Document:

Exhibit 10.5

 

 

 

INTERCREDITOR AGREEMENT

 

among

 

PROSPECT
MEDICAL HOLDINGS, INC.

as the
Company

 

and

 

CERTAIN
SUBSIDIARIES OF THE COMPANY

FROM TIME
TO TIME PARTIES HERETO

as
Guarantors,

 

and

 

ROYAL
BANK OF CANADA,

as
First Lien Collateral Agent

 

and

 

U.S. BANK
NATIONAL ASSOCIATION,

as
Second Lien Collateral Agent

 

and

 

ROYAL
BANK OF CANADA,

as
Control Agent

 

Dated
as of July 29, 2009

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS

  	
  2

  
	
  SECTION 1.01

  	
  Defined Terms

  	
  2

  
	
  SECTION 1.02

  	
  Other Interpretive Provisions

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE II LIEN
  PRIORITIES

  	
  11

  
	
  SECTION 2.01

  	
  Relative Priorities

  	
  11

  
	
  SECTION 2.02

  	
  Failure to Perfect

  	
  11

  
	
  SECTION 2.03

  	
  Nature of First Lien
  Obligations

  	
  11

  
	
  SECTION 2.04

  	
  Prohibition on
  Contesting Liens

  	
  12

  
	
  SECTION 2.05

  	
  No New Liens

  	
  12

  
	
  SECTION 2.06

  	
  Similar Liens and
  Agreements

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE III
  ENFORCEMENT

  	
  14

  
	
  SECTION 3.01

  	
  Exercise of Remedies

  	
  14

  
	
  SECTION 3.02

  	
  Actions Upon Breach

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  PAYMENTS

  	
  17

  
	
  SECTION 4.01

  	
  Application of Proceeds

  	
  17

  
	
  SECTION 4.02

  	
  Payments Over

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE V OTHER
  AGREEMENTS

  	
  18

  
	
  SECTION 5.01

  	
  Releases

  	
  18

  
	
  SECTION 5.02

  	
  Insurance

  	
  18

  
	
  SECTION 5.03

  	
  Amendments to First
  Lien Documents and Second Lien Documents

  	
  19

  
	
  SECTION 5.04

  	
  Rights As Unsecured
  Creditors

  	
  20

  
	
  SECTION 5.05

  	
  Control Agent for
  Perfection

  	
  21

  
	
  SECTION 5.06

  	
  When Discharge of First
  Lien Obligations Deemed to Not Have Occurred

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI
  INSOLVENCY OR LIQUIDATION PROCEEDINGS

  	
  24

  
	
  SECTION 6.01

  	
  Finance and Sale Issues

  	
  24

  
	
  SECTION 6.02

  	
  Relief from the
  Automatic Stay

  	
  24

  
	
  SECTION 6.03

  	
  Adequate Protection

  	
  25

  
	
  SECTION 6.04

  	
  No Waiver

  	
  26

  
	
  SECTION 6.05

  	
  Avoidance Issues

  	
  26

  
	
  SECTION 6.06

  	
  Separate Grants of
  Security and Separate Classification

  	
  26

  
	
  SECTION 6.07

  	
  Reorganization
  Securities

  	
  26

  
	
  SECTION 6.08

  	
  Post-Petition Claims

  	
  26

  
	
  SECTION 6.09

  	
  Waiver

  	
  27

  
	
  SECTION 6.10

  	
  Expense Claims

  	
  27

  
	
  SECTION 6.11

  	
  Other Matters

  	
  27

  
	
  SECTION 6.12

  	
  Effectiveness in
  Insolvency or Liquidation Proceedings

  	
  27

  

 

i

 

	
  SECTION 6.13

  	
  Limitation of
  Applicability

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII
  RELIANCE; WAIVERS; ETC.

  	
  28

  
	
  SECTION 7.01

  	
  Non-Reliance

  	
  28

  
	
  SECTION 7.02

  	
  No Warranties or
  Liability

  	
  28

  
	
  SECTION 7.03

  	
  Obligations
  Unconditional

  	
  29

  
	
  SECTION 7.04

  	
  Certain Notices

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII
  MISCELLANEOUS

  	
  30

  
	
  SECTION 8.01

  	
  Inconsistencies with
  Other Documents

  	
  30

  
	
  SECTION 8.02

  	
  Effectiveness;
  Continuing Nature of this Agreement; Severability

  	
  30

  
	
  SECTION 8.03

  	
  Amendments; Waivers

  	
  31

  
	
  SECTION 8.04

  	
  Information Concerning
  Financial Condition of the Company and its Subsidiaries

  	
  31

  
	
  SECTION 8.05

  	
  Subrogation

  	
  32

  
	
  SECTION 8.06

  	
  Application of Payments

  	
  32

  
	
  SECTION 8.07

  	
  SUBMISSION TO
  JURISDICTION

  	
  32

  
	
  SECTION 8.08

  	
  Notices

  	
  33

  
	
  SECTION 8.09

  	
  Further Assurances

  	
  33

  
	
  SECTION 8.10

  	
  APPLICABLE LAW

  	
  34

  
	
  SECTION 8.11

  	
  Binding on Successors
  and Assigns

  	
  34

  
	
  SECTION 8.12

  	
  Specific Performance

  	
  34

  
	
  SECTION 8.13

  	
  Titles and Captions

  	
  34

  
	
  SECTION 8.14

  	
  Counterparts;
  Integration

  	
  34

  
	
  SECTION 8.15

  	
  Authorization

  	
  34

  
	
  SECTION 8.16

  	
  No Third Party
  Beneficiaries

  	
  34

  
	
  SECTION 8.17

  	
  Provisions Solely to Define Relative Rights

  	
  34

  

 

ii

 

INTERCREDITOR AGREEMENT

 

This
INTERCREDITOR AGREEMENT, is dated as of July 29, 2009, and entered into by
and among PROSPECT MEDICAL HOLDINGS, INC., a Delaware corporation (“Holdings”
or the “Company”), each of the Subsidiaries of Holdings identified on the
signature pages hereof as a Guarantor (such Subsidiaries, the “Guarantors”),  ROYAL BANK OF CANADA,  in its capacity as administrative agent
for the First Lien Obligations (as defined below), including its successors and
assigns from time to time (the “First Lien Collateral Agent”), U.S. BANK
NATIONAL ASSOCIATION, in its capacity as collateral agent in respect of the
Second Lien Obligations (as defined below), including its successors and
assigns from time to time (the “Second Lien Collateral Agent”) and ROYAL
BANK OF CANADA, in its capacity as Control Agent (as defined below) for the
First Lien Collateral Agent and the Second Lien Collateral Agent.  Capitalized terms used herein but not
otherwise defined herein have the meanings set forth in Article I below.

 

RECITALS

 

WHEREAS,
the Company, the lenders party thereto from time to time, and Royal Bank of
Canada, as administrative agent, have entered into that certain Credit
Agreement dated as of the date hereof providing for a revolving credit facility
to the Company (as amended, restated, supplemented, modified or Refinanced from
time to time, the “Credit Agreement”);

 

WHEREAS,
the Company, the Guarantors and U.S. Bank National Association, as trustee,
have entered into that certain Indenture dated as of the date hereof in respect
of the Company’s 2014 Notes (as amended, restated, supplemented, modified or
Refinanced from time to time, the “Indenture”);

 

WHEREAS,
(a) the obligations of the Company and the Guarantors under the Credit
Agreement and the other First Lien Documents, (b) any Secured Hedge
Agreement, and (c) any Secured Cash Management Agreement will be secured,
in part, by the Controlled Accounts and the Accounts of the Company and the
Guarantors and the proceeds thereof (whether by sale or collection) and the
Controlled Accounts pursuant to the terms of the First Lien Collateral
Documents;

 

WHEREAS,
the obligations of the Company and the Guarantors under the Indenture and the
other Second Lien Documents will be secured, in part, the Accounts of the Company
and the Guarantors and the proceeds thereof (whether by sale or collection) and
the Controlled Accounts pursuant to the terms of the Second Lien Collateral
Documents;

 

WHEREAS,
the First Lien Documents and the Second Lien Documents provide, among other
things, that the parties thereto shall set forth in this Agreement their
respective rights and remedies with respect to the Collateral; and

 

WHEREAS,
in order to induce the First Lien Collateral Agent and the First Lien
Claimholders to consent to the incurrence by the Grantors (as defined below) of
the Second Lien Obligations and to induce the First Lien Claimholders to extend
credit and other financial accommodations to or for the benefit of the Company,
or any other Grantor, the Second Lien 

 

 

Collateral Agent on behalf of the Second Lien
Claimholders has agreed to the lien subordination, intercreditor and other
provisions set forth in this Agreement.

 

NOW,
THEREFORE, in consideration of the
foregoing, the mutual covenants and obligations herein set forth and for other
good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.01               Defined
Terms.  As used in the Agreement, the
following terms shall have the following meanings:

 

“2014 Notes” means the Company’s senior secured
notes due 2014 issued under the Indenture.

 

“Accounts” has the meaning ascribed to such
term in the UCC, but shall not include Designated Accounts (as defined in the
Shared Collateral Agreement).

 

“Affiliate”
means, with respect to any Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.

 

“Agreement”  means this Intercreditor Agreement, as
amended, restated supplemented or otherwise modified from time to time.

 

“Attributable
Indebtedness” means, on any date, (a) in respect of any Capitalized
Lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in
respect of any Synthetic Lease Obligation, the capitalized amount of the
remaining lease or similar payments under the relevant lease or other
applicable agreement or instrument that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP if such lease or other
agreement or instrument were accounted for as a Capitalized Lease and (c) all
Synthetic Debt of such Person.

 

“Bankruptcy
Code”  means title 11 of the
United States Code entitled “Bankruptcy,” as now and hereafter in effect, or
any successor statute.

 

“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, New York,
New York.

 

“Capitalized
Lease” means all leases that have been or should be, in accordance with
GAAP, recorded as capitalized leases.

 

“Cash
Management Agreement” means any agreement to provide cash management
services, including treasury, depository, overdraft, credit or debit card,
electronic funds transfer and other cash management arrangements.

 

2

 

“Cash
Management Bank” means any Person that, at the time it enters into a Cash
Management Agreement, is a Lender or an Affiliate of a Lender, in its capacity
as a party to such Cash Management Agreement.

