Document:

Nobilis Health Corp.: Exhibit 10.40 - Filed by newsfilecorp.com

CREDIT AGREEMENT 

between 

NORTHSTAR HEALTHCARE SURGERY CENTER - HOUSTON, LLC 

Borrower 

and 

COMPASS BANK 

Lender 

As of November 10, 2014 

TABLE OF CONTENTS 

Page 

	Section
      1 DEFINITIONS AND TERMS. 	1
      
	     1.1
      	Definitions
      	1
      
	     1.2
      	Interpretive
      Provisions 	13
      
	     1.3
      	Accounting
      Terms. 	14
      
	     1.4
      	References
      to Documents 	14
      
	     1.5
      	Time
      	14
      
	  	  	  
	Section
      2 LOAN COMMITMENTS 	14
      
	     2.1
      	Revolving
      Credit Facility 	14
      
	     2.2
      	Loan
      Procedure. 	14
      
	     2.3
      	Voluntary
      Prepayment. 	15
      
	     2.4
      	Mandatory
      Prepayment. 	16
      
	  	  	  
	Section
      3 TERMS OF PAYMENT 	16
      
	     3.1
      	Note
      and General Payment Terms. 	16
      
	     3.2
      	Revolving
      Credit Facility. 	17
      
	     3.3
      	Interest
      	17
      
	     3.4
      	Default
      Rate 	17
      
	     3.5
      	Interest
      Calculations 	17
      
	     3.6
      	Order
      of Application. 	17
      
	     3.7
      	Maximum
      Rate 	18
      
	     3.8
      	Set
      off 	18
      
	     3.9
      	Debit
      Account 	18
      
	     3.10
      	Increased
      Cost and Reduced Return. 	18
      
	     3.11
      	Alternate
      Interest Rate 	19
      
	     3.12
      	Payment
      and Billing Agreements. 	19
      
	  	  	  
	Section
      4 FEES AND LATE PAYMENTS 	20
      
	     4.1
      	Treatment
      of Fees 	20
      
	     4.2
      	Unused
      Commitment Fee 	20
      
	     4.3
      	Late
      Payment Fee 	20
      
	  	  	  
	Section
      5 CONDITIONS PRECEDENT 	20
      
	     5.1
      	Conditions
      to Initial Loans 	20
      
	     5.2
      	Conditions
      to All Loans 	20
      
	     5.3
      	Post-Closing
      	20
      
	     5.4
      	No
      Waiver 	21
      
	  	  	  
	Section
      6 SECURITY AND GUARANTIES 	21
      
	     6.1
      	Collateral
      	21
      
	     6.2
      	Financing
      Statements 	21
      
	     6.3
      	Guaranties
      	21
      
	     6.4
      	Reserves
      	21
      
	     6.5
      	Further
      Assurances; Collateral 	21
      

i 

	Section
      7 REPRESENTATIONS AND WARRANTIES 	22
      
	     7.1
      	Existence
      	22
      
	     7.2
      	Authorization
      	22
      
	     7.3
      	Enforceability
      	22
      
	     7.4
      	Subsidiaries
      	22
      
	     7.5
      	Litigation
      	22
      
	     7.6
      	Taxes
      	22
      
	     7.7
      	Environmental
      Matters 	22
      
	     7.8
      	Ownership
      of Assets; Intellectual Property 	23
      
	     7.9
      	Liens
      	23
      
	     7.10
      	Debt
      	23
      
	     7.11
      	Insurance
      	23
      
	     7.12
      	Place
      of Business; Real Property 	23
      
	     7.13
      	Purpose
      of Credit Facilities 	23
      
	     7.14
      	Trade
      Names 	23
      
	     7.15
      	Transactions
      with Affiliates 	23
      
	     7.16
      	Financial
      Information 	23
      
	     7.17
      	Material
      Agreements and Funded Debt 	23
      
	     7.18
      	ERISA
      	24
      
	     7.19
      	Solvency
      	24
      
	     7.20
      	Investment
      Company Act 	24
      
	  	  	  
	Section
      8 AFFIRMATIVE COVENANTS 	24
      
	     8.1
      	Items
      to be Furnished 	24
      
	     8.2
      	Books,
      Records, Inspections and Collateral Audits 	26
      
	     8.3
      	Taxes
      	27
      
	     8.4
      	Compliance
      with Laws 	27
      
	     8.5
      	Maintenance
      of Existence, Assets, and Business 	27
      
	     8.6
      	Insurance
      	27
      
	     8.7
      	Environmental
      Laws 	28
      
	     8.8
      	ERISA
      	28
      
	     8.9
      	Use
      of Proceeds 	28
      
	     8.10
      	Application
      of Insurance and Eminent Domain Proceeds 	28
      
	     8.11
      	Banking
      Relationship 	28
      
	     8.12
      	Payment
      of Obligation and Expenses 	28
      
	     8.13
      	Cash
      Management 	29
      
	     8.14
      	Further
      Assurances 	29
      
	  	  	  
	Section
      9 NEGATIVE COVENANTS 	29
      
	     9.1
      	Debt
      	29
      
	     9.2
      	Liens
      	29
      
	     9.3
      	Acquisition,
      Mergers, and Dissolutions 	30
      
	     9.4
      	Disposition
      of Assets 	30
      
	     9.5
      	Distributions
      	30
      
	     9.6
      	Loans
      and Advances 	30
      
	     9.7
      	Investments
      	30
      
	     9.8
      	Organizational
      Documents 	30
      

ii 

	     9.9
      	Change
      of Business 	30
      
	     9.10
      	Transactions
      with Affiliates 	31
      
	     9.11
      	Assignment
      	31
      
	     9.12
      	Fiscal
      Year and Accounting Methods 	31
      
	     9.13
      	Payroll
      Taxes 	31
      
	     9.14
      	Prepayment
      of Debt 	31
      
	     9.15
      	Compliance
      with Government Regulations 	31
      
	     9.16
      	Factoring
      	31
      
	     9.17
      	Kramer
      Note 	31
      
	  	  	  
	Section
      10 FINANCIAL COVENANTS 	31
      
	     10.1
      	Leverage
      Ratio 	31
      
	     10.2
      	Fixed
      Charge Coverage Ratio 	32
      
	     10.3
      	Minimum
      Liquidity 	32
      
	  	  	  
	Section
      11 DEFAULT 	32
      
	     11.1
      	Payment
      of Obligation 	32
      
	     11.2
      	Covenants
      	32
      
	     11.3
      	Debtor
      Relief 	32
      
	     11.4
      	Judgments
      	32
      
	     11.5
      	False
      Information; Misrepresentation 	32
      
	     11.6
      	Default
      Under Other Agreements 	32
      
	     11.7
      	Validity
      and Enforceability of Loan Documents 	33
      
	     11.8
      	Change
      of Contro 	33
      
	     11.9
      	Change
      of Management 	33
      
	     11.10
      	Ownership
      of Other Companies 	33
      
	     11.11
      	Material
      Adverse Event 	33
      
	  	  	  
	Section
      12 RIGHTS AND REMEDIES 	33
      
	     12.1
      	Remedies
      Upon Default 	33
      
	     12.2
      	Waivers
      	33
      
	     12.3
      	No
      Waiver 	34
      
	     12.4
      	Performance
      by Lender 	34
      
	     12.5
      	Cumulative
      Rights 	34
      
	  	  	  
	Section
      13 MISCELLANEOUS 	34
      
	     13.1
      	Governing
      Law, Forum, and Venue 	34
      
	     13.2
      	Waiver
      of Right to Trial by Jury 	34
      
	     13.3
      	Invalid
      Provisions 	35
      
	     13.4
      	Multiple
      Counterparts and Electronic Signatures 	35
      
	     13.5
      	Notice
      	35
      
	     13.6
      	Binding
      Effect; Survival 	35
      
	     13.7
      	Amendments
      	35
      
	     13.8
      	Participants
      	36
      
	     13.9
      	Discharge
      Only Upon Payment in Full; Reinstatement in Certain Circumstances 	36
      
	     13.10
      	INDEMNITY
      	36
      
	     13.11
      	Patriot
      Act 	37
      

iii 

	13.12 	Document
      Retention Policy 	37
  
	13.13 	Entirety 	37 

SCHEDULES AND EXHIBITS 

	SCHEDULE 1 	Parties, Contact Information,
      and Wiring Instructions 
	SCHEDULE 2 	Existing Debt and Liens 
	SCHEDULE 5 	Conditions Precedent 
	SCHEDULE 7.4 	Subsidiaries; Ownership 
	SCHEDULE 7.5 	Litigation 
	SCHEDULE 7.7 	Environmental Matters 
	SCHEDULE 7.12 	Place of Business 
	SCHEDULE 7.14 	Trade Names 
	SCHEDULE 7.15 	Transactions with Affiliates
  
	SCHEDULE 7.17 	Material Agreements 
	 	  
	EXHIBIT A 	Revolving Note 
	EXHIBIT B 	Borrowing Base Certificate
  
	EXHIBIT C 	Loan Request 
	EXHIBIT D 	Compliance Certificate
  

iv 

CREDIT AGREEMENT 

THIS CREDIT AGREEMENT is entered into
as of November 10, 2014, between Northstar Healthcare Surgery Center - Houston,
LLC, a Texas limited liability company (“Borrower”), and COMPASS
BANK, an Alabama banking corporation (the “Lender”). 

RECITALS 

A. Borrower has requested that Lender
extend credit to Borrower in the form of a revolving credit facility. 

B. Lender is willing to extend the
requested credit on the terms and conditions of this Agreement. 

Accordingly, Borrower and Lender agree
as follows: 

SECTION 1 DEFINITIONS AND
TERMS. 

1.1 Definitions. As used in the
Loan Documents: 

Affiliate means, as to
any Person, any other Person that directly or indirectly Controls, or is
Controlled by, or is under common Control with, that Person. For purposes of
this definition, (a) the term “Affiliate” when used in respect of any
Company includes each shareholder, member, partner, officer, director, or
manager of such Company, and (b) each of the following are “Affiliates”
of the others: (i) each Guarantor; (ii) each Company; (iii) any shareholder,
member, partner, officer, director, or manager of any Company; (iv) any
corporation, partnership or limited liability company whose primary
shareholders, partners or members are the spouse, children or other family
member of any natural person who directly or indirectly Controls Borrower; and
(v) any trust whose primary beneficiaries are the spouse, children or other
family member of any natural person who directly or indirectly Controls
Borrower. 

Agreement means this
Credit Agreement, and all exhibits and schedules to this Agreement, in each case
as amended, restated, or supplemented from time to time. 

Applicable Margin means a
per annum rate equal to 3.50% . 

Base Rate 
means, when determined, a fluctuating rate per annum equal to the higher of (a)
the Federal Funds Rate
plus 0.50%, (b) LIBOR plus 1%, and (c) the Prime Rate. 

Base Rate Loan means any
Loan accruing interest based on the Base Rate. 

Board of Directors means,
with respect to any Person, (a) in the case of any corporation, the board of
directors of such Person, (b) in the case of any limited liability company, the
board of managers, sole member, managing member, or other governing body of such
Person, (c) in the case of any partnership, the Board of Directors of the
general partner of such Person and (d) in any other case, the functional
equivalent of the foregoing.

Borrowing Base means,
when determined, an amount equal to the total of (a) eighty percent (80%)
of Eligible Accounts,
minus (b) any Reserves established by Lender, in Lender’s reasonable
credit judgment, and in effect at such time, in each case as shown on the most
recent Borrowing Base Certificate. 

Borrowing Base Certificate means a certificate
substantially in the form of Exhibit B which is signed by a
Responsible Officer. 

Business Day means any day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close
under the Laws of, or are in fact closed in, Houston, Texas and, if such day
relates to any LIBOR Loan, means any such day on which dealings in dollar
deposits are conducted by and between banks in the London interbank eurodollar
market. 

Cash Equivalents means any of the following types
of investments, to the extent owned by Borrower or any of its Subsidiaries free
and clear of all Liens (other than Permitted Liens):

(a) readily marketable obligations issued or directly and fully
guaranteed or insured by the U.S. or any agency or instrumentality thereof
having maturities of not more than one year from the date of acquisition
thereof; provided that the full faith and credit of the U.S. is pledged
in support thereof; 

(b) time deposits with, or insured certificates of deposit or
bankers’ acceptances of, any commercial bank that (i) is organized under the
Laws of the U.S., any state thereof or the District of Columbia or is the
principal banking subsidiary of a bank holding company organized under the Laws
of the U.S., any state thereof or the District of Columbia, and is a member of
the Federal Reserve System, and (ii) has combined capital and surplus of at
least $750,000,000, in each case with maturities of not more than one hundred
eighty (180) days from the date of acquisition thereof; 

(c) commercial paper issued by any Person organized under the
Laws of any state of the U.S. and rated at least “Prime-1” (or the then
equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by
S&P, in each case with maturities of not more than one hundred eighty (180)
days from the date of acquisition thereof; 

(d) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (a) above
entered into with any Person meeting the qualifications specified in clause
(b) above; and 

(e) investments, classified in accordance with GAAP as current
assets of Borrower or any of its Subsidiaries, in money market funds that comply
with the Investment Company Act of 1940, which are administered by financial
institutions that have the highest rating obtainable from either Moody’s or
S&P, and the portfolios of which are limited solely to investments of the
character, quality and maturity described in clauses (a), (b) and
(c) of this definition. 

Capital Expenditures means, for any Company and
its Subsidiaries, all expenditures for assets which, in accordance with GAAP,
are required to be capitalized and so shown on the consolidated balance sheet of
such Company and its Subsidiaries (excluding any such assets acquired in
connection with normal replacement and maintenance programs properly expensed in
accordance with GAAP). 

Cash Management Liabilities is defined in the
definition of “Cash Management Products and Services.” Cash Management
Products and Services shall mean agreements or other arrangements under
which Lender or any Affiliate of Lender provides any of the following products
or services to Borrower: (a) credit cards; (b) credit card processing services;
(c) debit cards and stored value cards; (d) commercial cards; (e) ACH
transactions; and (f) cash management and treasury management services and
products, including without limitation controlled disbursement accounts or
services, lockboxes, automated clearinghouse transactions, overdrafts, interstate depository
network services. The indebtedness, obligations and liabilities of Borrower to
the provider of any Cash Management Products and Services (including all
obligations and liabilities owing to such provider in respect of any returned
items deposited with such provider) (the “Cash Management
Liabilities”) shall be included and shall be part of the “Obligation”
under this Agreement, guaranteed obligations under any Guaranty, and secured
obligations under any Security Document, as applicable, and otherwise treated as
a portion of the Obligation for purposes of each of the other Loan Documents. 

2 

Change in Law means (a) the adoption of any Law,
rule or regulation after the date of this Agreement, (b) any change in any Law,
rule or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by
Lender with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this
Agreement, provided that notwithstanding anything herein to the contrary,
(i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith or in implementation thereof, and (ii) all requests, rules,
guidelines, requirements and directives promulgated by the Bank for
International Settlements, the Basel Committee on Banking Supervision (or any
successor or similar authority) or the U.S. or foreign regulatory authorities,
in each case pursuant to Basel III, shall in each case be deemed to be a “Change
in Law”, regardless of the date enacted, adopted, issued or implemented. 

Closing Date means November 10, 2014, whether or
not a Loan is made on such date. 

Collateral is defined in Section
6.1. 

Commitment means Lender’s obligation and
commitment to make Loans under the Revolving Credit Facility in the Revolving
Committed Amount. 

Company means each of, and Companies
means all of, Borrower and its Subsidiaries. 

Compliance Certificate means a certificate
substantially in the form of Exhibit D signed by a Responsible
Officer. 

Control means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms “Controls,” “Controlling,” and “Controlled”
shall have meanings correlative thereto. 

Current Financials means, when determined, the
consolidated financial statements of Borrower, Guarantor, and the other
Companies most recently delivered to Lender under Section 8.1.

Debt means, for any Person and without
duplication (a) Funded Debt, (b) all obligations of such Person evidenced by
bonds, notes, debentures, or other similar instruments, (c) liabilities to the
extent secured by any Lien existing on property owned or acquired by that Person
(or for which and to the extent the holder of the Debt has an existing right,
contingent or otherwise, to be so secured), (d) capital leases, synthetic
leases, and other obligations that have been (or under GAAP should be)
capitalized for financial reporting purposes, (e) all guaranties, endorsements,
letters of credit, reimbursement obligations under letters of credit, bankers’
acceptances, surety or other bonds, and similar instruments and other contingent
liabilities with respect to Debt or obligations of others, (f) all indebtedness
representing deferred payment of the purchase price of property or assets, (g)
any repurchase obligation or liability of a Person with respect to accounts,
chattel paper, or notes receivable sold by such Person, (h) any obligation to
redeem or repurchase any of such Person’s Equity Interests, (i) all liabilities
of such Person in respect of unfunded vested benefits under any Employee Plan, and (j) all other
obligations required by GAAP to be classified upon such Person’s balance sheet
as liabilities. For purposes hereof, the Debt of any Person shall include the
Debt of any partnership or joint venture (other than a joint venture that is
itself a corporation or limited liability company) in which such Person is a
general partner or a joint venturer, unless such Debt is expressly made
non-recourse to such Person. 

