day following the Second Borrowing Date.  If the Maturity Date of an initial Borrowingoccurs on the same date as the Fourth and/or Fifth Borrowing Date, WP shall beobligated to repay the initial loans on the applicable Maturity Dates and mayborrow again on the new Borrowing Date based on the terms and conditions setforth in this FCG Loan Agreement.  Suchrepayment and

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## borrowing processes will be conducted in a mutually agreeable and costefficient manner.

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## Baseline/Measurement:                 After the execution of the IT OutsourcingServices Agreement (the ***“Agreement”***) between FCG and Healthstar Network, Inc.dba Stellaris Health Network (***“Stellaris”***) dated as of the date hereof, FCG willconduct an analysis of WP’s A/R Days Outstanding and Actual A/R.  FCG will measure WP’s A/R Days Outstandingand Actual A/R during the four (4) month period immediately preceding the 1stday of the month in which the execution of the Agreement occurs (the ***“Baseline Measurement Period”***).  During the Baseline Measurement Period, WP’smaximum monthly A/R Days Outstanding will be the ***“Baseline DO Threshold”*** and WP’s maximummonthly Actual A/R will be the ***“Baseline A/R Threshold.”***  During the period that any amounts under the Notes areoutstanding, WP will continue to operate in accordance with its bad debtreserve and “write off” policies for the calculation of A/R Days Outstandingand Actual A/R in accordance with its past customs and practices.  Such customs and practices are described inExhibit B attached hereto, but in any event, WP’s Actual A/R and A/R DaysOutstanding will be calculated “net” of its bad debt reserves and itscontractual allowances.

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## Hospitals’ Obligations:                   WP agrees to perform the following tasks, andimplement and maintain the following processes and practices commencing uponthe execution of the Agreement and extending through the termination date ofthis FCG Loan Agreement (each, a ***“Hospital Obligation”***):

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1.                                       The allowance schedule, A/R Days Outstandingcalculation, write-off policies (including bad debt, charity, courtesy, andothers ) and discount policies of WP that are described in Exhibit B attachedereto shall remain constant.

 

## 2.                                       WP shall timely take all reasonable actionsrecommended by FCG to reduce its Actual A/R and A/R Days Outstanding betweenthe date of the Agreement and the termination date of this FCG LoanAgreement.  Such reasonable actionsshall include, without limitation, allowing FCG to use additional resources towork with WP’s personnel to reduce the Actual A/R and the A/R Days Outstanding.  Specifically, FCG will be allowed to insertresources, at FCG’s expense, to co-manage current accounts receivable within120 days after the date of the Agreement to establish a detailed “workplan”with goals and procedures to lower WP’s accounts receivable.  Such FCG resources will provide value to WPas they are skilled professionals that generally provide consulting andoperational services for other FCG clients. The “workplan” will be created and mutually agreed upon by FCG andWP.  WP will work with FCG to dedicatesufficient staff (no less than the current staffing levels used to manage theaccounts receivable) to ensure the “workplan” is accomplished.  The FCG resource will have full access toall patient accounting departments and accounts receivable information.

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## 3.                                       The FTE level dedicated by WP during theperiod between the date of the Agreement and the “go live” date of the Meditechsoftware system will average at least ninety percent (90%) of the amount ofFTEs dedicated to the collection of WP’s accounts receivable during theBaseline Measurement Period.  Such

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## FTE level dedicated by WP after the “go live” date of the Meditechsoftware system will equal one hundred percent (100%) of the FTEs dedicated tothe collection of WP’s accounts receivable during the Baseline MeasurementPeriod.