 

“Collateral”  means the assets and property of any
Grantor, whether tangible or intangible, constituting both First Lien
Collateral and Second Lien Collateral.

 

“Company”
has the meaning set forth in the preamble of this Agreement.

 

“Control
Agent” has the meaning set forth in Section 5.05(a).

 

“Control
Collateral” means any Collateral consisting of any cash and any other
Collateral as to which a first priority Lien shall or may be perfected through
possession or control by the secured party or any agent therefor.

 

“Controlled
Accounts” means those certain Deposit Accounts of any Grantor subject to
Liens under the terms of the First Lien Collateral Documents and the Second
Lien Collateral Documents and subject to control or a control agreement in
favor of the Control Agent.

 

“Credit
Agreement”  has the meaning
assigned thereto in the recitals.

 

“Debtor
Relief Laws” means the Bankruptcy Code, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, 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.

 

“Deposit
Account” has the meaning ascribed to such term in the UCC.

 

“DIP
Financing”  has the meaning set
forth in Section 6.01.

 

“Discharge
of First Lien Obligations”  means,
except to the extent otherwise provided in Section 5.06, (a) payment
in full in cash of the principal of and interest (including interest accruing
on or after the commencement of any Insolvency or Liquidation Proceeding,
whether or not a claim for such interest is, or would be, allowed in such
Insolvency or Liquidation Proceeding, in which case such interest shall be
repaid from funds otherwise possibly available to the Second Lien Claimholders)
and premium, if any, on all Indebtedness outstanding under the First Lien
Documents and termination of all commitments to lend or otherwise extend credit
under the First Lien Documents, (b) payment in full in cash of all other
First Lien Obligations that are due and payable or otherwise accrued and owing
at or prior to the time such principal and interest are paid (including legal
fees and other expenses, costs or charges accruing on or after the commencement
of any Insolvency or Liquidation Proceeding, whether or not a claim for such
fees, expenses, costs or charges is, or would be, allowed in such Insolvency or
Liquidation Proceeding), (c) termination of any Secured Hedge Agreement
and the payment in full in cash of all obligations thereunder, (d) termination
of any Secured Cash Management Agreement and the payment in full in cash of all
obligations thereunder, (e) termination or cash collateralization (in an
amount reasonably satisfactory to the First Lien 

 

3

 

Collateral Agent not to exceed 105%) of all letters of
credit issued under the First Lien Documents, and (f) adequate provision
has been made for any contingent or unliquidated First Lien Obligations related
to claims, causes of action, or liabilities that have been asserted or
threatened against the Lenders or the First Lien Claimholders or that otherwise
can be reasonably identified based on the then known facts and circumstances.

 

“Disposition”
has the meaning set forth in Section 5.01(a)(ii).

 

“Equity
Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the
warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests
in) such Person, all of the securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or acquisition from such
Person of such shares (or such other interests), and all of the other ownership
or profit interests in such Person (including partnership, member or trust
interests therein), whether voting or nonvoting.

 

“Exercise
of Remedies” has the meaning set forth in Section 5.01(a)(i).

 

“First
Lien Claimholders”  means, at
any relevant time, the holders of First Lien Obligations at such time,
including, without limitation, the Lenders and any agent under the Credit
Agreement.

 

“First
Lien Collateral”  means “Collateral”
as defined in the First Lien Security Agreement.

 

“First
Lien Collateral Agent” has the meaning set forth in the preamble hereof.

 

“First
Lien Collateral Documents”  means
the First Lien Security Agreement and any other agreement, document or
instrument pursuant to which a Lien is granted on assets intended to constitute
First Lien Collateral which secures any First Lien Obligations or under which
rights or remedies with respect to such Liens are governed.

 

“First
Lien Documents”  means the
Credit Agreement and the Loan Documents (as defined in the Credit Agreement),
First Lien Collateral Documents and each of the other agreements, documents and
instruments providing for or evidencing any other First Lien Obligation, and
any other document or instrument executed or delivered at any time in
connection with any First Lien Obligations, including any intercreditor or
joinder agreement among holders of First Lien Obligations, to the extent such
are effective at the relevant time, as each may be modified from time to time
in accordance with their terms.

 

“First
Lien Obligations”  means all (a) outstanding
“Obligations” as defined in and arising under the Credit Agreement and the
other First Lien Documents (it being understood, for avoidance of doubt, that
obligations owed to a Hedge Bank and/or a Cash Management Bank that is both a
First Lien Claimholder and a Second Lien Claimholder at the time such Secured
Hedge Agreement and/or Secured Cash Management Agreement was entered into by
the Company shall be considered First Lien Obligations) and (b) any DIP
Financing.  “First Lien Obligations”
shall include (i) all interest accrued or accruing (or which would, absent

 

4

 

commencement of an Insolvency or Liquidation
Proceeding, accrue) in accordance with the rate specified in the relevant First
Lien Document and (ii) all fees, costs and charges incurred in connection
with the First Lien Documents and provided for thereunder (including, without
limitation, legal fees), in the case of clause (i) and (ii) whether
before or after commencement of an Insolvency or Liquidation Proceeding and
irrespective of whether any claim for such interest, fees, costs or charges is
allowed as a claim in such Insolvency or Liquidation Proceeding.

 

“First
Lien Security Agreement” means that certain First Lien Collateral Agreement
in respect of the First Lien Collateral dated the date hereof from the Grantors
in favor of the First Lien Collateral Agent, as amended, restated, supplemented
or otherwise modified from time to time.

 

“GAAP”
means generally accepted accounting principles in the United States as in
effect as of the date hereof and as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or such other principles as may be approved by a
significant segment of the accounting profession in the United States, that are
applicable to the circumstances as of the date of determination, consistently
applied.

 

“Governmental
Authority” means the government of the United States or any other nation,
or of any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

 

“Grantors”  means the Company and each of the
Guarantors that have executed and delivered, or may from time to time hereafter
execute and deliver, a First Lien Collateral Document or a Second Lien Collateral
Document.

 

“Guarantee”
means, as to any Person, any (a) obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or
services for the purpose of assuring the obligee in respect of such
Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level
of income or cash flow of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (iv) entered into
for the purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such Person securing any Indebtedness or other obligation
of any other Person, whether or not such Indebtedness or other obligation is
assumed by such Person (or any right, contingent or otherwise, of any holder of
such Indebtedness to obtain any such Lien). 
The amount of any 

 

5

 

Guarantee shall be deemed to be an amount equal to the
stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a
corresponding meaning.

 

“Guarantors”
has the meaning set forth in the preamble of this Agreement.

 

“Hedge
Bank” means any Person that, at the time it enters into a Secured Hedge
Agreement, is a Lender or an Affiliate of a Lender, in its capacity as a party
to such Secured Hedge Agreement.

 

“Indebtedness”
means, as to any Person at a particular time, without duplication, all of the
following, whether or not included as indebtedness or liabilities in accordance
with GAAP:

 

(a)           all obligations of such Person for
borrowed money and all obligations of such Person evidenced by bonds, debentures,
notes, loan agreements or other similar instruments;

 

(b)           the maximum amount of all direct or
contingent obligations of such Person arising under letters of credit,
including standby and commercial, solely to the extent that such letters of
credit are not fully cash collateralized, bankers’ acceptances, bank
guaranties, surety bonds and similar instruments;

 

(c)           net obligations of such Person under
any Swap Contract;

 

(d)           all obligations of such Person to pay
the deferred purchase price of property or services (other than trade accounts
payable in the ordinary course of business and not past due for more than 90
days after the date on which such trade account was created);

 

(e)           indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased by
such Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;

 

(f)            all Attributable Indebtedness in
respect of Capitalized Leases and Synthetic Lease Obligations of such Person
and all Synthetic Debt of such Person;

 

(g)           all obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in respect of any
Equity Interest in such Person or any other Person or any warrant, right or
option to acquire such Equity Interest, valued, in the case of a redeemable
preferred interest, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends;

 

(h)           all Guarantees of such Person in
respect of any of the foregoing; and

 

6

 

(i)            all obligations of such Person owing
in respect of Medicare and/or Medicaid.

 

For
all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness 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 Indebtedness is expressly
made non-recourse to such Person.  The
amount of any net obligation under any Swap Contract on any date shall be
deemed to be the Swap Termination Value thereof as of such date.

 

“Indenture”
has the meaning set forth in the Recitals.

 

“Insolvency
or Liquidation Proceeding” means (a) any voluntary or involuntary case
or proceeding under the Bankruptcy Code or any other Debtor Relief Law with
respect to any Grantor, (b) any other voluntary or involuntary insolvency,
reorganization or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding with respect to
any Grantor or with respect to a material portion of its respective assets, (c) any
liquidation, dissolution, reorganization or winding up of any Grantor whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy
or (d) any assignment for the benefit of creditors generally or any other
marshalling of assets and liabilities of any Grantor.

 

“Lenders”  means the “Lenders” under and as defined
in the Credit Agreement.

 

“Lien”  means any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
charge, or preference, priority or other security interest or preferential
arrangement in the nature of a security interest of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
any easement, right of way or other encumbrance on title to real property, and
any financing lease having substantially the same economic effect as any of the
foregoing).

 

“Operating
Lease” means, as to any Person as determined in accordance with GAAP, any
lease of property (whether real, personal or mixed) by such Person as lessee
which is not a Capital Lease.

 

“Person”  means any natural person, corporation,
limited liability company, trust, joint venture, association, company,
partnership, governmental authority or other entity.

 

“PMG”
means Prospect Medical Group, Inc., a California professional corporation.

 

“PMG
Parties” means PMG, each direct or indirect Subsidiary of PMG and each
future direct or indirect subsidiary of PMG.

 

“Recovery”  has the meaning set forth in Section 6.05.

 

7

 

“Refinance”  means, in respect of any indebtedness, to
refinance, replace or repay, or to issue other indebtedness, in exchange or
replacement for, such indebtedness.  “Refinanced”
and “Refinancing” shall have correlative meanings.

 

“Requisite
Claimholders” means those lenders under the Credit Agreement or those
Second Lien Claimholders in respect of the Indenture, as applicable, that are
necessary to approve the contemplated action.

 

“Second
Lien Claimholders”  means, at
any relevant time, the holders of Second Lien Obligations at such time,
including, without limitation, the Second Lien Collateral Agent and any other
agent under the Indenture.

 

“Second
Lien Collateral”  means “Collateral”
as defined in the Second Lien Security Agreement.