3 

Debtor Relief Laws means Title 11 of the
United States Code and all other applicable liquidation, conservatorship,
bankruptcy, fraudulent transfer, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debtor relief Laws of the United States or other
applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally. 

Default is defined in Section 11.

Default Rate means, when determined, an annual
rate of interest equal to the lower of (a) the Maximum Rate, and (b)
LIBOR plus the Applicable Margin, plus 3.0% . 

Disposition means the sale, lease, transfer,
conveyance, assignment, license, or other disposition of any asset by any Person
(including any sale and leaseback transaction), and any sale, assignment,
transfer, conveyance, or other disposition, with or without recourse, of any
notes or accounts receivable or any rights and claims associated therewith.

Distribution means (a) any dividend,
distribution, or other payment (whether in cash, securities, or other property)
in respect of the Equity Interests of Borrower or any other Company, (b) any
redemption, purchase, retirement or other acquisition by Borrower of any of its
Equity Interests, or (c) the establishment of any fund for any such
distribution, dividend, payment, redemption, purchase, retirement, or
acquisition, including any sinking fund or similar arrangement. 

Dollar, Dollars and $
means currency of the United States of America which is at the time of payment
legal tender for the payment of public and private debts in the United States of
America. 

EBITDA means, for any period, the total of
(a) consolidated net income of the Companies for such period, plus (b) to
the extent (and in the same proportion) added or subtracted in calculating such
consolidated net income, (i) cash income taxes for such period, plus (ii)
cash interest expense for such period, plus (iii) depreciation and
amortization for such period. 

Eligible Accounts means an account or account
receivable of any Company in which Lender holds a first-priority perfected
security interest and which satisfies all of the following requirements: 

(a) it has not been outstanding more than 90 days after the
date it became due and payable; 

(b) it arises from the sale or lease of goods or from services
rendered, such goods have been shipped or delivered to the account debtor under
such account or such services have been fully performed and have been accepted
by the account debtor, and such Company’s full right to payment for all sums due
from such account debtor with respect to such account shall have been earned and
then be due and payable; 

(c) it is a valid and legally enforceable obligation of the
account debtor thereunder according to its express terms, and is not subject to
any offset, counterclaim, crossclaim, or other defense on the part of such
account debtor denying liability thereunder in whole or in part; 

4 

(d) it is not subject to any Lien, right of a surety under a
performance bond or otherwise or similar adverse rights or interests whatsoever
other than the Lien granted to Lender under the Loan Documents; 

(e) it is evidenced by an invoice dated the date of shipment
(in the case of goods sold or leased) or the date of performance (in the case of
services rendered) and having payment terms acceptable to Lender, and is not
evidenced by an instrument, note, draft, title retention and lien instrument,
security agreement, acceptance, conditional sales contract, chattel mortgage or
chattel paper and, if requested by Lender, a copy of such invoice shall have
been delivered to and received by Lender; 

(f) it is not owing by an account debtor which is an Affiliate
of any Company; 

(g) it does not constitute, require or provide for progress
billings, retainages or deferred payments under a contract not fully performed;

(h) it does not constitute, in whole or in part, interest or
finance charges on outstanding balances, any amount received as a down payment
or prepayment or other principal reduction or similar payment, any chargebacks
or contra amounts or accounts; 

(i) it is an account with respect to which no return,
repossession, rejection, cancellation, or repudiation shall have occurred or
have been threatened; 

(j) it is an account with respect to which such Company
continues to be in full conformity with the representations, warranties and
covenants of such Company made with respect thereto; 

(k) it is not subject to any sales terms, trial terms,
sales-or-return terms, consignment terms, guaranteed sales or performance terms,
minimum sales terms, C.O.D. terms, cash terms, or similar terms or conditions;

(l) it is not owing by an account debtor which is a Foreign
Person; 

(m) it is not an account subject, in whole or in part, to any
“bill and hold” or similar arrangement pursuant to which the invoice is
delivered prior to the actual delivery of the sold or leased goods or the
performance of the services; 

(n) it is not an account owed by the U.S. Government or any
other Governmental Authority, including, but not limited to, Medicaid or
Medicare; provided that, notwithstanding the foregoing, an account owed
by Medicare may be deemed to be an Eligible Account to the extent that such
account has not been outstanding more than 30 days after the date it became due
and payable); 

(o) it is not owed by an account debtor with respect to which
ten percent (10%) or more of such account debtor’s total accounts owing to the
Companies would not be deemed to be Eligible Accounts under clause (a)
above; 

(p) it is not owed by an account debtor whose aggregate account
balance with such Company exceeds twenty-five percent (25%) of the total value
of such Company’s total accounts, provided that, such accounts shall be
excluded from the definition of Eligible Account only to the extent to which
such accounts exceed twenty-five percent (25%) of the accounts of such Company;
and 

5 

(q) it is not owed by an account debtor which is subject to any
Debtor Relief Law or whose obligations with respect to which Lender, acting in
its discretion, shall have notified the applicable Company in writing are not
deemed to constitute an Eligible Account; 

The amount of Eligible Accounts owed by an account debtor to
such Company shall be reduced by the amount of all “contra accounts” and other
obligations owed by any Company to such account debtor. Accounts which are at
any time Eligible Accounts, but which subsequently fail to meet any of the
foregoing requirements shall, at such time, cease to be Eligible Accounts. 

Eminent Domain Event means any Governmental
Authority or any Person acting under, for, or on behalf of, a Governmental
Authority institutes proceedings to condemn, seize or appropriate all or part of
any asset of a Company. 

Eminent Domain Proceeds means all amounts
received by any Company as a result of any Eminent Domain Event. 

Employee Plan means a pension, profit-sharing, or
stock bonus plan intended to qualify under Section 401(a) of the Tax Code,
maintained or contributed to by Borrower or any ERISA Affiliate, including any
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA. 

Environmental Law means any Law that relates to
the pollution or protection of the environment, the release of any materials
into the environment, including those related to Hazardous Substances, air
emissions and discharges to waste or public systems, or to health and safety.

Equity Interests means, with respect to any
Person, any and all shares, interests, participations or other equivalents,
including membership interests (however designated, whether voting or
nonvoting), or equity of such Person, including, if such Person is a
partnership, partnership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of property of, such partnership,
in each case, whether outstanding on the date hereof or issued after the date
hereof. 

ERISA means the Employee Retirement Income
Security Act of 1974, as amended, and its related rules, regulations, and
published interpretations. 

ERISA Affiliate means any trade or business
(whether or not incorporated) under common Control with Borrower within the
meaning of Section 414(b) or (c) of the Tax Code (including any multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA). 

Federal Funds Rate means, for any day, the rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published in the Federal Reserve Bank of New York
Statistical Daily Rates for the applicable day (or, if such source is not
available, such alternate source as determined by Lender). 

Field Audit means audits, verifications and
inspections of (a) the Collateral, (b) the accounting and financial processes
and procedures of the Borrower and the other Companies pertaining to the
Collateral, and (c) the books, records and documents of the Borrower and the
other Companies pertaining to the Collateral, in each case conducted by a Person
(who may be an employee of Lender or who may be an independent third party)
satisfactory to Lender. 

Finance Code is defined in the definition of
“Maximum Rate.” 

6 

Fixed Charge Coverage Ratio means the ratio of
(a) EBITDA plus the Companies’ rental expense in respect of its leased
real property minus Non-Financed Capital Expenditures minus cash
Distributions, in each case for the immediately preceding four fiscal quarter
period, to (b) the sum of (i) the Companies’ scheduled principal payments
on Funded Debt (excluding Subordinated Debt), plus (ii) the Companies’
interest expense in respect of Funded Debt (excluding Subordinated Debt),
plus (iii) the Companies’ rental expense in respect of its leased real
property, in each case for the immediately preceding four fiscal quarter period.

Foreign Person means (a) a natural person who
does not reside in the U.S., or (b) any Person (other than a natural person)
that is not organized and validly existing under the laws of the U.S. or a state
within the U.S. 

Funded Debt means, when determined, (a) all Debt
of the Companies for borrowed money, whether or not evidenced by notes, bonds,
debentures or similar instruments and whether as a direct obligor on a
promissory note, a guarantor, or otherwise, (b) all obligations to pay the
deferred purchase price of property or services arising, and accrued expenses
incurred, in the ordinary course of business (excluding trade accounts payable
in the ordinary course of business that are not past due by more than 90 days),
(c) liabilities under unfunded letters of credit, and (d) all capital lease
obligations of the Companies. 

GAAP means generally accepted accounting
principles in the U.S. set out in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board as in effect from time
to time. 

Governmental Authority means any nation or
government, any state or other political subdivision thereof, any agency,
authority, instrumentality, regulatory body, court, administrative tribunal,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of, or pertaining to,
government. 

Guarantor means (a) NHI, (b) each Company (other
than Borrower), and (c) each other Person executing a Guaranty to directly or
indirectly guarantee the Obligation. 

Guaranty means a guarantee of the Obligation
under a guaranty agreement in Proper Form. Hazardous Substance
means (a) any explosive or radioactive substance or waste, all hazardous or
toxic substances, waste, or other pollutants, and any other substance the
presence of which requires removal, remediation or investigation under any
applicable Environmental Law, (b) any substance that is defined or classified as
a hazardous waste, hazardous material, pollutant, contaminant, or toxic or
hazardous substance under any applicable Environmental Law, or (c) petroleum,
petroleum distillates, petroleum products, oil, polychlorinated biphenyls, radon
gas, infectious medical wastes, and asbestos or asbestos-containing materials.

Insurance Proceeds means all cash and non-cash
proceeds in respect of any insurance policy maintained by any Company under the
terms of this Agreement. 

Kramer Note means that certain Second Amended and
Restated Promissory Note dated as of March 6, 2013, executed by Northstar
Healthcare Subco, LLC, and payable to the order of Donald Kramer, M.D., in the
original principal amount of $1,692,565, and all renewals, extensions,
modifications, amendments, supplements, restatements, and replacements of, or
substitutions for, such promissory note. 

7 

Laws means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation
or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, requests, licenses, authorizations and permits of, and agreements with, any
Governmental Authority (whether or not such orders, requests, licenses, authorizations, permits or agreements have the force of law) including all Environmental Laws. 

Lender’s Office means Lender’s address and, as appropriate, account (or accounts) set out on Schedule 1, or such other address or account as Lender may from time to time notify Borrower. 

LIBOR means, when determined, the London Interbank Offered Rate for the term equivalent to one month, as obtained by Lender from Reuters, Bloomberg or another commercially reliable source, two (2) Business Days before the date of
determination (or in the event no such quotation is available on such date, as quoted on the day most immediately preceding the date of determination on which such quotation was available) as adjusted from time to time in Lender’s sole
discretion for then-applicable reserve requirements, deposit insurance assessment rates and other regulatory costs.  If more than one rate is stated by the source Lender uses to obtain the applicable rate, then the applicable rate shall be the
arithmetic mean of all stated rates for that period.

LIBOR Loan means a Loan accruing interest based on LIBOR. 

Lien means any lien (statutory or other), mortgage, security interest, financing statement, collateral assignment, pledge, negative pledge assignment, charge, hypothecation, deposit arrangement, or preference, priority or other
security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing), or
encumbrance of any kind, and any other right of or arrangement with any creditor (whether based on common law, constitutional provision, statute or contract) to have its claim satisfied out of any property or assets, or their proceeds, before the
claims of the general creditors of the owner of the property or assets. 

Liquidity means, as of the date of determination, the sum of (a) unrestricted cash and Cash Equivalents held by Borrower and its Subsidiaries, plus (b) an amount equal to the excess of the Revolving Credit Limit over the
Revolving Principal Amount. 

Litigation means any action by or before any Governmental Authority, arbitrator, or arbitration panel. 

Loan means any amount disbursed by Lender to, or on behalf of, any Company under the Loan Documents, whether such amount constitutes an original disbursement of funds or a disbursement in accordance with, and to satisfy the obligations
of any Company under, any Loan Document. 

Loan Date means, for any Loan requested under a Loan Request, the date on which funds are to be transferred to, or made available to, Borrower. 

Loan Documents means (a) this Agreement, certificates and requests delivered under this Agreement, and exhibits and schedules to this Agreement, (b) the Note, (c) all Guaranties, (d) the Security Documents, (e) all Cash Management
Products and Services, (f) any Subordination Agreement, (g) all other agreements, documents, and instruments in favor of Lender ever delivered in connection with or under this Agreement, and (h) all renewals, extensions,
amendments, modifications, supplements, restatements, and replacements of, or
substitutions for, any of the foregoing. 

 8 

Loan Request means a request (a) substantially in
the form of Exhibit C or (b) otherwise in Proper Form. 

Material Adverse Effect means (a) the impairment
of the ability of any Company or any Guarantor to perform any of its payment or
other material obligations under any Loan Document, (b) the impairment of the
ability of Lender to enforce any Company’s or any Guarantor’s material
obligations, or Lender’s rights, under any Loan Document, (c) a material adverse
effect upon the legality, validity, binding effect or enforceability against any
Company or any Guarantor of any Loan Document to which it is a party, and (d) a
material and adverse change in, or a material adverse effect upon, the
operations, business, properties, liabilities (actual or contingent), condition
(financial or otherwise), or prospects of any Company or any Guarantor as
represented in the initial financial statements delivered to Lender on or about
the Closing Date in respect of such Company or Guarantor. 

Material Adverse Event means any circumstance or
event that, individually or collectively with other circumstances or events,
could reasonably be expected to have a Material Adverse Effect.

Material Agreement means, for any Person, any
agreement to which that Person is a party, by which that Person is bound, or to
which any assets of that Person may be subject, and that is not cancelable by
that Person upon 30 or fewer days’ notice without liability for further payment
other than a nominal penalty, and that requires that Person to pay more
than $100,000 in the aggregate during each year during the term of such
agreement. 

Maximum Rate means the maximum non-usurious rate
of interest that Lender is permitted to contract for, charge, take, reserve or
receive on the Obligation under applicable Law including, without limitation,
Chapter 303 of the Texas Finance Code (the “Finance Code”). To the
extent that Chapter 303 of the Finance Code is relevant to Lender for purposes
of determining the Maximum Rate, Lender may elect to determine the Maximum Rate
under the Finance Code pursuant to the “weekly ceiling” from time to time in
effect, as referred to in Chapter 303 of the Finance Code; subject, however, to
any right Lender subsequently may have under applicable Law to change the method
of determining the Maximum Rate. 

Net Proceeds means (a) with respect to any
Disposition of any asset by any Person, the aggregate amount of cash and
non-cash proceeds from such Disposition received by, or paid to or for the
account of, such Person, net of customary and reasonable out-of-pocket costs,
fees, and expenses, (b) with respect to the issuance of equity securities, debt
securities, subordinated debt, or similar instruments, or the incurrence of
Debt, the cash and non-cash proceeds received from such issuance or incurrence,
net of attorneys’ fees, investment banking fees, accountants fees, underwriting
discounts and commissions and other customary fees and expenses actually
incurred in connection with such issuance, (c) with respect to Insurance
Proceeds, all cash proceeds received by any Company or Lender from an insurer
under any insurance policy maintained by such Company, and (d) with respect to
Eminent Domain Proceeds, all cash proceeds received by any Company from any
Governmental Authority net of attorney’s fees and other customary and reasonable
out of pocket costs, fees, and expenses. Non-cash proceeds include any proceeds
received by way of deferred payment of principal pursuant to a note, installment
receivable, purchase price adjustment receivable, or otherwise, but only as and
when received. 

NHI means Northstar Healthcare, Inc., a
corporation organized under the laws of the province of British Columbia,
Canada. 

9 

Non-Financed Capital Expenditures means Capital
Expenditures by any Company which are not made using Debt (and includes the
equity portion of Capital Expenditures financed with Debt). 

Note means the Revolving Note. 