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## 4.                                       The WP Chief Financial Officer shall meetwith FCG at least once per month between the execution of the Agreement and thetermination date of this FCG Loan Agreement to discuss and act upon, amongother things, the topics set forth below:

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## a.                                       Current A/R Days Outstanding calculationsb.                                      Current allowance schedule c.                                       Current bad debt actual and provisiond.                                      Current hours worked within the patientaccounting departmente.                                       Current number of open account aged f.                                         Current dollars outstanding agedg.                                      Aged trail balance report aged for thefollowing dollars ranges:

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## 9,999,999.99 – 00 – 5,000.005,001.00 – 15,000.0015,001.00 – 30,000.0030,001.00 – 9, 999,999.99

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## h.                                      Monthly cash collections to include unpostedi.                                          Last 90 days of revenue

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## WP shall endeavor to makeall of the above listed information available to FCG, subject to the reportingcapabilities of WP’s financial systems. Any information or reports that WP does not currently generate must bemutually agreed upon by WP and FCG.  Thefinancial information (or other reasonable information) discussed above must beprovided at least 5 working days prior to such monthly meetings.

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## Borrowing Mechanics:                     WP shall be entitled to borrow under this FCGLoan Agreement on each of the following dates (each, a “Borrowing Date”):

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## a.                                       Commencement Date +25 days (“First BorrowingDate”)b.                                      Commencement Date + 55 days (“SecondBorrowing Date”)c.                                       Commencement Date + 85 days (“Third BorrowingDate”)d.                                      Commencement Date + 115 days (“FourthBorrowing Date”)e.                                       Commencement Date + 145 days (“FifthBorrowing Date”)

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## WP shall only be able to borrow under this FCG Loan Agreement to theextent that the Conditions to Borrow (set forth below) have been satisfied andit has not exceeded the maximum amount available to be borrowed under its FCGLoan Agreement (e.g., $4,080,000).  Oneach of the applicable Borrowing Dates, WP shall be able to borrow under thisFCG Loan Agreement by an amount equal to

 

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## the lesser of the following two calculations:

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## (i) the difference between the A/R Days Outstanding for the previousmonth-end less its Baseline DO Threshold (and only if such difference is a positivenumber), multiplied by $408,000; and

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## (ii)  the difference between theActual A/R for the previous month-end less its Baseline A/R Threshold (and onlyif such difference is a positive number).

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## Based on the foregoing calculation, the amount WP can borrow on theSecond, Third, Fourth or Fifth Borrowing Dates shall be reduced by theaggregate amount of any borrowings on a previous Borrowing Date that has notbeen repaid.

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## For example, (assuming the above calculation is based on A/R DaysOutstanding) IF WP’s Baseline DO is 72 days, its A/R Days Outstanding on theFirst Borrowing Date is 74 days and its A/R Days Outstanding on the SecondBorrowing Date is 75 days, THEN the maximum amount WP could request on theFirst Borrowing Date is $816,000 and the maximum amount WP could request on theSecond Borrowing Date is $408,000.

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## Notwithstanding anything herein to the contrary, in no event shall WPbe able to borrow more than $4,080,000 under this FCG Loan Agreement.

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## Within 3 business days of the any Borrowing Date, WP shall submit FCG arequest to borrow (“Request”) which shall (i) state the amount that it wouldlike to borrow under this FCG Loan Agreement (based on the calculations setforth above), and (ii) provide satisfactory evidence to FCG to support the amountof its A/R Days Outstanding or its Actual A/R used in the calculation.  FCG shall have the option to audit theRequest, the costs of which shall be borne by WP if FCG finds anyinconsistencies or errors in the A/R Days Outstanding or Actual A/R determinationdue to deviations from its past customs and practices for the retiring of baddebt, etc.

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## Conditions to Borrow:                        In addition to other customary conditions,each of the following conditions must be satisfied before WP may borrow underits FCG Loan Agreement:

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## 1.                                       All of its Hospital Obligations (definedabove) shall have been satisfied.

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## 2.                                       WP shall have complied with the processes andprocedures under “Borrow Mechanisms” (set forth above).  Specifically, (i) WP can only borrow on aBorrowing Date, and (ii) WP shall submit a Request to FCG and state the amountof money it would like to borrow based on the calculations above.

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## 3.                                       WP may not borrow under this FCG LoanAgreement prior to the Commencement Date or after the Fifth Borrowing Date.

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## 4.                                       WP may not borrow under this FCG LoanAgreement if it has reached the maximum limit of this FCG Loan Agreement.