 

“Second
Lien Collateral Agent”  has the
meaning set forth in the preamble hereof.

 

“Second
Lien Collateral Documents”  means
the Second Lien Security Agreement and any other agreement, document or
instrument pursuant to which a Lien is granted on assets intended to constitute
Second Lien Collateral which secures any Second Lien Obligations or under which
rights or remedies with respect to such Liens are governed.

 

“Second
Lien Documents”  means the
Indenture, the 2014 Notes and the Second Lien Collateral Documents and
each of the other agreements, documents and instruments providing for or
evidencing any other Second Lien Obligation, and any other document or
instrument executed or delivered at any time in connection with any Second Lien
Obligations, including any intercreditor or joinder agreement among holders of
Second Lien Obligations, to the extent such are effective at the relevant time,
as each may be modified from time to time in accordance with their terms.

 

“Second
Lien Enforcement Date” means the date which is 120 days after the
occurrence of (a) an Event of Default (under and as defined in the
Indenture) and (b) the First Lien Collateral Agent’s receipt of
written notice from the Second Lien Collateral Agent certifying that (i) an
Event of Default (under and as defined in the Indenture) has occurred and is
continuing and (ii) the Second Lien Obligations are currently due and
payable in full (whether as a result of acceleration thereof or otherwise) in
accordance with terms of the Indenture; provided that the Second Lien Enforcement Date shall be
stayed and shall not occur and shall be deemed not to have occurred (1) at
any time the First Lien Collateral Agent or the First Lien Claimholders have
commenced and are diligently pursuing in good faith any enforcement action with
respect to all or a material portion of the Collateral, (2) at any time
any Grantor is then a debtor under or with respect to (or otherwise subject to)
any Insolvency or Liquidation Proceeding or (3) if the acceleration of the
Second Lien Obligations (if any) is rescinded in accordance with the terms of
the Indenture or otherwise.

 

“Second
Lien Obligations”  means all (a) outstanding
obligations arising under the Indenture and the other Second Lien
Documents.  “Second Lien Obligations”
shall include, without limitation, (i) all principal and interest
(including any Additional Interest (as defined in the Indenture)) accrued or
accruing (or which would, absent commencement of an Insolvency or 

 

8

 

Liquidation Proceeding, accrue) in accordance with the
rate specified in the relevant Second Lien Document and (ii) all fees,
costs, premium and charges incurred in connection with the Second Lien
Documents and provided for thereunder (including, without limitation, legal
fees), in each case after commencement of an Insolvency or Liquidation
Proceeding irrespective of whether any claim for such interest, fees, costs,
premium or charges is allowed as a claim in such Insolvency or Liquidation
Proceeding.

 

“Second
Lien Security Agreement” means that certain Second Lien Collateral
Agreement in respect of the Second Lien Collateral dated the date hereof from
the Grantors in favor of the Second Lien Collateral Agent, as amended,
restated, supplemented or otherwise modified from time to time.

 

“Secured
Cash Management Agreement” means any Cash Management Agreement that is
entered into by and between the Company and any Cash Management Bank.

 

“Secured
Hedge Agreement” means any interest rate Swap Contract required or
permitted under the Credit Agreement or the Indenture that is entered into by
and between the Company and any Hedge Bank.

 

“Shared
Collateral Agreement” means that certain Collateral Agreement dated as of
the date hereof from the Grantors in favor of U.S. Bank National Association,
as collateral agent, for the equal and ratable benefit of (x) Royal Bank
of Canada and the lenders referred to therein and (y) U.S. Bank National
Association, as note trustee and the holders of the 2014 Notes, as such
Collateral Agreement may be amended, supplemented or otherwise modified from
time to time.

 

“Standstill
Period”  has the meaning set
forth in Section 3.01(a)(i)(A) hereof.

 

“Subsidiary”
of a Person means a corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the shares of
securities or other interests having ordinary voting power for the election of
directors or other governing body (other than securities or interests having
such power only by reason of the happening of a contingency) are at the time
beneficially owned, or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or the right to
designate the individual or individuals who own such majority of the shares of
securities or other interests having ordinary voting power is controlled,
directly or indirectly, or both, by such Person.  Unless otherwise specified or the context
otherwise requires, all references herein to a “Subsidiary” or to “Subsidiaries”
shall refer to a Subsidiary or Subsidiaries of Holdings and shall include the
PMG Parties.

 

“Swap
Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any 

 

9

 

combination of any of the foregoing (including any
options to enter into any of the foregoing), whether or not any such
transaction is governed by or subject to any master agreement, and (b) any
and all transactions of any kind, and the related confirmations, which are
subject to the terms and conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master
Agreement.

 

“Swap
Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s) determined
in accordance therewith, such termination value(s), and (b) for any date
prior to the date referenced in clause (a), the amount(s) determined
as the mark-to-market value(s) for such Swap Contracts, as determined
based upon one or more mid-market or other readily available quotations
provided by any recognized dealer in such Swap Contracts (which may include a
Lender or any Affiliate of a Lender).

 

“Synthetic
Debt” means, with respect to any Person as of any date of determination
thereof, all obligations of such Person in respect of transactions entered into
by such Person that are intended to function primarily as a borrowing of funds
but are not otherwise included in the definition of “Indebtedness” or as a
liability on the consolidated balance sheet of such Person and its Subsidiaries
in accordance with GAAP.

 

“Synthetic
Lease Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating obligations that do not appear on the
balance sheet of such Person but which, upon the application of any Debtor
Relief Laws to such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

 

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

 

“United
States” means the United States of America.

 

SECTION 1.02               Other
Interpretive Provisions.

 

(a)           The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation.”  The word “will” shall be construed
to have the same meaning and effect as the word “shall”.  Unless the context 

 

10

 

requires otherwise (i) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restriction on such
amendments, supplements or modifications set forth herein), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (iii) the words “herein”, “hereof” and “hereunder”,
and words of similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision hereof, (iv) all
references herein to Recitals, Exhibits or Sections shall be construed to refer
to Recitals, Exhibits, Articles or Sections of this Agreement and (v) the
words “asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

(b)           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.”

 

(c)           Section headings
herein are included for convenience of reference only and shall not affect the
interpretation of this Agreement.

 

ARTICLE II

LIEN PRIORITIES

 

SECTION 2.01               Relative
Priorities.  Notwithstanding the
date, manner or order of grant, attachment or perfection of any Liens securing
the Second Lien Obligations granted on the Collateral or of any Liens securing
the First Lien Obligations granted on the Collateral and notwithstanding any
provision of the UCC, or any applicable law or the Second Lien Documents, the
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) hereby agrees that:  (a) any
Lien on the Collateral securing any First Lien Obligations now or hereafter
held by or on behalf of the First Lien Collateral Agent or any First Lien
Claimholders or any agent or trustee therefor, regardless of how acquired,
whether by grant, possession, statute, operation of law, subrogation or
otherwise, shall be senior in all respects and prior to any Lien on the
Collateral securing any of the Second Lien Obligations; and (b) any Lien
on the Collateral now or hereafter held by or on behalf of the Second Lien
Collateral Agent, any Second Lien Claimholders or any agent or trustee therefor
regardless of how acquired, whether by grant, possession, statute, operation of
law, subrogation or otherwise, shall be junior and subordinate in all respects
to all Liens on the Collateral securing any First Lien Obligations.

 

SECTION 2.02               Failure
to Perfect.  All Liens on the
Collateral securing any First Lien Obligations shall be and remain senior in
all respects and prior to all Liens on the Collateral securing any Second Lien
Obligations for all purposes, notwithstanding any failure of the First Lien
Collateral Agent or the First Lien Claimholders to adequately perfect its
security interests in the Collateral, the subordination of any Lien on the
Collateral securing any First Lien Obligations to any Lien securing any other
obligation of any Grantor, or the avoidance, invalidation or lapse of any Lien
on the Collateral securing any First Lien Obligations.

 

SECTION 2.03               Nature
of First Lien Obligations.  The
Second Lien Collateral Agent (for itself and on behalf of the other Second Lien
Claimholders) acknowledges that (a) the 

 

11

 

First Lien Obligations
are revolving in nature, (b) the amount thereof that may be outstanding at
any time or from time to time may be increased or reduced and subsequently
reborrowed and (c) the terms of the First Lien Obligations may be
modified, extended or amended from time to time and the aggregate amount of the
First Lien Obligations may be increased or Refinanced, in either event, without
notice to or consent by the Second Lien Claimholders and without affecting the
provisions hereof.  The lien priorities
provided in Sections 2.01 and 2.02 shall not be altered or
otherwise affected by any such amendment, modification, supplement, extension,
repayment, reborrowing, increase, replacement, renewal, restatement or
Refinancing of either the First Lien Obligations or the Second Lien
Obligations, or any portion thereof.

 

SECTION 2.04               Prohibition
on Contesting Liens.  Each of the
Second Lien Collateral Agent (for itself and on behalf of each Second Lien
Claimholder) and the First Lien Collateral Agent (for itself and on behalf of
each First Lien Claimholder) agrees that it shall not (and hereby waives any
right to) contest or support any other Person in contesting, in any proceeding
(including any Insolvency or Liquidation Proceeding), the priority, validity or
enforceability of a Lien held by or on behalf of any of the First Lien
Claimholders in the First Lien Collateral or by or on behalf of any of the
Second Lien Claimholders in the Second Lien Collateral, as the case may be; provided
that nothing in this Agreement shall be construed to prevent or impair the
rights of the First Lien Collateral Agent or any First Lien Claimholder to
enforce this Agreement, including the priority of the Liens securing the First
Lien Obligations as provided in Sections 2.01 and 3.01.

 

SECTION 2.05               No
New Liens.