Obligation means all present and future Debt,
liabilities and obligations (including the Loans, the Cash Management
Liabilities, and indemnity obligations), whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become due, and
all renewals, increases and extensions thereof, or any part thereof, now or in
the future owed to Lender by any Company or Guarantor under this Agreement or
any of the other Loan Documents, together with all interest accruing
thereon, reasonable fees, costs and expenses payable under the Loan Documents or
in connection with the enforcement of rights under the Loan Documents, including
(a) fees and expenses under Section 8.12, and (b) interest and
fees that accrue after the commencement of any proceeding under any Debtor
Relief Law naming any Company or Guarantor, or any Affiliate thereof as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding. 

Organizational Documents means, for any Person,
(a) the articles of incorporation or certificate of formation and bylaws of such
Person if such Person is a corporation, (b) the articles of organization or
certificate of formation and regulations or limited liability company agreement
(or other similar governing document) of such Person if such Person is a limited
liability company, (c) the certificate of limited partnership or certificate of
formation and the limited partnership agreement of such Person if such Person is
a limited partnership, or (d) the documents under which such Person was created
and is governed if such person is not a corporation, limited liability company
or limited partnership. 

Participant is defined in Section
13.8. 

Patriot Act is defined in Section
13.11. 

PBGC means Pension Benefit Guaranty Corporation,
or any successor thereof, established under ERISA. 

Permitted Debt means (a) the Obligation, (b) Debt
arising from endorsing negotiable instruments for collection in the ordinary
course of business, (c) purchase money Debt and capital lease obligations
incurred in the ordinary course of business which, in the aggregate, do not
exceed $50,000, (d) Debt between and among the Borrower and the other Companies
that are Guarantors, (e) guaranties by any Company of Permitted Debt, (f) Debt
existing on the Closing Date and described on Schedule 2
(including any extensions and renewals of such Debt but excluding any increases
in the principal amount of such Debt), (g) indemnities arising under agreements
entered into by any Company in the ordinary course of business, (h) trade
payables and other current liabilities incurred in the ordinary course of
business, (i) Tax liabilities, (j) any financed portion of the premium for any
Company’s insurance policies, provided that such financed portion is paid
within the required due dates, and (k) any Debt approved in writing by Lender
after the Closing Date. 

Permitted Investments means (a) marketable
obligations backed by the full faith and credit of the U.S. (and investments in
mutual funds investing primarily in those obligations), (b) certificates of
deposit or banker’s acceptances that are fully insured by the Federal Deposit
Insurance Corporation or are issued by commercial banks having combined capital,
surplus, and undivided profits of not less than $250,000,000 (as shown on its
most recently published statement of condition), (c) cash or cash equivalents,
(d) non-cash proceeds from Dispositions permitted under Section
9.4, and (e) investments by any Company in its wholly-owned Subsidiaries
which are Borrower or Guarantors. 

10 

Permitted Liens means (a) Liens securing the
Obligation, (b) Liens existing on the Closing Date and described on
Schedule 2, (c) Liens which secure purchase money Debt and capital
lease obligations permitted under clause (c) of the definition of
Permitted Debt, (d) easements, rights-of-way, encumbrances and other
restrictions on the use of real property which do not materially impair the use
thereof, (e) Liens for Taxes; provided that, (i) no amounts are due and
payable and no Lien has been filed or agreed to, or (ii) the validity or amount
thereof is being contested in good faith by lawful proceedings diligently
conducted, and reserves (or other provision required under GAAP) have been
established in accordance with GAAP, (f) judgments and attachments permitted by
Section 11.4, (g) pledges or deposits made to secure payment of
workers’ compensation, unemployment insurance or other forms of governmental
insurance or benefits or to participate in any fund in connection with workers’
compensation, unemployment insurance, pensions or other social security
programs, (h) rights of offset or statutory banker’s Liens arising in the
ordinary course of business in favor of commercial banks; provided that,
any such Lien shall only extend to deposits and property in possession of such
commercial bank and its Affiliates, (j) good-faith pledges or deposits made in
the ordinary course of business to secure (i) performance of bids, tenders,
trade contracts (other than for the repayment of borrowed money) or
leases, (ii) statutory obligations, or (iii) surety or appeal bonds, or
indemnity, performance or other similar bonds, which, in the aggregate under
this clause (j), do not exceed $100,000 at any time, and (k) Liens (other
than for Taxes) imposed by operation of law (including Liens of mechanics,
materialmen, warehousemen, carriers and landlords and similar Liens);
provided that, (i) the validity or amount thereof is being contested in
good faith by lawful proceedings diligently conducted, (ii) reserves (or other
provision required under GAAP) have been established in accordance with GAAP,
and (iii) within 60 days after the entry thereof, levy and execution thereon
have been (and continue to be) stayed or payment thereof is covered in full by
insurance (subject to the customary deductible). 

Person means any natural person, partnership,
limited partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture,
syndicate, Governmental Authority or other entity or organization of whatever
nature. 

Potential Default means the occurrence of any
event or the existence of any circumstance that would, with the giving of notice
or lapse of time or both, become a Default. 

Prime Rate means the rate of interest publicly
announced from time to time by Lender as its Prime Rate. The Prime Rate is set
by Lender based on various factors, including Lender’s costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. Lender may price loans to its customers at, above, or
below the Prime Rate. The Prime Rate as used in this Agreement is a reference
rate that Lender has established for use in computing and adjusting interest and
is subject to change (increase or decrease) at Lender’s discretion and is only
one of the reference rates or indices Lender uses. Borrower is advised that
Lender may lend to others at rates of interest greater or lesser than the Prime
Rate or the rates provided in this Agreement and use indices other than the
Prime Rate. 

Proper Form means in form and substance
satisfactory to Lender and its legal counsel. Reconciliation
Report means the Accounts Receivable reconciliation report substantially
in the form attached as Schedule 1 to the Borrowing Base
Certificate. 

Representatives of any Person means
representatives, officers, directors, employees, consultants, contractors,
attorneys, agents and any other Person authorized by such Person’s Board of
Directors to act on behalf of such Person. 

11 

Reserves means reserves established from time to
time by Lender in its reasonable credit judgment against Eligible Accounts, or
the Borrowing Base. Without limiting the generality of the foregoing, Reserves
established to ensure the payment of accrued interest expense, Taxes, Debt, and
rent for locations without landlord waivers shall be deemed to be an exercise of
Lender’s reasonable credit judgment. 

Responsible Officer means the president, chief
executive officer, chief financial officer, treasurer, controller, chief
accounting officer, or chief operating officer of Borrower. 

Revolving Committed Amount means $1,000,000.
Revolving Credit Facility is defined in Section 2.1.

Revolving Credit Limit means the lesser of
(a) the Revolving Committed Amount and (b) the Borrowing Base. 

Revolving Credit Termination Date means the
earlier of (a) November 10, 2015; or (b) the effective date that Lender’s
Commitment to make Loans under the Revolving Credit Facility under this
Agreement is otherwise canceled or terminated in accordance with Section
12 of this Agreement or otherwise. 

Revolving Note means a promissory note
substantially in the form of Exhibit A, executed by
Borrower and made payable to Lender and all renewals, extensions, modifications,
amendments, supplements, restatements, and replacements of, or substitutions
for, that promissory note. 

Revolving Principal Amount means, when
determined, the outstanding principal balance of the Revolving Note. 

Security Agreement means each Security Agreement
in Proper Form executed by any Company, as debtor, and by Lender, as secured
party, granting Lender a Lien on, and security interest in, among other things,
such Company’s personal property assets. 

Security Documents means all Security Agreements
and all other documents executed in connection therewith to create or perfect a
Lien on any Collateral. 

Subordinated Debt means Debt which is
contractually subordinated in right of payment, collection, enforcement and lien
rights to the prior payment in full of the Obligation on terms satisfactory to
Lender. 

Subordination Agreement means a subordination
agreement in Proper Form. 

Subsidiary of a Person (the
“parent”) means, when determined, (a) any Person the accounts of
which would be consolidated with those of the parent in the parent’s
consolidated financial statements if such financial statements were prepared in
accordance with GAAP as of such date, (b) any other corporation, limited
liability company, association or other business entity of which securities or
other ownership interests representing more than 50% of the voting power of all
Equity Interests entitled (without regard to the occurrence of any contingency)
to vote in the election of the Board of Directors thereof are, as of such date,
owned, Controlled or held by the parent and/or one or more subsidiaries of the
parent, (c) any partnership (i) the sole general partner or the managing general
partner of which is the parent and/or one or more subsidiaries of the parent or
(ii) the only general partners of which are the parent and/or one or more
subsidiaries of the parent, and (d) any other Person that is otherwise
Controlled by the parent and/or one or more subsidiaries of the parent.
Unless the context requires otherwise, all references in this Agreement or the
Loan Documents to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or to Subsidiaries of Borrower. 

12 

Tax Code means the Internal Revenue Code of
1986, as amended, and related rules, regulations and published
interpretations. 

Tax Distribution means any cash Distribution made
by Borrower in amounts which are sufficient to permit the owners of the Equity
Interests of Borrower to pay their federal and state, if any, income taxes which
arise solely and directly as a result of their Equity Interests in Borrower.

Taxes means, for any Person, all present and
future taxes, levies, imposts, duties, deductions, withholdings, assessments,
fees or other charges imposed by any Governmental Authority upon that Person,
its income, or any of its properties, franchises or assets (including any
applicable interest, additions to tax, or penalties). 

UCC means the Uniform Commercial Code, as adopted
in Texas (or any other applicable jurisdiction), as amended from time to time.

U.S. means United States of America. 

1.2 Interpretive Provisions.

(a) Terms used but not defined in this Agreement, but which are
defined in the UCC (including, without limitation, “account”, “account debtor”,
“chattel paper”, “debtor” “deposit account”, “equipment” “fixture”, “general
intangible”, “goods”, “inventory”, “investment property”, “letter-of-credit
right”, and “proceeds”) have the meaning given them in the UCC. 

(b) The meanings of words and defined terms are equally
applicable to the singular and plural forms of the defined terms and words.
Defined terms in respect of one gender include each other gender where
appropriate. Derivatives of defined terms have corresponding meanings. 

(c) Any conflict or ambiguity between this Agreement and any
other Loan Document is controlled by the terms and provisions of this Agreement.
The headings and captions used in this Agreement and the other Loan Documents
are for convenience only and will not be deemed to limit, amplify or modify the
terms of this Agreement or the Loan Documents. 

(d) Article, Section, Exhibit and Schedule references are to
the Loan Document in which such reference appears, unless otherwise indicated.

(e) Any reference to dollar, dollars, or $ mean lawful currency
of the U.S. which is at the time of payment legal tender for the payment of
public and private debts in the U.S. 

(f) In the computation of periods of time from a specified date
to a later specified date, the word “from” means “from and including;” the words
“to” and “until” each mean “to but excluding;” and the word “through” means “to
and including.” (g) The words “herein,” “hereto,” “hereof” and “hereunder” and
words of similar import when used in any Loan Document shall refer to such Loan
Document as a whole and not to any particular provision of such Loan Document.

13 

(h) The term “including” is by way of example and not
limitation. 

1.3 Accounting Terms. 

(a) All accounting terms not specifically or completely defined
in this Agreement shall be construed in conformity with, and all financial data
(including financial ratios and other financial calculations) required to be
submitted pursuant to this Agreement shall be prepared in conformity with, GAAP,
with all accounting principles being consistently applied from period to period
and on a basis consistent with the most recent audited consolidated financial
statements of Borrower and its Subsidiaries. 

(b) While Borrower has any Subsidiaries, all accounting and
financial terms and financial calculations (including the calculation of all
financial covenants, ratios, and related definitions) in respect of Borrower or
any Company are on a consolidated basis for all Companies, unless otherwise
indicated. 

(c) If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set out in any Loan Document,
and either Borrower or Lender shall so request, Lender and Borrower shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject t o the approval
of Lender); provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP as in effect
prior to such change and (ii) Borrower shall provide to Lender financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting out a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in GAAP.

1.4 References to Documents. Unless ot herwise expressly
provided in this Agreement, (a) references to corporate formation or governance
documents, contractual agreements (including this Agreement and the Loan
Documents) and other contractual instruments shall be deemed to include all
subsequent amendments, restatements, extensions, supplements and other
modifications thereto, but only to the extent that such amendments,
restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document; and (b) references to any Law shall include all statutory
and regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such Law. 

1.5 Time. Unless otherwise indicated, all time
references (e.g., 11:00 a.m.) are to Central time (daylight or standard,
as applicable). 

SECTION 2 LOAN COMMITMENTS.

2.1 Revolving Credit Facility. Subject to the terms and
conditions of this Agreement, Lender agrees to loan to Borrower an amount not to
exceed the Revolving Committed Amount in one or more Loans from time to time,
which Borrower may borrow, repay, and reborrow under this Agreement
(collectively, the “Revolving Credit Facility”). 

2.2 Loan Procedure. 

(a) Subject to compliance with Section 5,
Borrower may request a Loan under the Revolving Credit Facility by submitting a
Loan Request to Lender. A Loan Request is irrevocable and binding on Borrower.
Each Loan Request must be received by Lender no later than 11:00 a.m. on the
proposed Loan Date. Each Loan Date must be a Business Day. Each Loan Date under
the Revolving Credit Facility must occur on or before the Revolving Credit
Termination Date.

14 

(b) Each Loan under the Revolving Credit Facility is subject to
the following conditions: 

(i) each Loan must occur on a Business Day and must occur on or
before the Revolving Credit Termination Date; 

(ii) unless otherwise approved by Lender, each Loan (unless the
remaining amount under clause (ii) below is less) must be in an amount
not less than $10,000 or a greater integral multiple of $1,000; 

(iii) no Loan may exceed an amount equal to the excess of the
Revolving Credit Limit over the Revolving Principal Amount; and 

(iv) after giving effect to any Loan, the Revolving Principal
Amount may not exceed the Revolving Credit Limit. 

(c) Each Loan under the Revolving Credit Facility will be
deposited by Lender into Borrower’s account with Lender set out on
Schedule 1. 

(d) Each Loan shall be a LIBOR Loan unless LIBOR is
unavailable. If LIBOR is unavailable, each Loan shall be immediately converted
into and shall be outstanding as a Base Rate Loan until LIBOR once again becomes
available, at which time each such Loan shall be automatically converted into a
LIBOR Loan. 

(e) From time to time, Lender may provide certain treasury or
cash management services to Borrower under which Borrower incurs Loans under the
Revolving Credit Facility. While a cash management agreement or arrangement is
in effect, Borrower may repay the Revolving Principal Amount under the terms of
the cash management agreement or arrangement without notice. Each Borrower
hereby authorizes Lender to honor all checks or other drafts received against
the accounts subject to the cash management agreement or arrangement. Subject to
Section 2.2(d) , Loans borrowed under the terms of any cash
management agreement or arrangement between Borrower and Lender shall be
borrowed as LIBOR Loans. 

2.3 Voluntary Prepayment. 

(a) Borrower may voluntarily prepay all or any part of the
Revolving Principal Amount at any time. Each voluntary prepayment is subject to
the following conditions: 

(i) Lender must receive Borrower’s written or telephonic
prepayment notice by 10:00 a.m. on the prepayment date; 

(ii) Borrower’s prepayment notice shall (A) specify the
prepayment date, (B) specify the amount of the Loan to be prepaid, (C) specify
whether the Revolving Principal Amount is being prepaid (and if not specified,
such prepayment will be applied to the Revolving Principal Amount), and (D)
constitute an irrevocable and binding obligation of Borrower to make a
prepayment in such amount on the designated prepayment date; and 

(iii) each partial prepayment must be in a minimum amount of
not less than (A) $10,000 or a greater integral multiple of $1,000 or (B)
if less than the requested minimum amount, the outstanding balance of the
Revolving Principal Amount. 

15 

(b) All prepayments under this Section 2.3 shall
be without premium or penalty, provided that, each prepayment of a LIBOR
Loan will be accompanied by (i) the amount of accrued interest on the principal
amount prepaid and (ii) the amount of Lender’s loss or expense actually incurred
by it as a result of the prepayment (together with any related customary
administrative fees charged by Lender in connection therewith). 

2.4 Mandatory Prepayment. 

(a) If the Revolving Principal Amount at any time exceeds the
Revolving Credit Limit, then Borrower shall repay the Revolving Principal Amount
in at least the amount of that excess, together with all accrued and unpaid
interest on the principal amount so repaid. 