 

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## 5.                                       No event shall have occurred which has had orreasonably could have a material adverse effect on Stellaris or WP, and neitherStellaris nor WP shall have suffered any material loss or damage to any of itsproperties or assets since the Commencement Date, which change, loss or damagematerially affects or impairs the ability of Stellaris or WP to conduct itsbusiness or satisfy its obligations under the FCG Loan Agreement.

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## 6.                                       No Event of Default (defined below) by Stellaris or WP has occurred.

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## 7.                                        WP shall have duly executed and delivered aNote for the amount that it borrows on any Borrowing Date.

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## Events of Default:                                              In addition to other customary events ofdefaults, the following shall constitute an “Event of Default:”

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## 1.                                       The termination of the Agreement by Stellarisor FCG for any reason, or a breach by WP of the terms of this FCG LoanAgreement.

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## 2.                                       Stellaris’ failure to timely pay allundisputed fees associated with the Agreement, including all fees associatedwith the Meditech software implementation and the transition services providedby FCG.

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## 3.                                       WP’s failure to timely pay all outstandingprincipal amounts borrowed under this FCG Loan Agreement on the applicableMaturity Date in accordance with the terms of the Note.

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## 4.                                       Stellaris or WP’s default under any loan,extension of credit, line of credit, credit facility, security agreement, orother agreement that would materially affect Stellaris or WP’s property,accounts receivable or the ability of WP to repay any amounts under this FCGLoan Agreements or perform its obligations under any agreement related to thisFCG Loan Agreement.

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## 5.                                       The dissolution or termination of Stellarisor WP as an operating business, the insolvency of Stellaris or WP (determinedif the entity is unable to pay its debts before they become due or if its totalliabilities exceed its total assets), the appointment of a receiver forStellaris or WP’s business or property, any assignment for the benefit ofcreditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Stellaris or WP.

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## 6.                                       The commencement of foreclosure or forfeitureproceedings, whether by judicial proceeding, repossession or any other method,by any creditor of Stellaris or WP, or by any governmental agency against anycollateral securing any loan or credit facility.

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## 7.                                       Any change in ownership of 25% or more ofStellaris or WP.

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## 8.                                       WP’s use of the funds borrowed from this FCGLoan Agreement to repay any of its existing debt, except if required underpreviously existing terms and WP does not have sufficient cash available onhand.

 

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## 9.                                       Stellaris’ divestiture or sale of WP shallconstitute an “Event of Default” under this FCG Loan Agreement.

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## Remedies upon Default:               Upon any Event of Default by WP or thetermination of the Agreement, FCG may immediately declare the entire unpaidprincipal amount outstanding under this FCG Loan Agreement and the Notes to beimmediately due and payable, and terminate this FCG Loan Agreement.  Upon any Event of Default caused byStellaris, FCG may immediately terminate this FCG Loan Agreement and alloutstanding Notes under the FCG Loan Agreement will remain due and payable upontheir respective Maturity Dates.  If anyprincipal amounts are not immediately repaid upon the applicable MaturityDates, FCG shall begin to accrue interest charges (as set forth below) andshall be entitled to take all necessary actions to enforce WP’s repaymentobligations. Upon any Event of Default caused by Stellaris, FCG shall beentitled to terminate the Agreement for cause in accordance with the terms ofsuch Agreement.  Upon any Event ofDefault by WP, FCG shall be entitled to suspend all services to WP under theAgreement without being subject to any service level credits or otherpenalties; provided that (i) FCG provides WP with reasonable written notice ofa proposed suspension, (ii) the suspension does not interfere with or have anadverse effect on FCG’s rendition of services to the other StellarisFacilities; and (iii) FCG promptly recommences providing services to WP if WPcures its default under this FCG Loan Agreement (including interest).

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## Termination:                                                                           This FCG Loan Agreement shall terminate uponthe earlier to occur of (i) the Fifth Borrowing Date, or (ii) an Event ofDefault.  WP shall not be able to borrowunder this FCG Loan Agreement after such termination date.  Notwithstanding the foregoing, if Stellarisand WP does not receive a Certificate of Need for the Meditech softwareimplementation (if required) by September 30, 2004 (or other mutuallyagreed upon date), or the Letter of Engagement with FCG to implement theMeditech software system or the Agreement is terminated, then this FCG LoanAgreement shall immediately terminate.