 

(a)           Limitation
on other Collateral for First Lien Claimholders.  So long as any Second Lien Obligations remain
outstanding, and subject to Article VI, (i) the First Lien Collateral
Agent agrees that, after the date hereof, neither the First Lien Collateral
Agent nor any First Lien Claimholder shall acquire or hold any Lien on any
assets of the type contemplated by the definition of “First Lien Collateral” of
any Grantor securing any First Lien Obligations which assets are not also
subject to the second-priority Lien of the Second Lien Collateral Agent under
the Second Lien Collateral Documents, and (ii) each Grantor agrees not to
grant any Lien on any assets of the type contemplated by the definition of “First
Lien Collateral”, or permit any of its Subsidiaries to grant a Lien on any such
assets, in favor of the First Lien Collateral Agent or the First Lien
Claimholders unless it, or such Subsidiary, has granted a similar Lien on such
assets in favor of the Second Lien Collateral Agent or the Second Lien
Claimholders.  If the First Lien
Collateral Agent or any First Lien Claimholder shall (nonetheless and in breach
hereof) acquire any Lien on any assets of the type contemplated by the
definition of “First Lien Collateral” of any Grantor or any of their respective
Subsidiaries securing any First Lien Obligations which assets are not also
subject to the second-priority Lien of the Second Lien Collateral Agent under
the Second Lien Collateral Documents, then the First Lien Collateral Agent (or
the relevant First Lien Claimholder), shall, without the need for any further consent
of any other Person and notwithstanding anything to the contrary in any other
First Lien Document (x) in addition to holding such Lien for the benefit
of itself and the other First Lien Claimholders as security for the First Lien
Obligations, also hold and be deemed to have held such Lien for the benefit of
the Second Lien Collateral Agent as security for the Second Lien Obligations
subject to the priorities set forth herein or (y) release such Lien.

 

12

 

(b)           Limitation
on other Collateral for Second Lien Claimholders.  Until the date upon which the Discharge of
First Lien Obligations shall have occurred, (i) the Second Lien Collateral
Agent agrees that, after the date hereof, neither the Second Lien Collateral
Agent nor any Second Lien Claimholder shall acquire or hold any Lien on any
assets of the type contemplated by the definition of “Second Lien Collateral”
of any Grantor securing any Second Lien Obligations which assets are not also
subject to the senior priority Lien of the First Lien Collateral Agent under
the First Lien Collateral Documents, and (ii) each Grantor agrees not to
grant any Lien on any assets of the type contemplated by the definition of “Second
Lien Collateral”, or permit any of its Subsidiaries to grant a Lien on any such
assets, in favor of the Second Lien Collateral Agent or the Second Lien
Claimholders unless it, or such Subsidiary, has granted a similar Lien on such
assets in favor of the First Lien Collateral Agent or the First Lien
Claimholders.  If the Second Lien
Collateral Agent or any Second Lien Claimholder shall (nonetheless and in
breach hereof) acquire any Lien on any assets of the type contemplated by the
definition of “Second Lien Collateral” of any Grantor or any of their
respective Subsidiaries securing any Second Lien Obligations which assets are
not also subject to the first-priority Lien of the First Lien Collateral Agent
under the First Lien Collateral Documents, then the Second Lien Collateral
Agent (or the relevant Second Lien Claimholder), shall, without the need for
any further consent of any other Person and notwithstanding anything to the
contrary in any other Second Lien Document (x) in addition to holding such
Lien for the benefit of itself and the other Second Lien Claimholders as
security for the Second Lien Obligations, also hold and be deemed to have held
such Lien for the benefit of the First Lien Collateral Agent as security for
the First Lien Obligations or (y) release such Lien.

 

SECTION 2.06               Similar
Liens and Agreements.  The parties
hereto agree that it is their intention that the First Lien Collateral and the
Second Lien Collateral be identical.  In
furtherance of the foregoing and of Section 8.09, the parties
hereto agree, subject to the other provisions of this Agreement:

 

(a)           upon request by the First Lien
Collateral Agent or the Second Lien Collateral Agent, to cooperate in good
faith (and to direct their counsel to cooperate in good faith) from time to
time in order to determine the specific items included in the First Lien
Collateral and the Second Lien Collateral and the steps taken to perfect their
respective Liens thereon and the identity of the respective parties obligated
under the First Lien Documents and the Second Lien Documents; and

 

(b)           that the documents and agreements
creating or evidencing the Liens on the First Lien Collateral and the Second
Lien Collateral shall be in all material respects the same forms of documents
other than with respect to the senior and subordinate nature of the security
interests in the Collateral securing the respective First Lien Obligations and
Second Lien Obligations thereunder.

 

In addition, to the extent any guaranty is entered into by any Grantor
in respect of the Second Lien Obligations (whether or not the First Lien
Collateral Agent or First Lien Claimholders have consented thereto), a guaranty
by such Person shall be entered into in respect of the First Lien Obligations,
and for all purposes hereunder such Person shall be deemed a guarantor of the First
Lien Obligations and the Second Lien Obligations.  Furthermore, to the extent any guaranty is
entered into by any Grantor in respect of the First Lien Obligations (whether
or not the Second 

 

13

 

Lien Agent or the Second Lien Claimholders have consented thereto), a
guaranty by such Person shall be entered into in respect of the Second Lien
Obligations and, for all purposes hereunder, such Person shall be deemed a
guarantor of the Second Lien Obligations and the First Lien Obligations.

 

ARTICLE III

ENFORCEMENT

 

SECTION 3.01               Exercise
of Remedies.

 

(a)           So
long as the Discharge of First Lien Obligations has not occurred, whether or
not any Insolvency or Liquidation Proceeding has been commenced by or against
the Company or any other Grantor:

 

(i)            the Second Lien Collateral Agent and
the Second Lien Claimholders:

 

(A)          from the date hereof until the
occurrence of the Second Lien Enforcement Date (such period, the “Standstill
Period”), will not exercise or seek to exercise any rights or remedies
(including any right of set-off or recoupment) with respect to any Collateral
(including, without limitation, the exercise of any right under any lockbox
agreement, account control or collection agreement or similar agreement or
arrangement to which the Second Lien Collateral Agent or any Second Lien
Claimholder is a party) or institute or commence (or join with any other Person
in commencing) any enforcement, collection, execution, levy or foreclosure
action or proceeding (including, without limitation, any Insolvency or
Liquidation Proceeding) with respect to any Lien held by it under the Second
Lien Collateral Documents;

 

(B)           will not contest, protest or object
to any foreclosure proceeding or action brought by the First Lien Collateral
Agent or any First Lien Claimholder or any other exercise by the First Lien
Collateral Agent or any First Lien Claimholder, of any rights and remedies
relating to the Collateral under the First Lien Collateral Documents,
including, but not limited to, any motion by the First lien Collateral agent to
sell the Collateral pursuant to Section 363 of the Bankruptcy Code, provided
that the respective interests of the Second Lien Claimholders attach to the
proceeds thereof, subject to the relative priorities described in Article II;
provided, however, that this Section 3.01(B) shall
constitute consent by the Second Lien Collateral Agent and the Second Lien
Claimholders pursuant to Section 363(f) of the Bankruptcy Code to the
Section 363 sale of any or all of the Collateral; and

 

(C)           subject to the rights of the Second
Lien Collateral Agent under clause (i)(A) above, will not object to
the forbearance by the First Lien Collateral Agent or the First Lien
Claimholders from bringing or 

 

14

 

pursuing any foreclosure
proceeding or action or any other exercise of any rights or remedies relating
to the Collateral; and

 

(ii)           subject to Section 5.01,
until the Discharge of the First Lien Obligations, the First Lien Collateral
Agent and the First Lien Claimholders shall have the exclusive right to enforce
rights, exercise remedies (including set-off and the right to credit bid their
debt) and make determinations regarding the release, disposition, or
restrictions with respect to the Collateral without any consultation with or
the consent of the Second Lien Collateral Agent or any Second Lien Claimholder;
provided, that

 

(A)          in any Insolvency or Liquidation
Proceeding commenced by or against the Company or any other Grantor, the Second
Lien Collateral Agent may file a claim or statement of interest with respect to
the Second Lien Obligations;

 

(B)           the Second Lien Collateral Agent may
take any action (not adverse to the Liens on the Collateral securing the First
Lien Obligations, or the rights of any First Lien Collateral Agent or the First
Lien Claimholders to exercise remedies in respect thereof) in order to preserve
or protect its Lien on the Collateral;

 

(C)           the Second Lien Claimholders shall be
entitled to file any responsive or defensive pleadings in opposition to any
motion, claim, adversary proceeding or other pleading made by any person
objecting to or otherwise seeking the disallowance of the claims of the Second
Lien Claimholders, including, without limitation, any claims secured by the
Collateral, if any, in each case in accordance with the terms of this
Agreement;

 

(D)          the Second Lien Claimholders shall be
entitled to file any pleadings, objections, motions or agreements which assert
rights or interests available to unsecured creditors of the Grantors arising
under either the Debtor Relief Law or applicable non-bankruptcy law;

 

(E)           the Second Lien Claimholders shall be
entitled to file any proof of claim and other filings and make any arguments
and motions that are, in each case, in accordance with the terms of this
Agreement, with respect to the Second Lien Obligations and the Collateral;

 

(F)           the Second Lien Claimholders shall be
entitled, in any Insolvency or Liquidation Proceeding, to vote on any plan of
reorganization, to the extent consistent with the provisions hereof; and

 

(G)           the Second Lien Collateral Agent or
any Second Lien Claimholder may exercise any of its rights or remedies with
respect to the Collateral upon the occurrence and during the effective continuation
of the Second Lien Enforcement Date.

 

15

 

In
exercising rights and remedies with respect to the Collateral, the First Lien
Collateral Agent and the First Lien Claimholders may enforce the provisions of
the First Lien Documents and exercise remedies thereunder, all in such order
and in such manner as they may determine advisable in the exercise of their
sole discretion.  Such exercise and
enforcement shall include the rights of an agent appointed by the First Lien
Collateral Agent and the First Lien Claimholders to sell or otherwise dispose
of Collateral upon foreclosure, to incur expenses in connection with such sale
or disposition, and to exercise all the rights and remedies of a secured
creditor under the UCC of any applicable jurisdiction and of a secured creditor
under Debtor Relief Laws of any applicable jurisdiction.

 

(b)           The
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) agrees that it will not take or receive any Collateral or any
proceeds of Collateral in connection with the exercise of any right or remedy
(including set-off or recoupment) with respect to any Collateral, and that any
Collateral or proceeds taken or received by it will be paid over to the First
Lien Collateral Agent pursuant to Section 4.02, unless and until
the Discharge of First Lien Obligations has occurred, except as expressly
provided in the proviso in Section 3.01(a)(ii) and Section 6.07.  Without limiting the generality of the foregoing,
unless and until the Discharge of First Lien Obligations has occurred, except
as expressly provided in the proviso in Section 3.01(a)(ii), the
sole right of the Second Lien Collateral Agent and the Second Lien Claimholders
with respect to the Collateral is to hold a Lien on the Collateral pursuant to
the Second Lien Collateral Documents for the period and to the extent granted
therein and to receive a share of the proceeds thereof, if any, after the
Discharge of the First Lien Obligations has occurred in accordance with the
terms of the Second Lien Documents and applicable law.