(b) On the date such amounts are received by, or for the
account of, Borrower (or the applicable Company), the following amounts shall be
paid to Lender in the form received with any endorsement or assignment: (i) 100%
of the Net Proceeds from the issuance of any Equity Interests or Subordinated
Debt; (ii) 100% of the proceeds from any Insurance Proceeds in respect of any
casualty event affecting Collateral, (iii) 100% of all Eminent Domain Proceeds
in respect of any Eminent Domain Event affecting Collateral, and (iv) 100% of
the Net Proceeds from the Disposition of any Collateral. The non-cash portion of
all Net Proceeds that Lender is entitled to receive under this Section
2.4(b) , shall be pledged to Lender concurrently with the applicable
Disposition. 

(c) All prepayments under Section 2.4(b) shall be
applied to repay the Loans under the Revolving Credit Facility (with the
proceeds being applied in accordance with Section 3.6) and the
Revolving Committed Amount shall be automatically reduced by the amount of such
repayment. 

(d) All prepayments under this Section 2.4 shall
be without premium or penalty, provided that, each prepayment of a LIBOR
Loan, whether by reason of acceleration or otherwise, will be accompanied by (i)
the amount of accrued interest on the principal amount prepaid and (ii) the
amount of Lender’s loss or expense actually incurred by it as a result of the
prepayment (together with any related customary administrative fees charged by
Lender in connection therewith). 

(e) Subject to any prepayment fee and other conditions provided
in this Agreement, Borrower may pay all or a portion of the amount owed before
it is due. Prepayment in full shall consist of payment of the remaining unpaid
principal balance together with all accrued and unpaid interest and all other
amounts, costs and expenses for which Borrower is responsible under this
Agreement or any other agreement with Lender pertaining to the Obligation before
such amounts are due, whether such prepayment arises from a voluntary or
involuntary prepayment, acceleration of maturity, or any other cause or reason.
Prepayment in part shall consist of payment of any portion of the unpaid
principal balance before it is due, whether such prepayment arises from a
voluntary or involuntary prepayment, acceleration of maturity, or any other
cause or reason. 

SECTION 3 TERMS OF PAYMENT.

3.1 Note and General Payment Terms. 

(a) The Loans under the Revolving Credit Facility shall be
evidenced by the Revolving Note.

(b) Borrower must make each payment on the Obligation, without
offset, counterclaim or deduction, to Lender’s Office in funds that will be
available for immediate use by Lender by 12:00 noon on the day due. Payments
received after such time (and payments received on a day which is not a Business Day) will be deemed received on the next
Business Day but interest shall continue to accrue during such period. 

16 

3.2 Revolving Credit Facility. 

(a) Interest Payments. Accrued and unpaid interest on
the Revolving Principal Amount is due and payable monthly in arrears on the
first day of each month beginning December 1, 2014 and continuing thereafter
until the Revolving Credit Termination Date.

(b) Principal Payments. The Revolving Principal Amount,
and all accrued and unpaid interest thereon, is due and payable on the Revolving
Credit Termination Date. 

3.3 Interest. Except as otherwise provided in this
Agreement: 

(a) Loans under the Revolving Credit Facility shall accrue
interest at an annual rate equal to the lesser of (i) the sum of LIBOR
plus the Applicable Margin and (ii) the Maximum Rate. 

(b) LIBOR shall be set for each month on the first day of such
month. Each change in LIBOR is effective as of the date of such change without
notice to Borrower or any other Person. 

3.4 Default Rate. To the extent permitted by Law, while
a Default exists, the Obligation shall accrue interest at an annual rate equal
to the lesser of (a) the Default Rate and (b) the Maximum Rate, until all
past due amounts are paid (whether payment is made before or after entry of a
judgment or the Default is otherwise cured or waived). Subject to Section
3.7, if a Default exists, Lender may, in its sole discretion, to the
extent permitted by Law, add accrued and unpaid interest to the Revolving
Principal Amount and such amount will accrue interest until paid at the
applicable interest rate. 

3.5 Interest Calculations. Interest on Loans and all
fees and other amounts due under the Loan Documents will be calculated on the
basis of actual number of days elapsed (including the first day but excluding
the last day), but computed as if each calendar year consisted of 360 days
(unless computation would result in an interest rate in excess of the Maximum
Rate, in which event the computation is made on the basis of a year of 365 or
366 days, as the case may be). All interest rate determinations and calculations
by Lender are conclusive and binding, absent manifest error. 

3.6 Order of Application. 

(a) All payments and prepayments shall be applied as specified
in this Agreement. If the application of any payment (other than amounts
collected or proceeds of Collateral received from the exercise of rights and
remedies) is not specified, then it shall be applied in the following order: (i)
to all fees, expenses, late charges, collection costs, and other charges, costs
and expenses for which Lender has not been paid or reimbursed under the Loan
Documents; (ii) accrued and unpaid interest on the Revolving Principal Amount;
(iii) to the remaining Revolving Principal Amount; and (iv) to the remaining
Obligation in the order and manner Lender deems appropriate in its sole
discretion. 

(b) All amounts collected or proceeds of Collateral or any
Guaranty received from the exercise of rights and remedies shall be applied in
the following order: (i) to all fees, expenses, late charges, collection costs,
and other charges, costs and expenses for which Lender has not been paid or
reimbursed under the Loan Documents; (ii) accrued and unpaid interest on the
Revolving Principal Amount; (iii) to the payment of the outstanding principal
amount of the Obligation (including the remaining Revolving Principal Amount and
Cash Management Liabilities) on a ratable and pari passu basis, (iv) to the
remaining Obligation in the order and manner Lender deems appropriate in its
sole discretion, and (v) any surplus being delivered to the party
lawfully entitled to such surplus (or portion of such surplus).

17 

3.7 Maximum Rate. The parties
agree that the total amount of interest contracted for, charged, collected or
received by Lender under this Agreement shall not exceed the Maximum Rate.
Notwithstanding any contrary provisions contained herein, (a) the Maximum Rate
shall be calculated on the basis of the actual number of days elapsed over a
year of 365 or 366 days, as the case may be, (b) in determining whether the
interest hereunder exceeds interest at the Maximum Rate, the total amount of
interest shall be spread throughout the entire term of this Agreement until its
payment in full, (c) if at any time the interest rate chargeable under this
Agreement would exceed the Maximum Rate, thereby causing the interest payable
under this Agreement to be limited to the Maximum Rate, then any subsequent
reductions in the interest rate shall not reduce the rate of interest charged
under this Agreement below the Maximum Rate until the total amount of interest
accrued from and after the date of this Agreement equals the amount of interest
which would have accrued if the interest rates had at all times been in effect,
and (d) if Lender ever charges or receives anything of value which is deemed to
be interest under applicable Law, and if the occurrence of any event, including
acceleration of maturity of obligations owing to Lender, should cause such
interest to exceed the Maximum Rate, any amount which exceeds interest at the
Maximum Rate shall be applied to the reduction of the unpaid Revolving Principal
Amount under this Agreement (or any other indebtedness owed to Lender by
Borrower), and if this Agreement and such other indebtedness are paid in full,
any remaining excess shall be paid to Borrower. Chapter 346 of the Finance Code
shall not be applicable to this Agreement or the indebtedness outstanding
hereunder. 

3.8 Set off. While a Default
exists, Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by Law, to set off and apply
(a) any and all deposits (general or special, time or demand, provisional or
final) at any time held by Lender (or its Affiliates) and (b) any other Debt at
any time owing by Lender (or any of its Affiliates) to or for the credit or the
account of any Company, against the Obligation even if Lender has not made
demand under this Agreement and the Obligation is unmatured. Borrower agrees
that any other Person purchasing a participation from Lender may exercise all
its rights of payment (including the right of setoff) with respect to such
participation as fully as if such Person were the direct creditor of Borrower in
the amount of such participation. Lender agrees to promptly notify the
applicable Company after any such set off and application is made; provided
that, the failure to give such notice shall not affect the validity of such
set off and application. The rights of Lender under this Section 3.8
are in addition to other rights and remedies (including other rights of set off)
that Lender may have.

3.9 Debit Account. Borrower
agrees that the interest and principal payments and any fees will be deducted
automatically on the due date from such of Borrower’s accounts with Lender as
designated in writing by Borrower. This authorization shall not affect the
obligation of Borrower to pay such sums when due, without notice, if there are
insufficient funds in such account to make such payment in full on the due date
thereof, or if Lender fails to debit such account. 

3.10 Increased Cost and Reduced
Return. 

(a) If an y Change in Law: 

(i) shall subject Lender to any tax, duty, or other charge with
respect to Loans or its obligation to make Loans, or change the basis of
taxation of any amounts payable to it under this Agreement in respect of any
such Loans (other than Taxes imposed on its overall net income by the
jurisdiction in which Lender has its principal office); 

18 

(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement relating to any extensions
of credit or other assets of, or any deposits with or other liabilities or
commitments of, Lender; or 

(iii) shall impose on Lender or on the U.S. market for
certificates of deposit or the London interbank market any other condition
affecting this Agreement or any of the Loans, liabilities or commitments under
this Agreement; 

and the result of any of the foregoing is to increase the cost
to Lender of making or maintaining any Loans or to reduce any sum received or
receivable by Lender under this Agreement with respect to any Loans, then
Borrower shall pay to Lender on demand such amount or amounts as will compensate
Lender for such increased cost or reduction. 

(b) If any Change in Law has or would have the effect of
reducing the rate of return on the capital of Lender or any Person controlling
Lender as a consequence of its obligations under this Agreement to a level below
that which Lender or such Person could have achieved but for such Change in Law,
then from time to time upon demand, Borrower shall pay to Lender such additional
amount or amounts as will compensate Lender or such Person for such reduction.

(c) If Lender claims compensation under this Section
3.10, Lender shall furnish to Borrower a statement setting out the
additional amount or amounts to be paid to it hereunder, which shall be
conclusive in the absence of manifest error. 

3.11 Alternate Interest Rate. Notwithstanding any other
provision of this Agreement, if Lender determines that (a) adequate and
reasonable means do not exist for ascertaining LIBOR, (b) LIBOR will not
adequately and fairly reflect the cost to Lender of making or maintaining LIBOR
Loans, or (c) it becomes unlawful for Lender to make, maintain, or fund LIBOR
Loans under this Agreement (in each case such determination shall be conclusive
absent manifest error), Lender shall promptly notify Borrower of such
determination and for so long as such events or circumstances shall continue in
effect, the obligation of Lender to make LIBOR Loans shall terminate, and (i)
all future Loans shall be Base Rate Loans and (ii) all outstanding Loans which
are LIBOR Loans shall be immediately converted to Base Rate Loans. 

3.12 Payment and Billing Agreements. 

(a) Unless otherwise agreed by Lender in writing and provided
that Borrower is current on all amounts due, payments applied to the Obligation
before Lender’s creation of a billing statement for the next payment due will be
applied entirely to the Revolving Principal Amount as provided in Section
3.6, and payments applied to the Obligation after the creation of such
billing statement will be applied according to that billing statement. Unless
otherwise agreed by Lender in writing and provided that Borrower is current on
all amounts due, payments applied to the Obligation before Lender’s creation of
a billing statement for the next payment due shall not relieve Borrower of
Borrower’s obligation to continue making, uninterrupted, payments under this
Agreement. 

(b) Borrower agrees not to send Lender payments marked “paid in
full,” “without recourse,” or with similar language. If Borrower sends such a
payment, Lender may accept it without losing any of Lender’s rights under this
Agreement or any other Loan Document, and Borrower will remain obligated to pay
any further amounts owed or that may become owed to Lender. All written
communications concerning disputed amounts, including any check or other payment
instrument that indicates that the payment constitutes “payment in full” of the
amount owed or that is tendered with other conditions or limitations or as full satisfaction of a
disputed amount, must be mailed or delivered to Compass Bank, PO Box 3096,
Birmingham AL 35202. 

19 

SECTION 4 FEES AND LATE
PAYMENTS. 

4.1 Treatment of Fees. To the extent permitted by Law
and subject to Section 3.7, the fees described in this
Section 4 (a) do not constitute compensation for the use,
detention, or forbearance of money, (b) are in addition to, and not in lieu of,
interest and expenses otherwise described in this Agreement or in any other Loan
Document, (c) are payable in accordance with Section 3.1, (d) are
non-refundable, (e) are earned fully when paid and will not be subject to
refund, except as required by Law, and (f) if not paid when due, accrue interest
at the Default Rate. 

4.2 Unused Commitment Fee. Borrower shall pay to Lender,
a fee equal to 0.50% multiplied by the actual daily amount by which the
Revolving Committed Amount exceeds the Revolving Principal Amount. The fee shall
be due and payable quarterly in arrears on the first day of each April, July,
October, and January, beginning January 1, 2015 and continuing until the
Revolving Credit Termination Date. 

4.3 Late Payment Fee. If any payment required under this
Agreement, any Note, or any other Loan Document (other than payment in full
which is required at maturity) is not paid within ten (10) days after such
payment is due, then, at the option of Lender, Borrower shall pay a late charge
equal to five percent (5.0%) of the amount of such payment to compensate Lender
for administrative expenses and other costs of delinquent payments. This late
charge may be assessed without notice, shall be immediately due and payable and
shall be in addition to all other rights and remedies available to Lender. 

SECTION 5 CONDITIONS
PRECEDENT. 

5.1 Conditions to Initial Loans. This Agreement will
become effective once all parties have executed and delivered this Agreement.
Lender will not be obligated to make the initial Loan until (a) Lender has
received all of the items described on Schedule 5, each in Proper
Form, (b) Borrower has established (and thereafter maintains) with Lender a cash
management agreement or arrangement acceptable to Borrower and Lender, and (c)
the completion of Lender’s due diligence. 

5.2 Conditions to All Loans. Lender will not be
obligated to make any Loan unless on the applicable Loan Date (and after giving
effect to the requested Loan): (a) Lender has timely received a Loan Request and
Borrowing Base Certificate; (b) all of the representations and warranties of the
Companies and the Guarantors in the Loan Documents are true and correct in all
material respects (except to the extent that the representations and warranties
speak to a specific date); (c) Lender has received evidence that Borrower
continues to maintain the insurance required under Section 8.6
(including certificates and endorsements evidencing such insurance); (d) no
Material Adverse Event exists; and (e) no Default or Potential Default exists or
will result from such Loan (whether a funding, issuance, amendment, or renewal).
Each Loan Request delivered to Lender constitutes the representation and
warranty by the Companies that the statements in clauses (b), (c),
(d), and (e) above are true and correct in all material respects.

5.3 Post-Closing. As soon as available, and in any event
not later than the close of business on December 8, 2014, Borrower shall
deliver, or shall cause to be delivered to Lender the following, in each case,
in Proper Form: 

(a) an endorsement to Borrower’s insurance policy, adding
Lender as an additional insured with respect to Borrower’s liability coverage
under such policy; 

20

(b) an endorsement to Borrower’s insurance policy, adding
Lender as an additional insured with respect to Borrower’s property insurance
coverage under such policy. 

5.4 No Waiver. Each condition precedent in this
Agreement (including matters listed on Schedule 5) is material to
the transactions contemplated by this Agreement, and time is of the essence with
respect to each condition precedent. Lender may make any Loan without all
conditions being satisfied, but such Loan shall not be deemed a waiver of any
condition precedent for any other Loan. 

SECTION 6 SECURITY AND
GUARANTIES. 

6.1 Collateral. 

(a) The complete payment and performance of the Obligation
shall be secured by all of the Companies’ assets (collectively, the
“Collateral”). Each Company shall execute all applicable Security
Documents necessary to pledge and to grant Liens and security interests in all
of the Collateral it owns. 

(b) Borrower and each other Company shall pledge to Lender 100%
of the Equity Interests of each of its Subsidiaries existing on the Closing
Date, and for Subsidiaries formed or acquired after the Closing Date, within 10
Business Days after such Subsidiary is created or acquired. 

6.2 Financing Statements. Each Company hereby authorizes
Lender to file, and agrees to execute, if requested, financing statements,
continuation statements, or termination statements (each in Proper Form), or
take other action reasonably requested by Lender relating to the Collateral,
including any Lien search required by Lender. 

6.3 Guaranties. Each Guarantor and each Company (other
than Borrower) shall guarantee the complete payment and performance of the
Obligation (including Loans under the Revolving Credit Facility and any Cash
Management Products and Services) by executing and delivering a Guaranty to
Lender on the Closing Date or, for each Company formed or acquired after the
Closing Date, within ten (10) Business Days after such Company is formed or
acquired.