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## Costs and Expenses:                                Each party shall be responsible for its ownfees and expenses of counsel and other professionals, and other obligationsincidental to the establishment of this FCG Loan Agreement.  WP shall not be responsible for any interestcharges on the Notes until after the applicable Maturity Date (or earlier inthe case of an Event of Default).  Ifany principal amounts remain outstanding after the applicable Maturity Date (orafter an Event of Default) under the Notes, such outstanding principal amountswill incur an interest charge at the prime rate, as reported in the WesternAddition of the Wall Street Journal, plus 4.0%).

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## Governing Law:                                                          The laws of the State of New York will governthe terms of the FCG Loan Agreement.

 

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## Sincerely,

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## Luther Nussbaum,Chief Executive Officer

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## Accepted and Agreed:

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## White Plains Hospital Center

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|                    |   |   |   |
|-------------------------|--------|--------|--------|
| Name:                   |
| Chief Executive Officer |

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**EXHIBIT AFORM OF NOTE**

 

**PROMISSORYNOTE**

 
| $ |   |   |   | Borrowing Date:               ,  200   |
|---|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------|

 

***FOR VALUE RECEIVED,*** on or before             ,200   (the ***“MaturityDate”***), the undersigned promises to pay to the order of FirstConsulting Group, Inc. (***“FCG”***),the principal sum of                                                              Dollars($                      )in immediately available funds, without interest.  If such principal amount is not paid on the Maturity Date, or ifany Event of Default under and as defined in that certain FCG Loan Agreementdated October     , 2003 by and between theundersigned, as borrower, and FCG, as lender, as amended, restated or otherwisemodified from time to time in accordance with the terms thereof (the ***“Loan Agreement”***),the undersigned promises to pay to the order of FCG, interest on theoutstanding principal balance hereof, until paid in full, at a rate *per annum*equal to the sum of (i) theprime rate, as reported in the Western Addition of the *Wall Street Journal*, plus (ii) 4.0%, whichinterest shall be computed for actual days elapsed on the basis of a yearconsisting of 365 – or, when appropriate, 366 – days (but in no event in excessof the maximum amount permitted by applicable law).  Capitalized terms used and not otherwise defined herein shallhave the meanings attributed thereto in the Loan Agreement.

 

The Loan evidenced herebymay be prepaid by the undersigned at any time without premium or penalty. Eachpayment of principal or interest hereunder shall be made in immediatelyavailable funds.  If any payment shallbecome due and payable on a Saturday, Sunday or legal holiday under the laws ofCalifornia or New York, such payment shall be made on the next succeedingbusiness day in both such states and any such extended time of the payment ofprincipal or interest shall be included in computing interest, if applicable,at the rate this Note bears in connection with such payment.

 

Except as expressly setforth in the Loan Agreement, upon the occurrence of an Event of Default (otherthan an Event of Default arising from an Event of Bankruptcy with respect tothe undersigned), the outstanding principal balance hereof may be declared byFCG to be immediately due and payable, whereupon the full unpaid amount of theLoan evidenced hereby shall become immediately due and payable without furthernotice, demand or presentment, all of which are hereby expressly waived.

 

**THE UNDERSIGNED EXPRESSLY WAIVES ITS RIGHT TO TRIAL BY JURYAND ANY PRESENTMENT, DEMAND, PROTEST OR NOTICE IN CONNECTION WITH THIS NOTENOW, OR HEREAFTER, REQUIRED BY APPLICABLE LAW AND AGREES TO PAY ALL REASONABLECOSTS AND EXPENSES OF COLLECTION AND ENFORCEMENT HEREOF INCLUDING, WITHOUTLIMITATION, ALL REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS.**

 

THIS NOTE SHALL BEGOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORKWITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

WHITE PLAINS HOSPITALCENTER
| By:    |   |   |
|--------|--------|--------|
|   |   |   |
| Title: |   |   |
|        |        |        |  |

 

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**EXHIBIT BCUSTOMS AND PRACTICES**

 

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