 

(c)           Subject
to the proviso in Section 3.01(a)(ii) and Section 6.01,
(i) the Second Lien Collateral Agent (on behalf of itself and the Second
Lien Claimholders) agrees that the Second Lien Collateral Agent and the Second
Lien Claimholders will not take any action that would hinder, delay or impede
any exercise of remedies under the First Lien Collateral Documents, including
any sale, lease, exchange, transfer or other disposition of the Collateral,
whether by foreclosure or otherwise, and (ii) the Second Lien Collateral
Agent (on behalf of itself and the Second Lien Claimholders) hereby waives any
and all rights it or the Second Lien Claimholders may have as a junior lien
creditor or otherwise to object to the manner or order in which the First Lien
Collateral Agent or the First Lien Claimholders seek to enforce the Liens
granted in any of the First Lien Collateral.

 

(d)           The
Second Lien Collateral Agent hereby acknowledges and agrees that no covenant,
agreement or restriction contained in the Second Lien Collateral Documents
shall be deemed to restrict in any way the rights and remedies of the First
Lien Collateral Agent or the First Lien Claimholders with respect to the
Collateral as set forth in this Agreement and the First Lien Collateral
Documents.

 

SECTION 3.02               Actions
Upon Breach.

 

(a)           If
any Second Lien Claimholder, contrary to this Agreement, commences or
participates in any action or proceeding against the Company, any other Grantor
or the Collateral, the Company or such Grantor, with the prior written consent
of the First Lien Collateral Agent, may interpose as a defense or dilatory plea
the making of this Agreement, and 

 

16

 

the First Lien Collateral Agent may intervene and interpose such
defense or plea in its name, in the name of the First Lien Claimholders or in
the name of the Company or such Grantor.

 

(b)           Should
any Second Lien Claimholder, contrary to this Agreement, in any way take, or
attempt or threaten to take, any action with respect to the Collateral
(including, without limitation, any attempt to realize upon or enforce any
remedy with respect to this Agreement), or fail to take any action required by
this Agreement, the First Lien Collateral Agent (in its own name or in the name
of the Company) or the Company may obtain relief against such Second Lien
Claimholder by injunction, specific performance and/or other appropriate
equitable relief, it being understood and agreed by the Second Lien Collateral
Agent on behalf of each Second Lien Claimholder that (i) the First Lien
Claimholders’ damages from such actions may be difficult to ascertain and may
be irreparable, and (ii) the Second Lien Collateral Agent on behalf of each
Second Lien Claimholder waives any defense that the Company, any other Grantor
and/or the First Lien Claimholders cannot demonstrate damage or be made whole
by the awarding of damages.

 

ARTICLE IV

PAYMENTS

 

SECTION 4.01               Application
of Proceeds.  So long as the
Discharge of First Lien Obligations has not occurred, any proceeds of
Collateral received in connection with the sale or other disposition of such
Collateral, or collection on such Collateral upon the exercise of remedies,
shall be applied by the First Lien Collateral Agent to the First Lien
Obligations in such order as specified in the relevant First Lien
Documents.  Upon the Discharge of the
First Lien Obligations, the First Lien Collateral Agent shall deliver to the
Second Lien Collateral Agent any proceeds of Collateral held by it in the same
form as received, with any necessary endorsements or as a court of competent
jurisdiction may otherwise direct to be applied by the Second Lien Collateral
Agent to the Second Lien Obligations in such order as specified in the relevant
Second Lien Documents.

 

SECTION 4.02               Payments
Over.  So long as the Discharge of
First Lien Obligations has not occurred, any Collateral or proceeds thereof
(together with assets or proceeds subject to Liens referred to in the final
sentence of Section 2.05(b)) received by the Second Lien Collateral
Agent or any Second Lien Claimholders in connection with the exercise of any
right or remedy (including set-off) in respect of the Collateral shall be
segregated and held in trust and forthwith paid over to the First Lien
Collateral Agent for the benefit of the First Lien Claimholders in the same
form as received, with any necessary endorsements or as a court of competent
jurisdiction may otherwise direct.  The
First Lien Collateral Agent is hereby authorized to make any such endorsements
as agent for the Second Lien Collateral Agent or any such Second Lien
Claimholders.  This authorization is
coupled with an interest and is irrevocable until such time as this Agreement
is terminated in accordance with its terms.

 

17

 

ARTICLE V

OTHER AGREEMENTS

 

SECTION 5.01               Releases.

 

(a)           If, in connection with:

 

(i)            the exercise of any First Lien
Collateral Agent’s remedies in respect of the Collateral, including any sale,
exchange, transfer or other disposition of any such Collateral (an “Exercise
of Remedies”); or

 

(ii)           any sale, exchange, transfer or other
disposition of any Collateral permitted under the terms of the First Lien
Documents (whether or not an event of default thereunder, and as defined
therein, has occurred and is continuing) (a “Disposition”);

 

the First Lien Collateral Agent (on behalf of itself or any of the
First Lien Claimholders) releases any of its Liens on any part of the
Collateral other than in connection with the Discharge of the First Lien
Obligations, then the Liens, if any, of the Second Lien Collateral Agent, for
itself or for the benefit of the Second Lien Claimholders, on such Collateral
shall be automatically, unconditionally and simultaneously released (the “Second
Lien Release”) and the Second Lien Collateral Agent (on behalf of itself or
any such Second Lien Claimholders) shall promptly execute and deliver to the
First Lien Collateral Agent or such Grantor such termination statements,
releases and other documents as the First Lien Collateral Agent or such Grantor
may request to effectively confirm such release.

 

(b)           Until
the Discharge of First Lien Obligations occurs, the Second Lien Collateral
Agent (on behalf of itself and the Second Lien Claimholders) hereby irrevocably
constitutes and appoints the First Lien Collateral Agent and any officer or
agent of the First Lien Collateral Agent, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Second Lien Collateral Agent or such holder or in
the First Lien Collateral Agent’s own name, from time to time in the First Lien
Collateral Agent’s discretion, for the purpose of carrying out the terms of
this Section 5.01, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary to
accomplish the purposes of this Section 5.01, including any
endorsements or other instruments of transfer or release.  This authorization is coupled with an
interest and is irrevocable until such time as this Agreement is terminated in
accordance with its terms.

 

(c)           Until
the Discharge of First Lien Obligations occurs, to the extent that the First
Lien Collateral Agent (on behalf of itself and the First Lien Claimholders) (i) has
released any Lien on Collateral and any such Liens are later reinstated or (ii) obtains
any new Liens then the Second Lien Collateral Agent (on behalf of itself and
the Second Lien Claimholders) shall be granted a Lien on any such Collateral
subject to the priorities set forth in Article II.

 

SECTION 5.02               Insurance.  The First Lien Collateral Agent and the
Second Lien Collateral Agent shall be named as additional insureds and the
Control Agent shall be named as loss payee (on behalf of the First Lien
Collateral Agent, the First Lien Claimholders, the Second Lien Collateral Agent
and the Second Lien Claimholders) under any insurance 

 

18

 

policies maintained from
time to time by any Grantor.  Until the
date upon which the Discharge of First Lien Obligations shall have occurred, as
between the First Lien Collateral Agent and the First Lien Claimholders, on the
one hand, and the Second Lien Collateral Agent and the Second Lien Claimholders
on the other, the First Lien Collateral Agent and the First Lien Claimholders
shall have the sole and exclusive right (a) to adjust or settle any
insurance policy or claim covering any Collateral in the event of any loss
thereunder and (b) to approve any award granted in any condemnation or
similar proceeding affecting any Collateral. 
Until the date upon which the Discharge of First Lien Obligations shall
have occurred, all proceeds of any such policy and any such award in respect of
any Collateral that are payable to the First Lien Collateral Agent and the
Second Lien Collateral Agent shall be paid to the First Lien Collateral Agent
for the benefit of the First Lien Claimholders to the extent required under the
First Lien Documents and thereafter to the Second Lien Collateral Agent for the
benefit of the Second Lien Claimholders to the extent required under the
applicable Second Lien Documents and then to the owner of the subject property
or as a court of competent jurisdiction may otherwise direct.  If the Second Lien Collateral Agent or any
Second Lien Claimholder shall, at any time, receive any proceeds of any such
insurance policy or any such award in contravention of this Agreement, it shall
pay such proceeds over to the First Lien Collateral Agent in accordance with
the terms of Section 4.02.

 

SECTION 5.03               Amendments
to First Lien Documents and Second Lien Documents.

 

(a)           Until
the date upon which the Discharge of First Lien Obligations shall have
occurred, without the prior written consent of the First Lien Collateral Agent,
no Second Lien Collateral Document may be amended, supplemented or otherwise
modified or entered into to the extent such amendment, supplement or
modification, or the terms of any new Second Lien Collateral Document would
contravene any of the terms of this Agreement. 
The Second Lien Collateral Agent agrees that the Second Lien Security
Agreement shall include the following language or language substantially
similar:

 

“Notwithstanding
anything contained herein to the contrary, the lien and security interest granted
to the Trustee, for the benefit of the holders of the 2014 Notes, pursuant
to this Agreement, and the exercise of any right or remedy by the Trustee, for
the benefit of the holders of the 2014 Notes, under this Agreement, are subject
to the provisions of the Intercreditor Agreement, dated as of July 29,
2009 as the same may be amended, restated, supplemented, modified or replaced
from time to time (the ‘Intercreditor Agreement’) by and among Royal
Bank of Canada, as First Lien Collateral Agent, U.S. Bank National Association,
as Second Lien Collateral Agent, Royal Bank of Canada as Control Agent and the
Grantors (as defined therein) from time to time a party thereto.  In the event of any conflict between the
terms of the Intercreditor Agreement and this Agreement, the terms of the
Intercreditor Agreement shall govern and control.”

 

In the event of a
Refinancing of the First Lien Obligations not prohibited under the Indenture,
the Control Agent and the Second Lien Collateral Agent agree to enter into a
replacement or amendment of this Agreement to maintain the lien subordination,
intercreditor and other provisions set forth herein.  In the event of a Refinancing of the Second
Lien Obligations permitted under the Credit Agreement and the Indenture, the
First Lien Collateral Agent agrees 

 

19

 

to enter into a
replacement or amendment of this Agreement to maintain the lien subordination,
intercreditor and other provisions set forth herein.