6.4 Reserves. Lender shall have the right to establish,
modify or eliminate Reserves against Eligible Accounts and the Borrowing Base
from time to time in its reasonable credit judgment. In addition, Lender
reserves the right, at any time and from time to time after the Closing Date, to
adjust any of the criteria set out in the definitions of “Eligible Accounts” or
to establish new criteria in its reasonable credit judgment. In addition, Lender
has the right from time to time in its reasonable credit judgment to decrease or
increase the thresholds and percentages in the definition of “Borrowing Base.”
6.5 Further Assurances; Collateral. Each Company (at its expense) shall
obtain, or cooperate with Lender to obtain, agreements, documents, instruments,
and papers (all in Proper Form) as Lender may from time to time request to
attach or preserve the attachment, and to perfect or preserve the perfection and
priority, of Lender’s security interests granted under the Loan Documents
(including, landlord subordination agreements, creditor and mortgagee
subordination agreements, and Lien release documents). Borrower hereby appoints
and empowers Lender or its representatives, as its attorney-in-fact, to execute
and/or endorse (and file, as appropriate) on its behalf any documents,
agreements, papers, checks, financing statements and other documents which, in
Lender’s sole judgment, are necessary to be executed, endorsed and/or filed in
order to (a) perfect or preserve the perfection and priority of Lender’s
security interests granted under the Loan Documents and (b) collect or realize
upon the Collateral or otherwise exercise its rights and remedies under any of
the Loan Documents or applicable Law. 

21 

SECTION 7 REPRESENTATIONS AND
WARRANTIES. 

Each Company represents and warrants to Lender as follows: 

7.1 Existence. Each Company and Guarantor (a) is duly
organized, validly existing, and in good standing under the Laws of the
jurisdiction in which it is organized, (b) is qualified to do business in all
jurisdictions where such qualification is necessary (except where failure to so
qualify would not reasonably be expected to have a Material Adverse Effect), (c)
is in good standing, has all necessary permits, licenses, franchises, patents,
copyrights, trademarks and trade names, or rights to conduct its business, and
(d) has the necessary corporate, company, or partnership authority to own its
assets and conduct its business. 

7.2 Authorization. The execution and delivery by each
Company and Guarantor of the Loan Documents to which it is a party, and each
Company’s and Guarantor’s performance of its obligations under the Loan
Documents, (a) have been duly authorized by such Company or Guarantor, as
applicable, (b) do not conflict with any of its Organizational Documents, (c) do
not conflict with any Law or Material Agreement by which such Company or
Guarantor is bound, (d) do not require any material consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect, and
(e) will not result in the creation or imposition of any Lien on any of its
assets or any of its Subsidiaries. 

7.3 Enforceability. Each Loan Document has been duly
executed and delivered to Lender by each Company and Guarantor which is a party
to it, and the Loan Documents are enforceable against each Company and Guarantor
in accordance with their respective terms, except as enforceability may be
limited by applicable Debtor Relief Laws and general principles of equity. 

7.4 Subsidiaries. Other than those listed on
Schedule 7.4, Borrower has no Subsidiaries. For each Company,
Schedule 7.4 sets out such Company’s name, address, U.S. taxpayer
identification number, entity type and jurisdiction of organization, the amount
of issued and outstanding Equity Interests of such Company, and the names of the
owners of its Equity Interests. 

7.5 Litigation. Except as disclosed on Schedule
7.5, there is no Litigation pending, or to Borrower’s knowledge,
threatened in writing, involving any Company or Guarantor which (a) purports to
affect or pertain to this Agreement, any other Loan Document, or any of the
transactions contemplated by the Loan Documents, or (b) if determined adversely
to any Company or Guarantor would reasonably be expected to have a Material
Adverse Effect. 

7.6 Taxes. All Tax returns of each Company and Guarantor
required to be filed have been timely filed (or extensions have been granted)
and all Taxes imposed upon any Company or Guarantor that are due and payable
have been paid before delinquency, other than Taxes which are being
contested in good faith by lawful proceedings diligently conducted, against
which reserves (or other provision required by GAAP) have been established in
accordance with GAAP. Borrower knows of no pending investigation of any Company
or Guarantor by any Governmental Authority or of any pending but unassessed Tax
liability of any Company or Guarantor. 

7.7 Environmental Matters. Except as disclosed in
Schedule 7.7, no facility of any Company is used for, or to the
knowledge of any Company has been used for, storage, treatment, or disposal of
any Hazardous Substance in violation of any applicable Environmental Law, other
than violations that would not individually or collectively constitute a
Material Adverse Event. No Company knows of any environmental condition or
circumstance adversely affecting its assets, properties, or operations that
would reasonably be expected to have a Material Adverse Effect. 

22 

7.8 Ownership of Assets; Intellectual Property. Each
Company has (a) indefeasible title to its real property, (b) a vested leasehold
interest in all of its leased property, and (c) good and marketable title to its
personal property, all as reflected on the Current Financials (except for
property disposed of as permitted by Section 9.4). Each Company is
conducting its business without infringement or claim of infringement of any
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others, other than any infringements
or claims that, if successfully asserted against or determined adversely to any
Company, would not, individually or collectively, reasonably be expected to have
a Material Adverse Effect. 

7.9 Liens. No Lien exists on any asset of any Company,
other than Permitted Liens. 

7.10 Debt. No Company is an obligor of any Debt,
other than Permitted Debt. 

7.11 Insurance. The Companies maintain the insurance
required under Section 8.6. 

7.12 Place of Business; Real Property. Schedule
7.12 sets out (a) the location of each Company’s place of business or
chief executive office, (b) the location of all of the inventory, equipment or
goods for each Company (other than goods on consignment, in transit, or
in the possession of a Person under the terms of a contract with a Company), and
(c) all of the real property owned or leased by each Company. The books and
records of each Company are located at its place of business or chief executive
office. 

7.13 Purpose of Credit Facilities. Borrower will use the
proceeds of the Revolving Credit Facility for working capital and other general
corporate purposes. No part of the proceeds of the Revolving Credit Facility
will be used, directly or indirectly, for a purpose that violates any Law,
including the provisions of Regulation U. 

7.14 Trade Names. Each Company is in compliance with all
applicable trade name or “d/b/a” statutes in each state in which such Company
does business and except as disclosed on Schedule 7.14, no Company
has used or transacted business under any other corporate name, d/b/a, or trade
name in the five-year period preceding the Closing Date (including names of all
Persons with which any Company has merged or consolidated, or from which any
Company has acquired all or a substantial portion of such Person’s assets). 

7.15 Transactions with Affiliates. Except as disclosed
on Schedule 7.15, no Company is a party to an agreement or
transaction with any of its Affiliates other than transactions in the
ordinary course of business and upon fair and reasonable terms not materially
less favorable than it could obtain or could become entitled to in an
arm’s-length transaction with a Person that was not its Affiliate. 

7.16 Financial Information. Each material fact or
condition relating to the Loan Documents, the Collateral, and the Companies’ and
each Guarantor’s financial condition, business, property, or prospects has been
disclosed to Lender in writing. All financial and other information supplied to
Lender is sufficiently complete to give Lender accurate knowledge of each
Company’s and Guarantor’s financial condition, including all material contingent
liabilities. Since the date of the financial statement provided to Lender on or
about the Closing Date, there has been no material adverse change in the
business condition (financial or otherwise), operations, properties or prospects
of the Companies or any Guarantor. 

7.17 Material Agreements and Funded Debt. No Company is
a party to any Material Agreement, other than the Loan Documents and the
Material Agreements described on Schedule 7.17. No Company has
breached or is in default under any Material Agreement or Funded Debt
obligation. 

23 

7.18 ERISA. 

(a) Each Employee Plan (i) (other than a multiemployer plan) is
in compliance in all material respects with the applicable provisions of ERISA,
the Tax Code and other federal or state Law, and (ii) has received a favorable
determination letter from the IRS and, to the best knowledge of Borrower,
nothing has occurred which would cause the loss of such qualification. Borrower
has fulfilled its obligations, if any, under the minimum funding standards of
ERISA and the Tax Code with respect to each Employee Plan, and has not incurred
any liability with respect to any Employee Plan under Title IV of ERISA. There
are no claims, actions, or Litigation (including by any Governmental Authority),
and there has been no prohibited transaction or violation of the fiduciary
responsibility rules, with respect to any Employee Plan which is or could
reasonably be expected to be a Material Adverse Event. 

(b) With respect to any Employee Plan subject to Title IV of
ERISA: (i) no reportable event has occurred under Section 4043(c) of ERISA for
which the PBGC requires 30-day notice; (ii) no action by Borrower or any ERISA
Affiliate to terminate or withdraw from any Employee Plan has been taken and no
notice of intent to terminate an Employee Plan has been filed under Section 4041
of ERISA; and (iii) no termination proceeding has been commenced with respect to
an Employee Plan under Section 4042 of ERISA, and no event has occurred or
condition exists which might constitute grounds for the commencement of such a
proceeding. 

7.19 Solvency. The Companies, on a consolidated basis,
are solvent, the Companies’ assets, on a consolidated basis, exceed their
liabilities, and the Borrower will not be rendered insolvent by the execution
and performance of this Agreement and the Loan Documents. 

7.20 Investment Company Act. Neither Borrower nor any
other Company is an “investment company,” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended. 

SECTION 8 AFFIRMATIVE
COVENANTS. 

So long as Lender is committed to make any Loan under this
Agreement, and thereafter until the Obligation is paid in full (other than
contingent indemnification obligations, obligations under Cash Management
Products and Services, and other provisions under the Loan Documents which by
their terms expressly survive payment of the Obligation and termination of the
Loan Documents), each Company agrees as follows: 

8.1 Items to be Furnished. Borrower shall cause the
following to be furnished to Lender: 

(a) Borrower Annual Financial Statements. Promptly after
preparation, and no later than 90 days after the last day of each fiscal year of
Borrower, (A) unaudited financial statements (including statements of income,
statements of retained earnings and cash flows and a balance sheet) showing the
consolidated financial condition and results of operations of the Companies as
of, and for the year ended on, that last day, and (B) a Compliance Certificate
with respect to such financial statements to be delivered under this clause
(a), calculating and certifying as to the Companies’ compliance with the
financial covenants under this Agreement. 

(b) Borrower Quarterly Financial Statements. Promptly
after preparation, and no later than 45 days after the last day of each fiscal
quarter of Borrower, (A) unaudited financial statements (including statements of
income, statements of retained earnings and cash flows and a balance sheet)
showing the consolidated financial condition and results of operations of the
Companies for the prior fiscal quarter and for the period from the beginning of the
current fiscal year to the last day of that fiscal quarter, and (B) a Compliance
Certificate with respect to such financial statements to be delivered under this
clause (b), calculating and certifying as to the Companies’ compliance
with the financial covenants under this Agreement. 

24 

(c) NHI Annual Financial Statements. Promptly after
preparation, and no later than 120 days after the last day of each fiscal year
of NHI, audited financial statements (including statements of income, statements
of retained earnings and cash flows, and a balance sheet) showing the
consolidated financial condition and results of operations of NHI and its
Subsidiaries as of, and for the year ended on, that last day. These audited
financial statements shall be accompanied by the unqualified opinion prepared by
an independent certified public accounting firm satisfactory to Lender, based on
an audit using generally accepted auditing standards, that the financial
statements were prepared in accordance with GAAP and present fairly, in all
material respects, the consolidated financial condition and results of
operations of NHI and its Subsidiaries. 

(d) NHI Quarterly Financial Statements. Promptly after
preparation, and no later than 45 days after the last day of each fiscal quarter
of NHI, unaudited financial statements (including statements of income,
statements of retained earnings and cash flows and a balance sheet) showing the
consolidated financial condition and results of operations of NHI and its
Subsidiaries for the prior fiscal quarter and for the period from the beginning
of the current fiscal year to the last day of that fiscal quarter. 

(e) Borrowing Base Certificate. Promptly after
preparation, and no later than 25 days after the last day of each month (or more
often as Lender shall request), (i) a Borrowing Base Certificate (including the
Reconciliation Report), (ii) detailed reports in form acceptable to Lender of
all of the Companies’ accounts (including the aggregate balance of all accounts)
and accounts payable as of the last day of the immediately preceding calendar
month (or such shorter applicable period), and the period of time which has
elapsed with respect to such accounts and accounts payable since the invoice
date with respect thereto (together with Borrower’s certification as to any
counterclaims, offsets or contra-accounts with respect to any of Borrower’s
Accounts), (iii) summaries of all of Borrower’s inventory as of the last day of
the immediately preceding calendar month (or such shorter applicable period),
and the value thereof, and (iv) if requested by Lender, a copy of Borrower’s
sales journal or invoice register for the immediately preceding calendar month
(or such shorter applicable period) and the dates, amounts and account debtors
with respect to such billings. 

If there is any reduction or diminution in the face value of
any account by an amount greater than $50,000, Borrower shall advise Lender
thereof and, if Lender requests, Borrower shall provide Lender with a signed
writing explaining the circumstances resulting in such reduction. 

(f) Detailed Documentation. If requested by Lender, when
and as generated, copies of all of the Companies’ (i) invoices (or similar
documents relating to the sales and leasing of inventory or the provision of
services), which invoices (or similar documents) shall be in Proper Form and
shall specify the location at which the goods or services related thereto are to
be delivered, installed and/or performed, (ii) daily sales and invoice registers
or journals reflecting, on a daily basis, the information described above, (iii)
contemporaneously with each and every remittance with respect to the accounts
and upon each deposit of funds to the remittances account maintained by and in
the name of Lender, the Companies shall provide to Lender a report reflecting
the amount of all such remittances and the accounts with respect to which such
remittances were made, together with copies of the Companies’ cash receipts
journal reflecting such remittances, and (iv) all of any Company’s credit memos.

25 

(g) Notice of Litigation, Defaults, and Other Material
Events. Notice, promptly after any Company or Guarantor receives notice of,
or otherwise becomes aware of, (i) the institution of any Litigation involving
any Company or Guarantor for which the monetary amount at issue is greater than
$100,000, individually, or $300,000 in the aggregate, (ii) the institution of
any Litigation involving any Company or Guarantor which seeks equitable or
injunctive relief, (iii) any liability or alleged liability under any
Environmental Law arising out of, or directly affecting, the properties or
operations of such Company, or any Guarantor, (iv) any substantial dispute with
any Governmental Authority, (v) the incurrence of any material contingent Debt,
(vi) any Company’s execution of a Material Agreement (or any Company’s agreement
to execute a Material Agreement), (vii) any material change in respect of any
Collateral or any default by any Company in respect of any Collateral, (viii)
any claim, action or proceeding challenging a Lien granted by a Company to
Lender or affecting title to all or any material portion of the Collateral, and
(ix) a Default or Potential Default, specifying the nature thereof and what
action each Company or Guarantor has taken, is taking, or proposes to take. 

(h) Notice of Changes by a Company. At least 30 days
prior written notice of (i) any proposed relocation of any Company’s chief
executive office or principal place of business, (ii) any proposed relocation of
the place where a Company’s books and records relating to accounts and general
intangibles are kept, (iii) a change of any Company’s or Guarantor’s name,
Organizational Documents, jurisdiction of organization, or type of
organizational structure, (iv) any proposed relocation of any of the Collateral
(other than with respect to goods in transit between facilities, temporary
warehousing for up to 30 days, sales of inventory in the ordinary course of
business, or the sale of other Collateral to the extent permitted by the Credit
Agreement) to a location other than those set out on Schedule
7.12, and (v) any acquisition or creation of a Subsidiary by any
Company, or that any Person has become a Subsidiary of any Company. Nothing in
this section shall be construed as permitting the acquisition or creation of a
Subsidiary. 

(i) General Information. Promptly, upon reasonable
request by Lender, such other information and documents not otherwise required
to be furnished under the Loan Documents respecting the business affairs, assets
and liabilities of any Guarantor and the Companies. 

8.2 Books, Records, Inspections and Collateral Audits.

(a) Each Company and Guarantor shall maintain books, records,
and accounts necessary to prepare the financial statements required by
Section 8.1. Lender may discuss, from time to time, any of the
Companies’ and Guarantor’s affairs, conditions and finances with its officers,
members of its Board of Directors, and its certified public accountants and
other agents and advisors. 

(b) At any reasonable time during business hours (or other
reasonable times) and without interruption of operations, upon reasonable
notice, each Company shall allow Lender (or its representatives), at Borrower’s
expense, to (i) inspect each Company’s properties and Collateral, (ii) examine,
audit, and make copies of each Company’s books and records, and (iii) conduct
Field Audits. 

(c) Each Company shall from time to time furnish to Lender such
documents, lists, descriptions, certificates and other information necessary or
helpful to keep Lender informed with respect to the identity, location, status,
condition, terms of, parties to, and value of the Collateral, and shall maintain
at its principal place of business a current record of the location of all
Collateral. If any of the Companies’ Collateral, properties, books or records is
in the possession of a third party, the applicable Company shall authorize that
third party to permit Lender or its Representatives to have access to perform inspections or audits and to respond to
Lender’s requests for information concerning such Collateral, properties, books
and records. 