 

(b)           Until
the date upon which the Discharge of First Lien Obligations shall have
occurred, in the event the First Lien Collateral Agent or the First Lien
Claimholders enter into any amendment, waiver or consent in respect of any of
the First Lien Collateral Documents for the purpose of adding to, or deleting
from, or waiving or consenting to any departures from any provisions of any
First Lien Collateral Document or changing in any manner the rights of the
First Lien Collateral Agent, the First Lien Claimholders, or the Grantors thereunder,
then such amendment, waiver or consent shall automatically apply in a
comparable manner to any comparable provision of the Second Lien Collateral
Documents (which, for the avoidance of doubt, shall not include the Note
Collateral Documents (as defined in the Shared Collateral Agreement), the
Indenture or the 2014 Notes) without the consent of the Second Lien Collateral
Agent or the Second Lien Claimholders and without any action by the Second Lien
Collateral Agent or any Grantor; provided, however, (i) that
no such amendment, waiver or consent shall be effective to (A) release any
Lien of the Second Lien Collateral Documents, (B) remove assets subject to
the Lien of the Second Lien Collateral Documents, (C) adversely affect the
perfection or priority of any such Lien, except, in each case, to the extent
that a release of, or adverse effect on the perfection or priority of, such
Lien is permitted by Section 5.01 or Article VI, (D) reduce
the principal of, or interest or other amounts payable on, any amount payable
under the Indenture or any Second Lien Document, (E) postpone any date
fixed for any payment of principal of, or interest or other amounts payable on,
any amounts payable under the Indenture or any Second Lien Document, (F) permit
any Liens on the Collateral not permitted under the Second Lien Documents or Article VI,
or (G) impose duties on the Second Lien Collateral Agent, in each case
without the consent of the Second Lien Collateral Agent and (ii) notice of
such amendment, waiver or consent shall have been given to the Second Lien
Collateral Agent no later than 10 days after its effectiveness (provided
that the failure to give such notice shall not affect the effectiveness or
validity thereof) provided further that this paragraph is intended solely to
set forth provisions by which the Second Lien Collateral Documents shall be
automatically affected by amendments, waivers and consents given by the First
Lien Collateral Agent and First Lien Claimholders under the Credit Agreement
and the First Lien Collateral Documents and is not intended to impose any
liability on the First Lien Collateral Agent or First Lien Claimholders.

 

SECTION 5.04               Rights
As Unsecured Creditors.  The Second
Lien Collateral Agent and the Second Lien Claimholders may exercise rights and
remedies as unsecured creditors against any Grantor in accordance with the
terms of the Second Lien Documents and applicable law.  Except as otherwise set forth in Section 2.01,
nothing in this Agreement shall prohibit the receipt by the Second Lien
Collateral Agent or any Second Lien Claimholders of the required payments of
interest and principal so long as such receipt is not the direct or indirect
result of the exercise by the Second Lien Collateral Agent or any Second Lien
Claimholders of rights or remedies as a secured creditor (including set-off or
recoupment) or enforcement of any Lien created under the Second Lien Collateral
Documents held by any of them.  Nothing
in this Agreement impairs or otherwise adversely affects any rights or remedies
the First Lien Collateral Agent or the First Lien Claimholders may have with
respect to the Collateral, including, without limitation, rights under Section 4.02.  In the event that any Second Lien Claimholder
becomes a judgment Lien creditor as a result of its enforcement of its rights
as an unsecured creditor, such judgment Lien shall be subject to the terms of
this Agreement for all purposes (including in 

 

20

 

relation to the Liens
securing the First Lien Obligations) to the same extent as all other Liens
securing the Second Lien Obligations (created pursuant to the Second Lien
Collateral Documents) subject to this Agreement.

 

SECTION 5.05               Control
Agent for Perfection.

 

(a)           The
First Lien Collateral Agent (on behalf of itself and the First Lien
Claimholders) and the Second Lien Collateral Agent (on behalf of itself and the
Second Lien Claimholders) each hereby appoint Royal Bank of Canada, as its
collateral agent (in such capacity, together with any successor in such
capacity appointed by the First Lien Collateral Agent and the Second Lien
Collateral Agent, the “Control Agent”) for the limited purpose of acting
as the agent on behalf of the First Lien Collateral Agent (on behalf of itself
and the First Lien Claimholders) and the Second Lien Collateral Agent (on
behalf of itself and the Second Lien Claimholders) with respect to the Control
Collateral for the purposes of perfecting the Liens of such parties on the
Control Collateral.  The Control Agent accepts
such appointment and agrees to hold the Control Collateral in its possession or
control (or in the possession or control of its agents or bailees) as Control
Agent for the benefit of the First Lien Collateral Agent (on behalf of itself
and the First Lien Claimholders) and the Second Lien Collateral Agent (on
behalf of itself and the Second Lien Claimholders) and any permitted assignee
of any thereof solely for the purpose of perfecting the security interest
granted to such parties in such Control Collateral, subject to the terms and
conditions of this Section 5.05.

 

(b)           The
Control Agent, the First Lien Collateral Agent (on behalf of itself and the
First Lien Claimholders), and the Second Lien Collateral Agent (on behalf of
itself and the Second Lien Claimholders) each hereby agrees that the First Lien
Collateral Agent shall have the sole and exclusive right and authority to give
instructions to, and otherwise direct, the Control Agent in respect of the
Control Collateral or any control agreement with respect to any Controlled
Accounts until the earlier of (i) the date upon which the Discharge of
First Lien Obligations shall have occurred and (ii) the Second Lien
Enforcement Date, and neither the Second Lien Collateral Agent nor any Second
Lien Claimholder will impede, hinder, delay or interfere with the exercise of
such rights by the First Lien Collateral Agent in any respect.  The Grantors hereby jointly and severally
agree to pay, reimburse, indemnify and hold harmless the Control Agent to the
same extent and on the same terms that the Grantors are required to do so for
the First Lien Collateral Agent in accordance with the Credit Agreement.

 

(c)           The
provisions of Article IX of the Credit Agreement and Article VII of
the Indenture shall inure to the benefit of the Control Agent in respect of
this Agreement, the First Lien Collateral Documents and the Second Lien
Collateral Documents and shall be binding upon all Grantors, all First Lien
Claimholders and all Second Lien Claimholders and upon the parties hereto in
such respect.  In furtherance and not in
derogation of the rights, privileges and immunities of the Control Agent
therein set forth:

 

(i)            The Control Agent is authorized to
take all such actions as are provided to be taken by it as Control Agent
hereunder, under any First Lien Collateral Document, under any Second Lien
Collateral Document or as instructed by the First Lien Collateral Agent or the
Second Lien Collateral Agent as provided herein, in each case together with all
other actions reasonably 

 

21

 

incidental thereto.  As to any matters not expressly provided for
herein (including, without limitation, the timing and methods of realization
upon the Collateral) or in one or more of the First Lien Collateral Documents
or Second Lien Collateral Documents, the Control Agent shall act or refrain
from acting in accordance with written instructions from the First Lien
Collateral Agent or the Second Lien Collateral Agent, as applicable, or, in the
absence of such instructions or provisions, in accordance with its reasonable
discretion.

 

(ii)           The Control Agent shall not be
responsible for the existence, genuineness or value of any of the Collateral or
for the validity, perfection, priority or enforceability of any Lien created
under and First Lien Collateral Document or Second Lien Collateral Document in
any of the Collateral, whether impaired by operation of law or by reason of any
action or omission to act on its part hereunder unless such action or omission
constitutes gross negligence or willful misconduct.  The Control Agent shall not have a duty to
ascertain or inquire as to the performance or observance of any of the terms of
this Agreement, any First Lien Collateral Document or any Second Lien Collateral
Document by any Grantor.  This Agreement
shall not subject the Control Agent to any obligation or liability except as
expressly set forth herein.  In
particular, the Control Agent shall have no duty to investigate whether the
obligations of any Grantor to the First Lien Collateral Agent or the Second
Lien Collateral Agent or any other First Lien Claimholder or Second Lien
Claimholder are in default or whether the First Lien Collateral Agent or the
Second Lien Collateral Agent is entitled under the First Lien Collateral
Documents or the Second Lien Collateral Documents, as applicable, or otherwise
to give any instructions or notice of exclusive control.  The Control Agent is fully entitled to rely
upon such instructions as it believes in good faith to have originated from the
First Lien Collateral Agent or the Second Lien Collateral Agent, as applicable.

 

(d)           Except
as set forth below, the Control Agent shall have no obligation whatsoever to
the First Lien Collateral Agent, the Second Lien Collateral Agent or any First
Lien Claimholder or any Second Lien Claimholder including, without limitation,
any obligation to assure that the Control Collateral is genuine or owned by any
Grantor or one of their respective Subsidiaries or to preserve rights or benefits
of any Person except as expressly set forth in this Section 5.05.  In acting on behalf of the Second Lien
Collateral Agent and the Second Lien Claimholders and the First Lien Collateral
Agent and the First Lien Claimholders, the duties or responsibilities of the
Control Agent under this Section 5.05 shall be limited solely to (i) obtaining
“control” under the UCC over each Controlled Account as contemplated by the
First Lien Collateral Documents and the Second Lien Collateral Documents in
accordance with Section 5.05(a), and (ii) delivering such
collateral (or otherwise allowing the Second Lien Collateral Agent to obtain
control of Control Collateral) as set forth in Section 5.05(f) and
5.05(g).  The rights of the Second
Lien Collateral Agent with respect to the Collateral shall at all times be
subject to the terms of this Agreement and to the First Lien Collateral Agent’s
rights under the First Lien Documents.

 

22

 

(e)           Neither
the Control Agent nor the First Lien Collateral Agent shall have by reason of
the Second Lien Documents or this Agreement or any other document a fiduciary
relationship in respect of the Second Lien Collateral Agent or any Second Lien
Claimholder.

 

(f)            Upon
the Discharge of First Lien Obligations (other than in connection with a
Refinancing of the First Lien Obligations), the Control Agent shall deliver to
the Second Lien Collateral Agent the Control Collateral together with any
necessary endorsements (or otherwise allow the Second Lien Collateral Agent to
obtain control of such Control Collateral) or as a court of competent
jurisdiction may otherwise direct and the Second Lien Collateral Agent shall
accept and succeed to the role of the Control Agent as the agent for perfection
on the Control Collateral.