26 

8.3 Taxes. Each Company and Guarantor will promptly pay
before they are delinquent and all Taxes, other than Taxes which are
being contested in good faith by lawful proceedings diligently conducted,
against which reserves (or other provision required by GAAP) have been
established in accordance with GAAP, and in respect of which levy and execution
of any Lien are stayed. 

8.4 Compliance with Laws. Each Company and Guarantor
shall comply in all material respects with the requirements of all Laws
(including Environmental Laws, and all “d/b/a” or trade name statutes) and all
orders, writs, injunctions and decrees applicable to it or its business or
property, except in such instances in which (a) such requirement is deemed
contested in good faith by lawful proceedings diligently conducted, against
which reserves (or other provision required by GAAP) have been established in
accordance with GAAP, and (b) the failure to comply would not reasonably be
expected to have a Material Adverse Effect. 

8.5 Maintenance of Existence, Assets, and Business. Each
Company and Guarantor will (a) maintain its existence and good standing in its
state of organization and its authority to transact business and good standing
in all other jurisdictions where the nature and extent of its business and
properties require due qualification and good standing, (b) maintain all
permits, licenses, franchises, patents, copyrights, trademarks and trade names,
or rights necessary for its business where failure to do so would reasonably be
expected to have a Material Adverse Effect, (c) continue to conduct its primary
business as conducted as of the Closing Date and to continue its operations in
such business, and (d) keep all of its assets that are useful in and necessary
to its business in good working order and condition (ordinary wear and tear
excepted) and make all necessary repairs and replacements. In the event any
claim is asserted in respect of any Collateral or Lender’s Lien on such
Collateral, the applicable Company shall appear in and defend any such action or
proceeding at Borrower’s reasonable expense. In the event of any default by any
Company or any other party under or in connection with any material portion
(individually or collectively) of the Collateral, the Companies will immediately
use commercially reasonable efforts to remedy the same or immediately demand
that the same be remedied. 

8.6 Insurance. Each Company shall maintain insurance
satisfactory to Lender with financially sound and reputable insurance companies
acceptable to Lender. The insurance policies must (a) cover damage to the
tangible property comprising the Collateral (including loss of use and
occupancy), and must be for the full replacement cost of the Collateral, (b)
include liability insurance (including coverage for contractual liability,
product liability and workers’ compensation), (c) cover such other risks as are
usually insured against by Persons engaged in business similar to the Companies’
businesses, including, without limitation, business interruption insurance, (d)
include a replacement cost endorsement in an amount acceptable to Lender, (e)
include a lender’s loss payable endorsement in favor of Lender in Proper Form,
(f) (for any liability policies) name Lender as an additional insured, (g)
include a waiver of subrogation, (h) designate Lender as the Borrower’s
attorney-in-fact to make settlement claims with the insurer, and (i) provide for
at least thirty (30) days prior notice to Lender of any cancellation thereof.
Upon Lender’s request, Borrower shall deliver to Lender a copy of each insurance
policy, or, if permitted by Lender, a certificate of insurance listing all
insurance in force. Each Company hereby waives its rights of recovery from
Lender with regard to all causes of property and/or liability loss, and shall
cause a waiver of subrogation endorsement to be provided in favor of Lender on
all insurance coverage carried by each Company, whether or not required under
this Agreement. If Borrower fails to maintain the required insurance, Lender may
arrange for the insurance to be issued at Borrower’s cost and expense.

27 

8.7 Environmental Laws. Each Company shall conduct its
business so as to comply with all applicable Environmental Laws, shall promptly
take corrective action to remedy any violation of any Environmental Law, and
shall immediately notify Lender of any claims or demands by any Governmental
Authority or Person with respect to any Environmental Law or Hazardous
Substance. 

8.8 ERISA. Promptly during each year, (a) pay
contributions adequate to meet at least the minimum funding standards under
ERISA with respect to each and every Employee Plan, (b) file each annual report
required to be filed pursuant to ERISA in connection with each Employee Plan for
each year, and (c) notify Lender within 10 days after the occurrence of any
reportable event under Section 4043(c) of ERISA that might constitute grounds
for termination of any capital Employee Plan by the PBGC or for the appointment
by the appropriate United States District Court of a trustee to administer any
Employee Plan. 

8.9 Use of Proceeds. Borrower shall use the proceeds of
the Revolving Credit Facility only for the purposes represented in this
Agreement. 

8.10 Application of Insurance and Eminent Domain
Proceeds. 

(a) Lender and each Company agree (i) that all Insurance
Proceeds shall be paid by the insurers directly to Lender (as loss payee or
additional insured), and (ii) to cause all Eminent Domain Proceeds to be paid by
the condemning Governmental Authority directly to Lender. 

(b) If any Insurance Proceeds or Eminent Domain Proceeds are
paid to any Company, such Insurance Proceeds or Eminent Domain Proceeds shall be
received only in trust for Lender, shall be segregated from other funds of the
Companies and shall promptly be paid over to Lender in the same form as received
(with any necessary endorsement). 

(c) Notwithstanding anything to the contrary in this
Section 8.10, reimbursement under any liability insurance
maintained by any Company may be paid directly to the Person who incurred the
liability, cost, or expense covered by such insurance. 

(d) Any Eminent Domain Proceeds or Insurance Proceeds shall be
applied to the repayment of the Revolving Principal Amount in accordance with
Section 2.4, with the excess, if any, to be disbursed in
accordance with Section 2.4.

8.11 Banking Relationship. So long as the Commitment is
in effect or any part of the Obligation is outstanding, Borrower shall establish
and maintain its primary banking depository and disbursement relationship with
Lender. 

8.12 Payment of Obligation and Expenses.

(a) Borrower will promptly pay the principal of, interest on
and any other amount due on the Obligation in the amounts, on the dates and in
the manner provided herein and in each other Loan Document. 

(b) Borrower shall promptly pay upon demand (i) all reasonable
costs, fees and expenses paid or incurred by Lender (including those incurred
under Section 6) in connection with the negotiation, preparation,
delivery and execution of any Loan Document, and any related or subsequent
amendment, waiver, or consent (including in each case, the reasonable fees and
expenses of Lender’s counsel), (ii) all due diligence, closing, and post-closing
costs including filing fees, recording costs, lien searches, corporate due
diligence, third-party expenses, surveys (if required), appraisals (if required), title insurance (if required),
environmental surveys, Field Audits, and other related due diligence, closing
and post-closing costs and expenses, and (iii) all costs, fees and expenses of
Lender incurred in connection with the negotiation, workout, or restructure
under the Loan Documents, the enforcement of the Loan Documents or the exercise
of any rights arising under the Loan Documents, and any action taken in
connection with any Debtor Relief Laws (including, in each case, the reasonable
fees and expenses of Lender’s counsel), all of which shall be a part of the
Obligation and shall accrue interest, if not paid upon demand, at the Default
Rate until repaid. 

28 

(c) Lender may, but shall not be obligated to, advance funds
(or otherwise pay the costs) which Lender, in its sole discretion, determines
are necessary or helpful to preserve any Collateral, any Lien in favor of
Lender, or any claim, right, or interest beneficial to Lender or its rights
under this Agreement or any other Loan Document. All such funds advanced or
costs paid shall become part of the Obligation, shall be payable upon demand,
and shall accrue interest at the Default Rate from the date of such demand until
the date paid. 

8.13 Cash Management. So long as the Commitment is in
effect or any part of the Obligation is outstanding, Borrower shall maintain the
cash management agreement or arrangement established in compliance with
Section 5.1 (or an alternate treasury management arrangement
acceptable to Lender). 

8.14 Further Assurances. Borrower will execute and
deliver, and will cause each other Company and Guarantor to, promptly upon the
request of the Lender, (a) correct any defect or error that may be discovered in
any Loan Document or in the execution, acknowledgment, filing or recordation
thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register any and all such further acts, deeds,
certificates, assurances and other instruments as the Lender may reasonably
require from time to time in order to (i) carry out more effectively the
purposes of the Loan Documents, (ii) to the fullest extent permitted by
applicable Law, subject any Company’s properties, assets, rights or interest to
the Liens now or hereafter intended to be covered by any of the Security
Documents, (iii) perfect and maintain the validity, effectiveness, and priority
of any of the Security Documents and any of the Liens intended to be created
thereunder, and (iv) assure, convey, grant, assign, transfer, preserve, protect
and confirm more effectively unto the Lender the rights granted or hereafter
intended to be granted to the Lender under any Loan Documents or under any other
instrument executed in connection with the Loan Documents to which any Company
or Guarantor is or is to be a party. Because Borrower agrees that Lender’s
remedies at Law for failure of Borrower to comply with the provisions of this
Section 8.14 would be inadequate and that failure would not be
adequately compensable in damages, Borrower agrees that the covenants of this
Section 8.14 may be specifically enforced.

SECTION 9 NEGATIVE
COVENANTS. 

So long as Lender is committed to make any Loan under this
Agreement, and thereafter until the Obligation is paid in full (other than
contingent indemnification obligations, obligations under Cash Management
Products and Services, and other provisions under the Loan Documents which by
their terms expressly survive payment of the Obligation and termination of the
Loan Documents), each Company agrees as follows: 

9.1 Debt. No Company may create, incur, assume,
guarantee, or permit any Debt except Permitted Debt. 

9.2 Liens. No Company may create, incur, or permit any
Lien upon any of its assets, except Permitted Liens. No Company shall enter into
any agreement (other than the Loan Documents) prohibiting the creation or
assumption of any Lien upon its assets or revenues or prohibiting or restricting the ability of Borrower or any Company to amend or otherwise
modify this Agreement or any other Loan Document. For the avoidance of doubt, no
Company may create a Lien on any of the Collateral (or any proceeds or products
thereof), unless such Lien is expressly subordinated to Lender’s Lien on such
Collateral and Lender has approved in writing the existence and status of such
Lien.

29 

9.3 Acquisition, Mergers, and Dissolutions. No Company
may (whether in one transaction or a series of transactions) (a) acquire all or
any substantial portion of the Equity Interests issued by any other Person, (b)
acquire all or any substantial portion of the assets of any other Person, (c)
merge, combine, or consolidate with any other Person, (d) liquidate, wind up or
dissolve (or suffer any liquidation or dissolution), (e) suspend operations, or
(f) create or acquire any Subsidiaries. 

9.4 Disposition of Assets. No Company may make any
Disposition, or enter into any agreement to make any Disposition, except (a)
Dispositions of assets in the ordinary course of business which are obsolete or
worn out, or which are no longer used in such Company’s business, (b)
Dispositions of inventory in the ordinary course of business, (c) the
Disposition of delinquent accounts in the ordinary course of business for
purposes of collection, and (d) Dispositions of property by any Company to
another Company or to a wholly-owned Subsidiary; provided that, if the
transferor of such property is Borrower or a Guarantor, the transferee thereof
must either be Borrower or a Guarantor and must comply with Section
6. 

9.5 Distributions. No Company may declare or make any
Distribution other than (a) Tax Distributions, (b) Distributions declared
or made by such Company wholly in the form of its Equity Interests, (c)
Distributions by a Company to another Company which is a Guarantor, or to
Borrower, and (d) cash Distributions by Borrower; provided that, (i)
after giving pro forma effect to such Distribution, the Fixed Charge
Coverage Ratio is greater than or equal to 1.50 to 1.00 and (ii) no Default
exists or would result after giving effect to such Distribution. 

9.6 Loans and Advances. No Company may extend credit to
any other Person, other than (a) extensions of credit among the Companies which
have recourse liability for the Obligation, (b) extensions of credit in the
nature of accounts receivable or notes receivable arising from the sale or lease
of goods or services in the ordinary course of business to Persons which are not
Affiliates, (c) demand deposit accounts maintained in the ordinary course of
business, (d) expense accounts for employees in the ordinary course of business
which do not, in the aggregate, at any time exceed $10,000, (e) extensions of
credit that do not exceed an aggregate amount of $10,000 outstanding at any one
time, and (f) extensions of credit existing on the Closing Date and disclosed
to, and approved by, Lender in writing. 

9.7 Investments. No Company may make any investment in,
or purchase or commit to purchase any Equity Interests in, any Person, other
than Permitted Investments. 

9.8 Organizational Documents. No Company may modify,
repeal, replace or amend any provision of its Organizational Documents in any
manner, other than (a) minor modifications, supplements, or waivers that do not
in any material respect increase the obligations, or limit the rights of, such
Company, and (b) nonmaterial modifications that could not reasonably be expected
to be materially adverse to the Lender. If as of the Closing Date a Company has
not “opted in” to Article 8 of the applicable Uniform Commercial Code and
thereby elected to have its Equity Interests treated as securities for purposes
of the applicable Uniform Commercial Code, such Company may not “opt in” to
Article 8 of the applicable Uniform Commercial Code without the prior written
consent of Lender.

9.9 Change of Business. No Company may engage in any
business except the business in which it is engaged as of the Closing Date (or a
business reasonably related thereto). 

30 

9.10 Transactions with Affiliates. Except as disclosed
on Schedule 7.15, no Company may enter into any Material Agreement
or any material transaction with any of its Affiliates other than
transactions in the ordinary course of business which are upon fair and
reasonable terms not materially less favorable to such Company than such Company
could obtain in an arm’s-length transaction with a Person that was not an
Affiliate. 

9.11 Assignment. No Company or Guarantor may assign or
transfer any of its rights, duties or obligations under any of the Loan
Documents. 

9.12 Fiscal Year and Accounting Methods. No Company or
Guarantor may change its fiscal year end from December 31 or its method of
accounting (other than immaterial changes in methods or as required by
GAAP). 

9.13 Payroll Taxes. No Company may use any portion of
the proceeds of any Loan to pay the wages of employees, unless a timely payment
to or deposit with the appropriate Governmental Authority of all amounts of Tax
required to be deducted and withheld with respect to such wages is also made.

9.14 Prepayment of Debt. No Company may voluntarily
prepay principal of, or interest on, any Debt, other than the Obligation,
if a Default or Potential Default exists or would result after giving effect to
such payment. No Company may prepay, repay, repurchase, redeem or defease
Subordinated Debt prior to the irrevocable payment and performance in full of
the Obligation without the prior written consent of Lender. 

9.15 Compliance with Government Regulations. No Company
or Guarantor will, and no Company or Guarantor will permit any Subsidiary to,
(a) at any time be in violation of any Law if such Company’s or Guarantor’s
violation of such Law would result in (i) any Lender being prohibited from
making any Loan to any Company or Guarantor, (ii) any limitation on the ability
of any Lender to make a Loan to any Company or Guarantor, or (iii) any Lender
being prohibited from otherwise conducting business with any Company or
Guarantor, or (b) fail to provide documentary and other evidence of any
Company’s or Guarantor’s identity as may be requested by Lender at any time to
enable Lender to verify such Company’s or Guarantor’s identity or to comply with
any applicable Law, including, without limitation Section 326 of the Patriot
Act. 

9.16 Factoring. No Company may enter into a factoring
line with respect to its accounts receivable, whether with a third party or
otherwise, without Lender’s prior written consent. 

9.17 Kramer Note. No Company or Guarantor shall use the
proceeds of the Revolving Credit Facility to pay, or cause to be paid, any
portion of the Kramer Note. 

SECTION 10 FINANCIAL
COVENANTS. 

So long as Lender is committed to make any Loan under this
Agreement, and thereafter until the Obligation is paid in full (other than
contingent indemnification obligations, obligations under Cash Management
Products and Services, and other provisions under the Loan Documents which by
their terms expressly survive payment of the Obligation and termination of the
Loan Documents), each Company agrees as follows:  

10.1 Leverage Ratio. The
ratio of (a) total Funded Debt for the immediatley preceding four fiscal quarter
period, divided by (b) EBITDA for the immediately preceding four fiscal
quarter period, may not at any time be greater than 2.50 to 1.00.

31 

10.2 Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio may not at any time be less than 1.25 to 1.00; provided
that, prior to making any cash Distributions permitted under Section
9.5(d) , Borrower shall comply with the minimum Fixed Charge Coverage
Ratio set forth in Section 9.5(d) on a pro forma basis. 

10.3 Minimum Liquidity. Borrower shall at all times have
Liquidity in an amount equal to or greater than $500,000.00. 

Each of the covenants under this Section 10 shall
be calculated and tested quarterly as of the last day of each March, June,
September, and December beginning December 31, 2014. 

SECTION 11 DEFAULT. 

The term “Default” means the occurrence of any one or more of
the following events: 

11.1 Payment of Obligation. The failure of any Company
or Guarantor to pay any part of the Obligation when and as required to be paid
under the Loan Documents. 

11.2 Covenants. The failure of any Company or Guarantor
to punctually and properly perform, observe and comply with: 

(a) Any covenant, agreement, or condition contained in (i)
Sections 6.1, 6.3, 8.2,
8.6, 8.8, 8.9, or 8.10 and
such failure continues for 10 days or (ii) Sections 9 and
10, or 

(b) Any other covenant, agreement, or condition contained in
any Loan Document, (other than the covenants to pay the Obligation as set out in
Section 11.1 above, the covenants in clause (a) preceding and as
set out below in this Section 11), and such failure continues for
30 days. 

11.3 Debtor Relief. Any Company or any Guarantor (a)
voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor
Relief Law, (b) becomes a party to or is made the subject of any proceeding
provided for by any Debtor Relief Law (other than as a creditor or
claimant), and (i) the petition is not controverted within 10 days and is not
dismissed within 60 days, or (ii) an order for relief is entered under Title
11 of the United States Code, (c) makes an assignment for the benefit of
creditors, (d) fails (or admits in writing its inability) to pay its debts
generally as they become due, or (e) a receiver or liquidator is appointed for
any Company or for any Guarantor or any of their respective assets. 

11.4 Judgments. There is entered against any Company or
any Guarantor (a) a final non-appealable judgment or arbitration award for the
payment of money in the amount exceeding $100,000 (individually or in the
aggregate and net of applicable insurance if the insurer has accepted coverage)
or (b) one or more non-monetary final non-appealable judgments that could be, or
could reasonably be expected to be, individually or in the aggregate, a Material
Adverse Event, and, in either case enforcement of such judgment or award is not
stayed. 

11.5 False Information; Misrepresentation. Any
information given to Lender by any Company or any Guarantor is false or any
representation or warranty made to Lender by any Company or contained in any
Loan Document at any time proves to have been incorrect in any material respect
when made. 

11.6 Default Under Other Agreements. 

(a) Any Company fails to pay when due (after any applicable
grace period) any Debt which (individually or in the aggregate) exceeds
$100,000, or any default exists under any agreement which permits any Person to cause any Debt which (individually
or in the aggregate) exceeds $100,000 to become due and payable by any Company
before its stated maturity. 

32 

(b) Any Company breaches or defaults under any term, condition,
provision, representation or warranty contained in any Material Agreement,
including any agreement with Lender (other than the Loan Documents), and such
Company fails for 5 Business Days to commence and thereafter diligently pursue a
cure. 

11.7 Validity and Enforceability of Loan Documents. Any
Lien granted under any Security Document ceases to be a first priority Lien on
the Companies’ assets, or any Loan Document at any time after its execution and
delivery (a) ceases to be in effect in any material respect or is declared by a
Governmental Authority to be null and void, or (b) its validity or
enforceability is contested by a Company or a Company denies that it has any
further liability or obligations under any Loan Document. 

11.8 Change of Control. Any change in the ownership or
Control of the outstanding Equity Interests of Borrower occurs.

11.9 Change of Management. Any two of Dr. Donald Kramer,
Harry Fleming, or Andy Chen cease to be actively involved in the day-to-day
management or operation of Borrower. 

11.10 Ownership of Other Companies. Borrower fails to
own, beneficially and of record, with power to vote, 100% of the issued and
outstanding Equity Interests of any other Company that has executed a Loan
Document (except as a result of a transaction permitted by this Agreement). 

11.11 Material Adverse Event. A Material Adverse Event
exists. 

SECTION 12 RIGHTS AND
REMEDIES. 

12.1 Remedies Upon Default.

(a) If a Default exists under Section 11.3, the
Commitment to extend credit under this Agreement automatically terminates and
the unpaid balance of the Obligation automatically becomes due and payable
without any action of any kind. 

(b) If a Default exists, Lender may do any one or more of the
following: (i) if the maturity of the Obligation has not already been
accelerated under Section 12.1(a) , declare the unpaid balance of
the Obligation immediately due and payable to the extent permitted by applicable
Law, and the Obligation shall accrue interest at the Default Rate; (ii)
terminate the Commitment to extend credit under this Agreement; (iii) reduce any
claim to judgment; (iv) exercise the rights of set off or banker’s Lien under
Section 3.8 to the extent of the full amount of the Obligation;
(v) foreclose or otherwise enforce any Lien granted to Lender to secure payment
and performance of the Obligation; and (vi) exercise any and all other legal or
equitable rights afforded by the Loan Documents, the Laws of the State of Texas,
or any other applicable jurisdiction. 

33 

SECTION 13 MISCELLANEOUS.

13.1 Governing Law, Forum, and Venue. 

(a) EACH LOAN DOCUMENT
MUST BE CONSTRUED, AND ITS PERFORMANCE ENFORCED, UNDER TEXAS LAW. 

(b) ANY SUITS, CLAIMS
OR CAUSES OF ACTION ARISING DIRECTLY OR INDIRECTLY FROM THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN A COURT OF APPROPRIATE JURISDICTION IN
HARRIS COUNTY, TEXAS AND OBJECTIONS TO VENUE AND PERSONAL JURISDICTION IN SUCH
FORUM ARE HEREBY EXPRESSLY WAIVED. 

(c) Each Company
hereby acknowledges that (i) the negotiation, execution, and delivery of the
Loan Documents constitute the transaction of business within the State of Texas,
(ii) any cause of action arising under any of said Loan Documents will be a
cause of action arising from such transaction of business, and (iii) each
Company understands, anticipates, and foresees that any action for enforcement
of payment of the Obligation or the Loan Documents may be brought against it in
the State of Texas. To the extent allowed by Law, each Company hereby submits to
jurisdiction in the State of Texas for any action or cause of action arising out
of or in connection with the Obligation or the Loan Documents and waives any and
all rights under the Laws of any state or jurisdiction to object to jurisdiction
or venue within Harris County, Texas; notwithstanding the foregoing, nothing
contained in this Section 13.1 shall prevent Lender from bringing
any action or exercising any rights against Borrower, any Guarantor, any
Collateral, or any of Borrower’s or any Guarantor’s properties in any other
county, state, or jurisdiction. Initiating such action or proceeding or taking
any such action in any other state or jurisdiction shall in no event constitute
a waiver by Lender of any of the foregoing. 

13.2 Waiver of Right to Trial by Jury. EACH PARTY TO
THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 13.2 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 

34 

13.3 Invalid Provisions. If any provision of this
Agreement or the other Loan Documents is held to be illegal, invalid or
unenforceable, (a) the legality, validity and enforceability of the remaining
provisions of this Agreement and the other Loan Documents shall not be affected
or impaired thereby and (b) the parties shall engage in good faith negotiations
to replace the illegal, invalid or unenforceable provisions, with valid
provisions the economic effect of which comes as close as possible to that of
the illegal, invalid or unenforceable provisions. The invalidity of a provision
in a particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. 

13.4 Multiple Counterparts and Electronic Signatures.
Each Loan Document may be executed in any number of counterparts with the same
effect as if all signatories had signed the same document. All counterparts must
be construed together to constitute one and the same instrument. Loan Documents
may be transmitted and signed by facsimile, portable document format (PDF), or
other electronic means, and shall have the same effect as manually-signed
originals and shall be binding on all Companies and Lender. 

13.5 Notice. Unless otherwise provided in this
Agreement, all notices or consents required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, or by
overnight courier, or sent by facsimile. Notices and other communications shall
be effective (a) if mailed, upon the earlier of receipt or five (5) days after
deposit in the U.S. mail, first class, postage prepaid, (b) if faxed, when
transmitted, or (c) if hand-delivered, by courier or otherwise (including
telegram, lettergram or mailgram), when delivered. Until changed by notice
pursuant to this Agreement, the addresses and facsimile numbers for each party
is set out on Schedule 1. Lender shall be entitled to rely and act
upon any notices (including telephonic Loan Requests) purportedly given by or on
behalf of Borrower even if (i) such notices were not made in a manner specified
in this Section 13.5, were incomplete or were not preceded or
followed by any other form of notice specified in this Section
13.5, or (ii) the terms of the notice, as understood by the recipient,
varied from any confirmation of the notice. Borrower shall indemnify Lender and
its Affiliates and representatives from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of Borrower. All telephonic notices to and
other communications with Lender may be recorded by Lender, and each of the
parties to this Agreement hereby consents to such recording. 

13.6 Binding Effect; Survival. This Agreement is binding
upon, and inures to the benefit of, the parties hereto and their respective
successors and permitted assigns. Unless otherwise provided, all covenants,
agreements, indemnities, representations and warranties made in any of the Loan
Documents survive and continue in effect as long as the Commitment is in effect
or the Obligation is outstanding (other than contingent indemnification
obligations, obligations under Cash Management Products and Services, and other
provisions under the Loan Documents which by their terms expressly survive
payment of the Obligation and termination of the Loan Documents). 

13.7 Amendments. The Loan Documents may be amended,
modified, supplemented or be the subject of a waiver only by a writing executed
by Lender and Borrower. 

35 

13.8 Participants. Lender may, at any time, sell to one
or more Persons (each a “Participant”) participating interests in
the Obligation; provided that, (a) Lender remains the holder of the
Revolving Principal Amount, (b) Lender’s obligations under this Agreement remain
unchanged and Lender remains solely responsible for the performance of those
obligations, and (c) each Company continues to deal solely and directly with
Lender regarding the Loan Documents. Lender may furnish any information
concerning the Companies in its possession from time to time to assignees and
Participants (including prospective assignees and Participants). 

13.9 Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Each Company’s obligations under the Loan Documents
remain in full force and effect until the Commitment is terminated and the
Obligation is paid in full (other than contingent indemnification obligations,
obligations under Cash Management Products and Services, and other provisions
under the Loan Documents which by their terms expressly survive payment of the
Obligation and termination of the Loan Documents). If at any time any payment of
the principal of or interest on any Note or any other amount payable by any
Company or any other obligor on the Obligation under any Loan Document is
rescinded or must be restored or returned upon the insolvency, bankruptcy or
reorganization of Borrower or otherwise, the obligations of each Company under
the Loan Documents with respect to that payment shall be reinstated as though
the payment had been due but not made at that time. 

13.10 INDEMNITY. WHETHER OR NOT THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT ARE CONSUMMATED, BORROWER SHALL INDEMNIFY AND
HOLD HARMLESS LENDER AND ITS AFFILIATES AND REPRESENTATIVES (COLLECTIVELY, THE
“INDEMNITEES”) FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES AND DISBURSEMENTS (INCLUDING FEES AND EXPENSES OF
COUNSEL) OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT ANY TIME BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE IN ANY WAY RELATING TO OR
ARISING OUT OF OR IN CONNECTION WITH (A) THE EXECUTION, DELIVERY, ENFORCEMENT,
PERFORMANCE OR ADMINISTRATION OF ANY LOAN DOCUMENT OR ANY OTHER AGREEMENT,
LETTER OR INSTRUMENT DELIVERED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
THEREBY OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, (B) ANY
COMMITMENT, LOAN OR LETTER OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS
THEREFROM (INCLUDING ANY REFUSAL BY LENDER TO HONOR A DEMAND FOR PAYMENT UNDER A
LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO
NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT), OR (C) ANY
ACTUAL OR ALLEGED PRESENCE OR RELEASE OF ANY HAZARDOUS SUBSTANCE ON OR FROM ANY
PROPERTY CURRENTLY OR FORMERLY OWNED OR OPERATED BY BORROWER, ANY SUBSIDIARY OR
ANY OTHER COMPANY, OR ANY LIABILITY IN RESPECT OF ANY ENVIRONMENTAL LAW RELATED
IN ANY WAY TO BORROWER, ANY SUBSIDIARY OR ANY OTHER COMPANY, OR (D) ANY
ACTUAL OR PROSPECTIVE LITIGATION, CLAIM, OR INVESTIGATION RELATING TO ANY OF THE
FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY (INCLUDING ANY
INVESTIGATION OF, PREPARATION FOR, OR DEFENSE OF ANY PENDING OR THREATENED
CLAIM, INVESTIGATION, LITIGATION OR PROCEEDING) AND REGARDLESS OF WHETHER ANY
INDEMNITEE IS A PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY, THE
“INDEMNIFIED LIABILITIES”), IN ALL CASES, WHETHER OR NOT CAUSED
BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE NEGLIGENCE OF THE INDEMNITEE;
PROVIDED THAT, SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE
AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE. ALL AMOUNTS DUE UNDER THIS
SECTION 13.10 SHALL BE PAYABLE WITHIN 10 BUSINESS DAYS AFTER
WRITTEN DEMAND. THE AGREEMENTS IN THIS SECTION 13.10 SHALL SURVIVE
THE TERMINATION OF THE COMMITMENT AND THE REPAYMENT, SATISFACTION OR DISCHARGE
OF THE OBLIGATION. 

36 

13.11 Patriot Act. Lender hereby notifies 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”), it is required to obtain, verify and record information
that identifies Borrower, which information includes the name and address of
Borrower and other information that will allow Lender to identify Borrower in
accordance with the Patriot Act. Borrower shall, promptly following a request by
Lender, provide all documentation and other information that Lender requests in
order to comply with its ongoing obligations under applicable “know your
customer” and anti-money laundering rules and regulations, including the Patriot
Act. 

13.12 Document Retention Policy. Borrower understands
and agrees that (a) Lender’s document retention policy involves the imaging of
executed loan documents and the destruction of the paper originals, and (b)
Borrower waives any right that it may have to claim that the imaged copies of
the Loan Documents are not originals. 

13.13 Entirety. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG BORROWER, THE GUARANTORS, AND THE
LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS BY BORROWER, GUARANTORS, AND LENDER. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG BORROWER, GUARANTORS, AND LENDER. 

[Signatures appear on following pages.] 

37 

EXECUTED as of the day and year set out in the Preamble. 

BORROWER: 

NORTHSTAR HEALTHCARE SURGERY CENTER
-
HOUSTON, LLC,
a Texas limited liability company 

By:
_______________________________________
      Harry
Fleming 
      President and Secretary 

Signature Page to Credit Agreement 

LENDER: 

COMPASS BANK,
an Alabama banking
corporation 

By:
_______________________________
       Latrice
Tubbs 
       Vice President 

Signature Page to Credit AgreementExhibit 10.1

 

 

MAINSOURCE FINANCIAL GROUP, INC.

SHORT-TERM INCENTIVE PLAN

 

(Effective as of January 1, 2014)

 

 

TABLE OF CONTENTS

 

 

	
ARTICLE I Introduction
    	
1
    
	
1.1
    	
Objective
    	
1
    
	
1.2
    	
Administration of the   Plan
    	
1
    
	
1.3
    	
Definitions
    	
1
    
	
ARTICLE II Eligibility and Participation
    	
4
    
	
ARTICLE III Awards
    	
4
    
	
3.1
    	
Annual Determination of   Awards
    	
4
    
	
3.2
    	
Communication of Awards
    	
4
    
	
3.3
    	
Components of   Calculation
    	
4
    
	
3.4
    	
Earning of Awards
    	
4
    
	
3.5
    	
Time and Form of   Payment of Earned Awards
    	
5
    
	
3.6
    	
Change in Control
    	
5
    
	
3.7
    	
Clawback of Awards
    	
5
    
	
3.8
    	
Withholding of Taxes
    	
5
    
	
ARTICLE IV Miscellaneous
    	
6
    
	
4.1
    	
Amendment or   Termination
    	
6
    
	
4.2
    	
Employment Rights
    	
6
    
	
4.3
    	
Evidence
    	
6
    
	
4.4
    	
Gender and Number
    	
6
    
	
4.5
    	
Action by the Board or   Committee
    	
6
    
	
4.6
    	
Controlling Laws
    	
6
    
	
4.7
    	
Mistake of Fact
    	
6
    
	
4.8
    	
Severability
    	
6
    
	
4.9
    	
Effect of Headings
    	
6
    
	
4.10
    	
Nontransferability
    	
7
    
	
4.11
    	
No Liability
    	
7
    
	
4.12
    	
Funding
    	
7
    

 

i

 

MAINSOURCE FINANCIAL GROUP, INC.

SHORT-TERM INCENTIVE PLAN

 

(Effective January 1, 2014)

 

ARTICLE I

 

Introduction

 

1.1                               Objective.  The MainSource Financial Group, Inc. Short-Term Incentive Plan is designed to focus the efforts of key employees of the Company and its Subsidiaries on continued improvement in the profitability of the Company and its Subsidiaries with the objective of providing an adequate return to shareholders on their investment in the Company while at the same time assuring that Awards under the Plan, in combination with the Company’s other compensation programs: (a) provide Participants incentives that appropriately balance risk and reward; (b) are compatible with effective controls and risk-management; and (c) are supported by strong oversight of the Board as delegated to the Committee.