 

(g)           The
Control Agent shall have an unfettered right to resign as Control Agent upon
thirty (30) days notice to the First Lien Collateral Agent and the Second Lien
Collateral Agent.  Upon the effective
date of such resignation, the Control Agent shall deliver the Control
Collateral to the successor Control Agent (or otherwise allow the successor
Control Agent to obtain control of such Control Collateral).  If upon the effective date of such resignation
no successor Control Agent has been appointed by the First Lien Collateral
Agent and the Second Lien Collateral Agent, the Control Agent shall deliver to
the First Lien Collateral Agent the Control Collateral together with any
necessary endorsements (or otherwise allow the First Lien Collateral Agent to
obtain control of such Control Collateral) or as a court of competent
jurisdiction may otherwise direct and the First Lien Collateral Agent shall
accept and succeed to the role of the Control Agent as the agent for perfection
on the Control Collateral.

 

SECTION 5.06               When
Discharge of First Lien Obligations Deemed to Not Have Occurred.  If at any time after the Discharge of First
Lien Obligations has occurred, the Company thereafter enters into any
Refinancing of any First Lien Document evidencing a First Lien Obligation,
which Refinancing is permitted by the Indenture, then such Discharge of First
Lien Obligations shall automatically be deemed not to have occurred for all
purposes of this Agreement (other than with respect to any actions taken prior
to the date of such designation as a result of the occurrence of such first
Discharge of First Lien Obligations), and the obligations under such
Refinancing First Lien Document shall automatically be treated as First Lien
Obligations for all purposes of this Agreement, including for purposes of the
Lien priorities and rights in respect of Collateral set forth herein, and the
First Lien Collateral Agent under such First Lien Documents shall be a First
Lien Collateral Agent for all purposes of this Agreement.  Upon receipt of a notice stating that the
Company has entered into a new First Lien Document (which notice shall include
the identity of the new collateral agent, such agent, the “New Agent”),
the Second Lien Collateral Agent shall promptly (a) enter into such
documents and agreements (including amendments or supplements to this Agreement
as the Company or such New Agent shall reasonably request in order to provide
to the New Agent the rights contemplated hereby, in each case consistent in all
material respects with the terms of this Agreement and (b) deliver to the
New Agent any Control Collateral held by it together with any necessary
endorsements (or otherwise allow the New Agent to obtain control of the Control
Collateral).  If the new First Lien Obligations
under the new First Lien Documents are secured by assets of the Grantors of the
type constituting Collateral that do not also secure the Second Lien
Obligations, then the Second Lien Obligations shall be secured at such time by
a Lien on such assets to the same extent provided in the Second Lien Collateral
Documents.

 

23

 

ARTICLE VI

INSOLVENCY OR LIQUIDATION PROCEEDINGS

 

SECTION 6.01               Finance
and Sale Issues.  Until the Discharge
of First Lien Obligations has occurred, if the Company or any other Grantor
shall be subject to any Insolvency or Liquidation Proceeding and the First Lien
Collateral Agent shall desire to permit the use of all or a portion of the
Collateral as cash collateral or to permit the Company or any other Grantor to
obtain financing, whether from the First Lien Claimholders or any other entity
under Section 363 or Section 364 of the Bankruptcy Code or any
similar Debtor Relief Law, which financing may include a Refinancing of the
First Lien Obligations (provided that (i) such financing or Refinancing
shall be secured by all or any portion of the Collateral (including assets that
but for the application of Section 552 of the Bankruptcy Code would be
Collateral) and (ii) any such financing, whether or not pursuant to Section 363
or Section 364 of the Bankruptcy Code or any similar Debtor Relief Law,
shall not be secured by any assets of any Grantor other than the Collateral)
(each, a “DIP Financing”), then the Second Lien Collateral Agent (on
behalf of itself and the Second Lien Claimholders) agrees that (a) it will
not in respect of the Collateral (i) raise any objection to, or otherwise
contest or interfere with, such use of cash collateral or DIP Financing, (ii) support
any other Person objecting to, such sale, use, or lease of cash collateral or
DIP Financing or (iii) request any form of adequate protection or any
other relief in connection therewith with respect to the Collateral (except as
agreed by the First Lien Collateral Agent or to the extent expressly permitted
by Section 6.03) and, to the extent the Liens in respect of the
Collateral securing the First Lien Obligations are subordinated to or pari
passu with such DIP Financing, the Second Lien Collateral Agent will
subordinate its Liens in the Collateral to (A) the Liens securing such DIP
Financing (and all obligations relating thereto), (B) any adequate
protection provided to the First Lien Claimholders and (C) any “carve-out”
for professional and United States Trustee fees, claims of reclamation
creditors or holders of claims under Section 503(b) of the Bankruptcy
Code agreed to by the First Lien Collateral Agent; and (b) notice received
two (2) calendar days prior to the entry of an order approving such usage
of cash collateral or approving such DIP Financing shall be adequate notice; provided
that the foregoing shall not prohibit the Second Lien Collateral Agent or the
Second Lien Claimholders from objecting solely to any provisions in any DIP
Financing relating to, describing or requiring any provision or content of a
plan of reorganization other than provisions solely requiring that the DIP
Financing be paid in full in cash.  The
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) agrees that it will raise no objection to or oppose a sale or
other disposition of any Collateral (and any post-petition assets subject to
adequate protection liens in favor of the First Lien Collateral Agent) free and
clear of its Liens or other claims under Section 363 of the Bankruptcy
Code if the Requisite Claimholders under the Credit Agreement have consented to
such sale or disposition of such assets so long as the respective interests of
the Second Lien Claimholders attach to the proceeds thereof, subject to the terms
of this Agreement.  If requested by the
First Lien Collateral Agent in connection therewith, the Second Lien Collateral
Agent shall affirmatively consent to such a sale or disposition.

 

SECTION 6.02               Relief
from the Automatic Stay.  Until the
Discharge of First Lien Obligations has occurred, the Second Lien Collateral
Agent (on behalf of itself and the Second Lien Claimholders) agrees that none
of them shall (a) seek relief from the automatic stay or any other stay in
any Insolvency or Liquidation Proceeding in respect of the Collateral, without
the prior written consent of the First Lien Collateral Agent and Requisite
Claimholders 

 

24

 

under the First Lien
Collateral Agreement, or (b) oppose any request by the First Lien
Collateral Agent or any First Lien Claimholder to seek relief from the
automatic stay or any other stay in any Insolvency or Liquidation Proceeding in
respect of the Collateral.

 

SECTION 6.03               Adequate
Protection.

 

(a)           The
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) agrees that none of them shall contest (or support any other
person contesting) (i) any request by the First Lien Collateral Agent or
the First Lien Claimholders for adequate protection in respect of the
Collateral or (ii) any objection by the First Lien Collateral Agent or the
First Lien Claimholders to any motion, relief, action or proceeding based on
the First Lien Collateral Agent or the First Lien Claimholders claiming a lack
of adequate protection in respect of the Collateral.  In any Insolvency or Liquidation Proceeding,
the Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) may seek adequate protection in respect of the Second Lien
Obligations and the Collateral, subject to the provisions of this Agreement,
only if (x) the First Lien Claimholders (or any subset thereof) are
granted adequate protection in the form of additional collateral including
replacement liens on post-petition collateral, and (y) such additional
protection is in the form of a Lien on such additional collateral, which Lien,
if granted, will be subordinated to the adequate protection Liens securing the
First Lien Obligations and the Liens securing any DIP Financing (and all
obligations relating thereto) on the same basis as the other Liens securing the
Second Lien Obligations are so subordinated to the Liens securing the First
Lien Obligations under this Agreement and the Liens securing any such DIP
Financing.  In the event the Second Lien
Collateral Agent (on behalf of itself or any of the Second Lien Claimholders)
seeks or requests adequate protection in respect of Second Lien Obligations and
the Collateral and such adequate protection is granted in the form of
additional collateral, then the Second Lien Collateral Agent (on behalf of
itself and the Second Lien Claimholders) agrees that the First Lien Collateral
Agent shall also be granted a Lien on such additional collateral as security
for the First Lien Obligations and for any DIP Financing and that any Lien on
such additional collateral securing the Second Lien Obligations shall be
subordinated to the Liens on such collateral securing the First Lien
Obligations and any DIP Financing (and all obligations relating thereto)
and to any other Liens granted to the First Lien Claimholders as adequate
protection on the same basis as the other Liens securing the Second Lien
Obligations are so subordinated to the Liens securing the First Lien
Obligations under this Agreement and the Liens securing DIP Financing.

 

(b)           Similarly,
if the First Lien Claimholders (or any subset thereof) are granted adequate
protection in the form of a superpriority claim, then the Second Lien
Collateral Agent (on behalf of itself or any of the Second Lien Claimholders)
may seek or request a superpriority claim, which superpriority claim will be
junior in all respects to the superpriority claim granted to the First Lien
Collateral Agent and the First Lien Claimholders, and, in the event that the
Second Lien Collateral Agent (on behalf of itself or any of the Second Lien
Claimholders) seeks or requests adequate protection in respect of Second Lien
Obligations and such adequate protection is granted in the form of a
superpriority claim, then the Second Lien Collateral Agent (on behalf of itself
and the Second Lien Claimholders) agrees that the First Lien Collateral Agent
and the providers of any DIP Financing also shall be granted a superpriority
claim, which superpriority claim will be senior in all respects to the superpriority
claim granted to the Second Lien Collateral Agent and the Second Lien
Claimholders.

 

25

 

SECTION 6.04               No
Waiver.  Nothing contained herein
shall prohibit or in any way limit the First Lien Collateral Agent or any First
Lien Claimholder from objecting in any Insolvency or Liquidation Proceeding or
otherwise to any action taken by the Second Lien Collateral Agent or any of the
Second Lien Claimholders in respect of the Collateral, including the seeking by
the Second Lien Collateral Agent or any Second Lien Claimholders of adequate
protection in respect of the Collateral or the asserting by the Second Lien
Collateral Agent or any Second Lien Claimholders of any of its rights and
remedies under the Second Lien Documents or otherwise; provided, however, that
this Section 6.04 shall not limit the rights of the Second Lien
Claimholders under the proviso in Section 3.01(a)(ii) or under
Section 6.03 or Section 6.08.