 

1.2                               Administration of the Plan.  The Plan will be administered by the Committee.  The Committee will also (a) adopt such rules and regulations as are appropriate for the proper administration of the Plan in a manner that provides active and effective oversight of the Plan, and (b) make such determinations and take such actions in connection with the Plan as it deems necessary provided that the Committee may take action only upon the vote of a majority of its members.  While the Committee may appoint individuals to act on its behalf in the administration of the Plan, it will have the sole, final and conclusive authority to administer, construe and interpret the Plan.  The Committee’s determinations and interpretations will be final and binding on all persons, including the Company, its shareholders and persons having any interest in Awards.  Any notice or document required to be given to or filed with the Committee will be properly given or filed if delivered or mailed, by certified mail, postage prepaid, to the Executive Compensation Committee, MainSource Financial Group, Inc. Board of Directors, at P.O. Box 2000, Greensburg IN  47240.

 

1.3                               Definitions.  Whenever the initial letter of the following words or phrases is capitalized in the Plan, including any supplements hereto, they will have the respective meanings set forth below unless otherwise defined herein:

 

(a)                                 “Award” means the cash compensation awarded to a Participant pursuant to the Plan.

 

(b)                                 “Base Salary” means the regular base salary paid by the Company or a Subsidiary to an employee while such employee is a Participant during a calendar year, exclusive of additional forms of compensation such as bonuses, other incentive payments, automobile allowances or other fringe benefits.  Base Salary will include any salary deferral contributions made pursuant to Code Sections 401(k) and 125.

 

(c)                                  “Board” means the Board of Directors of the Company.

 

(d)                                 “Change in Control” means the occurrence of any one or more of the following:

 

1

 

(i)                                     The consummation of any merger, consolidation or similar transaction which involves the Company and in which persons who are the shareholders of the Company immediately prior to the transaction own, immediately after the transaction, shares of the surviving or combined entity which possess voting rights equal to or less than 50 percent of the voting rights of all shareholders of such entity, determined on a fully diluted basis;

 

(ii)                                  Any sale, lease, exchange, transfer or other disposition of all or any substantially all of the consolidated assets of the Company;

 

(iii)                               Any tender, exchange, sale or other disposition (other than disposition of the stock of the Company or MainSource Financial Group, Inc., in connection with bankruptcy, insolvency, foreclosure, receivership or other similar transactions) or purchase (other than purchases by the Company or any Company sponsored employee benefit plan, or purchases by members of the Board of Directors of the Company or any subsidiary) of shares of stock which represent more than 25 percent of the voting power of the Company or MainSource Financial Group, Inc.; or

 

(iv)                              During any period of two consecutive years, individuals who at the date of the adoption of this Plan constitute the Board cease for any reason to constitute at least a majority thereof, unless the nomination for election of each director at the beginning of the period has been approved by directors representing at least a majority of the directors then in office.

 

(e)                                  “Code” means the Internal Revenue Code of 1986, as amended.

 

(f)                                   “Company” means, unless otherwise stated, MainSource Financial Group, Inc., organized and existing under the laws of the State of Indiana, or any successor (by merger, consolidation, purchase or otherwise) to such corporation which assumes the obligations of such corporation under the Plan.  The term Company also includes Subsidiaries.

 

(g)                                  “Committee” means the Executive Compensation Committee of the Board.

 

(h)                                 “Disabled” or “Disability” means a disability as determined under the MainSource Financial Group, Inc. 401(k) and Employee Stock Ownership Plan.

 

(i)                                     “Effective Date” means April 3, 2012, which is the effective date of the Plan.

 

(j)                                    “Notice of Award” means the notice provided to a Participant which outlines the Threshold, Target and the WAP and other terms and conditions of the Award.

 

(k)                                 “Participant” means an individual who is employed by the Company and who is designated as a Participant by the Committee.

 

2

 

(l)                                     “Plan” means the short-term incentive plan contained in this instrument and any subsequent amendment to this instrument, known as the MainSource Financial Group, Inc. Short-Term Incentive Plan.

 

(m)                             “Retires” or “Retirement” means a Termination of Service on or after July 1st during a calendar year by a Participant after he or she has attained age 65.

 

(n)                                 “Subsidiary” means MainSource Bank and such other subsidiary entity of the Company which is designated by the Board or Committee as eligible to participate in the Plan.

 

(o)                                 “Superior” means the level of performance of a component of the WAP at or above which 150 percent of the Award attributable to that particular component will be paid.

 

(p)                                 “Target” means the level of performance of a component of the WAP at which 100 percent of the Award attributable to that particular component will be paid.

 

(q)                                 “Termination of Service” means the occurrence of any act or event or any failure to act, whether pursuant to an employment agreement or otherwise, that actually or effectively causes or results in a Participant ceasing, for whatever reason, to be an employee of the Company or a Subsidiary, including, but not limited to, death, Disability, Retirement, termination by the Company or a Subsidiary of the Participant’s employment with the Company or a Subsidiary and voluntary resignation or termination by the Participant of his or her employment with the Company or a Subsidiary.  Whether a Termination of Service has occurred will be determined in accordance with Treasury Regulation §1.409A-1(h).

 

(r)                                    “Threshold” means the level of performance of a component of the WAP at or below which zero percent of the Award attributable to that particular component will be paid.

 

(s)                                   “Weighted Average Performance” or “WAP” means the Company’s actual performance relative to specified performance measures as compared to its annual budget for the specified performance measures.  Initially, the Weighted Average Performance will be based on the following performance measures and weighted percentages:

 

	
Performance Measure
    	
 
    	
Weighted Percentage
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Earnings Per Share
    	
 
    	
40
    	
%
    
	
Return on Assets
    	
 
    	
30
    	
%
    
	
Non-Performing Assets/Total Assets
    	
 
    	
20
    	
%
    
	
Discretionary   measure for each Participant set out in the Notice of Award
    	
 
    	
10
    	
%
    

 

In determining the components of the WAP and the relative weight accorded each performance measure, the Committee must:

 

3

 

(i)                                     Balance risk and financial results in a manner that does not encourage Participants to expose the Company and its Subsidiaries to imprudent risks;

 

(ii)                                  Make such determination in a manner designed to ensure that Participant’s overall compensation is balanced between cash and equity and that the Awards are consistent with the policies and procedures of the Company and its Subsidiaries regarding such compensation arrangements; and

 

(iii)                               Monitor the Company’s success against the performance measures, alone and in combination with other incentive compensation awarded to the same Participants, and make appropriate adjustments in future calendar years as needed so that payments appropriately incentivize Participants and appropriately reflect risk.

 

ARTICLE II

 

Eligibility and Participation

 

Participation in the Plan is limited to those individuals who have been designated as Participants by the Committee.  An individual will become covered by the Plan effective as of the date specified by the Committee.

 

ARTICLE III

 

Awards

 

3.1                               Annual Determination of Awards.  Annually, the Committee will notify a Participant of the terms and conditions of an Award.  In making these determinations, the Committee may consider factors such as the nature of the services rendered by the Participant, his or her current and potential contributions to the Company’s success, the Participant’s Base Salary, and such other factors it considers relevant.

 

3.2                               Communication of Awards.  The Committee will deliver a Notice of Award to each Participant receiving an Award for a calendar year within 30 days of the date the Committee approves the Award.

 

3.3                               Components of Calculation.  The Committee, in its sole discretion, will establish the following business criteria for Awards:

 

(a)                                 The performance measures which comprise the WAP; and

 

(b)                                 The relative weight accorded each performance measure.

 

3.4                               Earning of Awards.  Except in the event of a Change in Control, an Award will be treated as earned (a) provided the Participant is employed on the last day of the calendar year unless the Participant died, became Disabled or Retired during the year and (b) to the extent a component of the WAP equals or exceeds the Threshold level.  Performance between Threshold,

 

4

 

Target and Superior levels will be interpolated.  A sample calculation of an earned Award is provided in Exhibit A.

 

If a Participant incurs a Termination of Service due to death, Disability or Retirement, then the Award will be treated as earned to the extent a component of the WAP equals or exceeds the Threshold level effective as of December 31.  The Award will be prorated to reflect the number of days during the calendar year in which the Participant was employed prior to the Termination of Service.

 

Example:  A Participant dies on July 1, 2014.  As of December 31, 2014, the Company’s performance exceeded the Threshold level of the WAP and the Participant would have been entitled to a payment of $40,000 had she been employed on the applicable payment dates.  Because she was only employed 182/365 days, her Award is prorated to $19,945.21.

 

3.5                               Time and Form of Payment of Earned Awards.  Except as set forth below, earned Awards will be paid in two installments provided the Participant is employed on the date of payment.  The first installment will be an amount equal to two-thirds of the earned Award and will be paid in cash within 30 days after the Committee calculates the WAP following the end of each calendar year.  The second installment will be an amount equal to one-third of the earned Award and will be paid in cash on the first anniversary of the initial payment.  Notwithstanding the foregoing, if a Participant incurs a Termination of Service due to death or Disability before an Award has initially been paid, the Participant, or his or her estate, will receive a lump sum payment of the Award, as calculated under Section 3.4, on the date of payment of the Award.  If a Participant incurs a Termination of Service due to death or Disability after the initial installment has been paid, the Participant, or his or her estate, will receive a lump sum payment of the final installment within 45 days of the Termination of Service.

 

3.6                               Change in Control.  In the event of a Change in Control, the Company’s performance relative to the WAP (prorated to reflect the period prior to the Change in Control) will be measured immediately prior to the Change in Control.  Awards will be paid in a single sum, in cash, on or before the Change in Control (prorated to reflect the period prior to the Change in Control).

 

3.7                               Clawback of Awards.  In the event the Company is required to prepare an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under securities laws, and the amount paid to a Participant under an earned Award was calculated using the erroneous data, and the accounting restatement occurred within three years from the date of payment of the improperly calculated earned Award, then the Participant shall be required to repay the Company the excess amount which should not have been paid to the Participant under the accounting restatement.

 

3.8                               Withholding of Taxes.  Each Participant will be solely responsible for, and the Company will withhold from any amounts payable under the Plan, all applicable federal, state, city and local income taxes and the Participant’s share of applicable employment taxes.

 

5

 

ARTICLE IV

 

Miscellaneous

 

4.1                               Amendment or Termination.  The Committee may, at any time, alter, amend, modify, suspend or terminate the Plan, but may not, without the consent of a Participant to whom an Award has been made, make any alteration which would adversely affect an Award previously granted under the Plan except as provided in Section 3.7.  The Committee may also amend the Plan without a Participant’s consent if it is determined to be necessary to comply with applicable law or to preserve the intended tax or accounting treatment of the Plan.

 

4.2                               Employment Rights.  The Plan does not constitute a contract of employment, and participation in the Plan will not give a Participant the right to be rehired or retained in the employ of the Company or any Subsidiary, nor will participation in the Plan give any Participant any right or claim to any benefit under the Plan, unless such right or claim exists under the terms of the Plan.

 

4.3                               Evidence.  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person relying thereon considers pertinent and reliable, and signed, made or presented by the proper party or parties.

 

4.4                               Gender and Number.  Where the context permits, words in the masculine gender will include the feminine gender, the plural will include the singular and the singular will include the plural.

 

4.5                               Action by the Board or Committee.  Any action required of or permitted by the Board or Committee under this Plan will be by resolution of the Board, the Committee or by a person or persons authorized by resolution of the Board or Committee.

 

4.6                               Controlling Laws.  Except to the extent superseded by laws of the United States, the laws of Indiana will be controlling in all matters relating to the Plan.  The Plan and all Awards are intended to comply with the applicable provision of Code Section 409A and will be construed by the Board or Committee, as the case may be, in a manner which complies with the applicable provisions of Code Section 409A.  To the extent there is any conflict between a provision of the Plan or a Notice of Award and a provision of Code Section 409A, the applicable provision of Code Section 409A will control.

 

4.7                               Mistake of Fact.  Any mistake of fact or misstatement of fact will be corrected when it becomes known and proper adjustment made by reason thereof.

 

4.8                               Severability.  In the event any provision of the Plan is held to be illegal or invalid for any reason, such illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and endorsed as if such illegal or invalid provision had never been contained in the Plan.

 

4.9                               Effect of Headings.  The descriptive headings of the Articles and Sections of the Plan are inserted for convenience of reference and identification only and do not constitute a part of the Plan for purposes of interpretation.

 

6

 

4.10                        Nontransferability.  No Award or Award payment will be transferable, except by the Participant’s will or the applicable laws of descent and distribution.  During the Participant’s lifetime, his Award will be payable only to the Participant or his guardian or attorney-in-fact.  The payment and any rights and privileges pertaining thereto may not be transferred, assigned, pledged or hypothecated by him in any way, whether by operation of law or otherwise and will not be subject to execution, attachment or similar process.

 

4.11                        No Liability.  No member of the Board or the Committee or any officer or Participant of the Company or Subsidiary will be personally liable for any action, omission or determination made in good faith in connection with the Plan.  The Company will indemnify and hold harmless the members of the Committee, the Board and the officers and Participants of the Company and its Subsidiaries, and each of them, from and against any and all loss which results from liability to which any of them may be subjected by reason of any act or conduct (except willful misconduct or gross negligence) in their official capacities in connection with the administration of the Plan, including all expenses reasonably incurred in their defense, in case the Company fails to provide such defense.  By participating in the Plan, each Participant agrees to release and hold harmless each of the Company, the Subsidiaries (and their respective directors, officers and employees), the Board and the Committee, from and against any tax or other liability, including without limitation, interest and penalties, incurred by the Participant in connection with his participation in the Plan.

 

4.12                        Funding.  All amounts payable under the Plan will be paid by the Company from its general assets.  The Company is not required to segregate on its books or otherwise establish any funding procedure for any amount to be used for the payment of benefits under the Plan.  The Company may, however, in its sole discretion, set funds aside in investments to meet its anticipated obligations under the Plan.  Any such action or set-aside amount may not be deemed to create a trust of any kind between the Company and any Participant or beneficiary or to constitute the funding of any Plan benefits.  Consequently, any person entitled to a payment under the Plan will have no rights against the assets of the Company greater than the rights of any other unsecured creditor of the Company.

 

[Execution Page Follows]

 

7

 

SIGNATURES

 

IN WITNESS WHEREOF, the Company has caused this MainSource Financial Group, Inc. Short-Term Incentive Plan to be executed by its officers thereunder duly authorized, this 22nd day of December, 2014, but effective as of January 1, 2014.

 

	
 
    	
MAINSOURCE FINANCIAL GROUP, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Archie M. Brown, Jr.
    
	
 
    	
 
    	
Archie   M. Brown, Jr., Chief Executive Officer
    

 

ATTEST:

 

	
By:
    	
/s/   James M. Anderson
    	
 
    

 

8

 

Exhibit A
  Example Calculation

 

Based upon:

 

Target salary of $235,000

Target STIP of 40% ($94,000)

 

Performance Goals

 

	
Perormance
   Measure
    	
 
    	
Weight
    	
 
    	
Evaluated
   vs.
    	
 
    	
Payout %
    	
 
    	
Threshold
   0%
    	
 
    	
Target
   100%
    	
 
    	
Superior
   150%
    	
 
    	
Actual
   Performance
    	
 
    	
Implied
   Payout
    	
 
    	
Weighted
   Payout
    	
 
    
	
EPS
    	
 
    	
40
    	
%
    	
Budget
    	
 
    	
 
    	
 
    	
$
    	
1.00
    	
 
    	
$
    	
1.25
    	
 
    	
$
    	
1.50
    	
 
    	
$
    	
1.25
    	
 
    	
100
    	
%
    	
40
    	
%
    
	
ROA
    	
 
    	
30
    	
%
    	
Budget
    	
 
    	
 
    	
 
    	
.80
    	
%
    	
.90
    	
%
    	
1.00
    	
%
    	
1.00
    	
%
    	
150
    	
%
    	
45
    	
%
    
	
Non-Performing   Assets/Total Assets
    	
 
    	
20
    	
%
    	
Budget
    	
 
    	
 
    	
 
    	
1.00
    	
%
    	
.90
    	
%
    	
.80
    	
%
    	
1.10
    	
%
    	
0
    	
%
    	
0
    	
%
    
	
Individual Goals
    	
 
    	
10
    	
%
    	
Goals
    	
 
    	
As set for each   participant.
    	
 
    	
At Target
    	
 
    	
100
    	
%
    	
10
    	
%
    
																								

 

Total Payout: 95%

 

Earned STIP: $89,300

 

1

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