 

SECTION 6.05               Avoidance
Issues.  If any First Lien
Claimholder is required in any Insolvency or Liquidation Proceeding, or
otherwise, to turn over or otherwise pay to the estate of the Company or any
other Grantor any amount in respect of a First Lien Obligation (a “Recovery”),
then such First Lien Claimholders shall be entitled to a reinstatement of First
Lien Obligations with respect to all such recovered amounts.  If this Agreement shall have been terminated
prior to such Recovery, this Agreement shall be reinstated in full force and
effect, and such prior termination shall not diminish, release, discharge,
impair or otherwise affect the obligations of the parties hereto from such date
of reinstatement.  Collateral or proceeds
thereof received by the Second Lien Collateral Agent or any Second Lien Claimholder
after a Discharge of First Lien Obligations and prior to the reinstatement of
such First Lien Obligations shall be delivered to the First Lien Collateral
Agent upon such reinstatement in accordance with Section 4.02.

 

SECTION 6.06               Separate
Grants of Security and Separate Classification.  Each of the Grantors, the First Lien
Claimholders and the Second Lien Claimholders acknowledges and agrees that (a) the
grants of Liens pursuant to the First Lien Collateral Documents and the Second
Lien Collateral Documents constitute two separate and distinct grants of Liens
and (b) because of, among other things, their differing rights in the
Collateral, the Second Lien Obligations are fundamentally different from the
First Lien Obligations and must be separately classified in any plan of
reorganization proposed or adopted in an Insolvency or Liquidation Proceeding.

 

SECTION 6.07               Reorganization
Securities.  If, in any Insolvency or
Liquidation Proceeding, debt obligations of the reorganized debtor secured by
Liens upon any property of the reorganized debtor of the type contemplated by
the definition of “Collateral” are distributed pursuant to a plan of
reorganization or similar dispositive restructuring plan, both on account of
First Lien Obligations and on account of Second Lien Obligations, then, to the
extent the debt obligations distributed on account of the First Lien
Obligations and on account of the Second Lien Obligations are secured by Liens
upon the same property of the type contemplated by the definition of “Collateral”,
the provisions of this Agreement will survive the distribution of such debt
obligations pursuant to such plan and will apply with like effect to the Liens
securing such debt obligations.

 

SECTION 6.08               Post-Petition
Claims.

 

(a)           Neither
the Second Lien Collateral Agent nor any other Second Lien Claimholder shall
oppose or seek to challenge any claim by the First Lien Collateral Agent or 

 

26

 

any First Lien Claimholder for allowance in any Insolvency or
Liquidation Proceeding of First Lien Obligations consisting of post-petition
interest, fees, costs, charges or expenses to the extent of the value of the
First Lien Collateral Agent’s Lien on the Collateral held for the benefit of
the First Lien Claimholders, without regard to the existence of the Lien of the
Second Lien Collateral Agent on behalf of the Second Lien Claimholders on the
Collateral.

 

(b)           Neither
the First Lien Collateral Agent nor any other First Lien Claimholder shall
oppose or seek to challenge any claim by the Second Lien Collateral Agent or
any Second Lien Claimholder for allowance in any Insolvency or Liquidation
Proceeding of Second Lien Obligations consisting of post-petition interest,
fees, costs, charges or expenses to the extent of the value of the Lien of the
Second Lien Collateral Agent on behalf of the Second Lien Claimholders on the
Collateral (after taking into account the First Lien Obligations).

 

SECTION 6.09               Waiver.  The Second Lien Collateral Agent (on behalf
of itself and the Second Lien Claimholders) waives any claim it or they may
hereafter have against the First Lien Collateral Agent or any First Lien
Claimholder arising out of the election of the First Lien Collateral Agent or
any First Lien Claimholder of the application of Section 1111(b)(2) of
the Bankruptcy Code in respect of the Collateral, or out of any cash collateral
or financing arrangement or out of any grant of a security interest in
connection with the Collateral in any Insolvency or Liquidation Proceeding.

 

SECTION 6.10               Expense
Claims.  Neither the Second Lien
Collateral Agent nor any Second Lien Claimholder will (a) contest the
payment of fees, expenses or other amounts to the First Lien Collateral Agent
or any First Lien Claimholder under Section 506(b) of the Bankruptcy
Code or otherwise to the extent provided for in the First Lien Credit Agreement
or (b) assert or enforce, at any time prior to the Discharge of First Lien
Obligations, any claim under Section 506(c) of the Bankruptcy Code
senior to or on parity with the First Lien Obligations for costs or expenses of
preserving or disposing of any Collateral.

 

SECTION 6.11               Other
Matters.  To the extent that the
Second Lien Collateral Agent or any Second Lien Claimholder has or acquires
rights under Section 361, Section 363 or Section 364 of the
Bankruptcy Code with respect to any of the Collateral, the Second Lien
Collateral Agent (on behalf of itself and the Second Lien Claimholders) agrees,
unless the Discharge of the First Lien Obligations has occurred, not to assert
any of such rights without the prior written consent of the First Lien
Collateral Agent; provided that if requested by the First Lien
Collateral Agent, the Second Lien Collateral Agent shall timely exercise such
rights in the manner requested by the First Lien Collateral Agent, including
any rights to payments in respect of such rights.

 

SECTION 6.12               Effectiveness
in Insolvency or Liquidation Proceedings. 
This Agreement, which the parties hereto expressly acknowledge is a “subordination
agreement” under Section 510(a) of the Bankruptcy Code, shall be
effective before, during and after the commencement of an Insolvency or
Liquidation Proceeding.  All references
in this Agreement to any Grantor shall include such Person as a debtor-in-possession
and any receiver or trustee for such Person in any Insolvency or Liquidation
Proceeding.

 

27

 

SECTION 6.13               Limitation
of Applicability.  Notwithstanding
anything to the contrary in this Agreement, Article VI hereof shall
apply only with respect to the Collateral and shall not in any way affect the
rights of any of the Collateral Agent (as defined in the Shared Collateral
Agreement), the Note Trustee (as defined in the Shared Collateral Agreement) or
the holders of the 2014 Notes in their respective capacity as an unsecured
creditor or as a result of the Liens held by any of them on other assets of the
Company and the Guarantors not constituting Collateral.

 

ARTICLE VII

RELIANCE; WAIVERS; ETC.

 

SECTION 7.01               Non-Reliance.

 

(a)           The
consent by the First Lien Claimholders to the execution and delivery of the
Second Lien Documents and the grant to the Second Lien Collateral Agent on
behalf of the Second Lien Claimholders of a Lien on the Collateral and all
loans and other extensions of credit made or deemed made on and after the date
hereof by the First Lien Claimholders to the Grantors shall be deemed to have
been given and made in reliance upon this Agreement.

 

(b)           The
consent by the Second Lien Claimholders to the execution and delivery of the
First Lien Documents and the grant to the First Lien Collateral Agent on behalf
of the First Lien Claimholders of a Lien on the Collateral and all extensions
of credit made or deemed made on and after the date hereof by the Second Lien
Claimholders to the Grantors shall be deemed to have been given and made in
reliance upon this Agreement.

 

SECTION 7.02               No
Warranties or Liability.

 

(a)           The
First Lien Collateral Agent (on behalf of itself and the First Lien
Claimholders) acknowledges and agrees that each of the Second Lien Collateral
Agent and the Second Lien Claimholders have made no express or implied
representation or warranty, including with respect to the execution, validity,
legality, completeness, collectibility or enforceability of any of the Second
Lien Documents, the ownership of any Collateral or the perfection or priority
of any Liens thereon.  The Second Lien
Claimholders will be entitled to manage and supervise their respective
extensions of credit under the Second Lien Documents in accordance with law and
as they may otherwise, in their sole discretion, deem appropriate.

 

(b)           The
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders), acknowledges and agrees that the First Lien Collateral Agent and
the First Lien Claimholders have made no express or implied representation or
warranty, including with respect to the execution, validity, legality,
completeness, collectibility or enforceability of any of the First Lien
Documents, the ownership of any Collateral or the perfection or priority of any
Liens thereon.  The First Lien
Claimholders will be entitled to manage and supervise their respective loans
and extensions of credit under their respective First Lien Documents in
accordance with law and as they may otherwise, in their sole discretion, deem
appropriate.

 

(c)           The
Second Lien Collateral Agent and the Second Lien Claimholders shall have no
duty to the First Lien Collateral Agent or any of the First Lien Claimholders,
and the First Lien Collateral Agent and the First Lien Claimholders shall have
no duty to the Second 

 

28

 

Lien Collateral Agent or any of the Second Lien Claimholders, to act or
refrain from acting in a manner which allows, or results in, the occurrence or
continuance of an event of default or default under any agreements with the
Company or any other Grantor (including the First Lien Documents and the Second
Lien Documents), regardless of any knowledge thereof which they may have or be
charged with.

 

(d)           The
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) hereby waives all claims against any First Lien Claimholder and
the First Lien Collateral Agent, arising out of any and all actions which the
First Lien Claimholders or the First Lien Collateral Agent may take or permit
or omit to take with respect to the foreclosure upon, or sale, liquidation or
other disposition of, any Collateral. 
The First Lien Collateral Agent (on behalf of itself and the First Lien
Claimholders) agrees that the Second Lien Claimholders and the Second Lien
Collateral Agent have no duty to them in respect of the maintenance or
preservation of the Collateral, the Second Lien Obligations or otherwise.  The Second Lien Collateral Agent (on behalf
of itself and the Second Lien Claimholders) agrees that the First Lien Claimholders
and the First Lien Collateral Agent have no duty to them in respect of the
maintenance or preservation of the Collateral, the First Lien Obligations or
otherwise.

 

(e)           The
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) agrees not to assert and hereby waives, to the fullest extent
permitted by law, any right to demand, request, plead or otherwise assert or
otherwise claim the benefit of, any marshalling, appraisal, valuation or other
similar right that may otherwise be available under applicable law with respect
to the Collateral or any other similar rights a junior secured creditor may
have under applicable law.

 

SECTION 7.03               Obligations
Unconditional.  All rights,
interests, agreements and obligations of the First Lien Collateral Agent and
the First Lien Claimholders and the Second Lien Collateral Agent and the Second
Lien Claimholders, respectively, hereunder shall remain in full force and
effect irrespective of:

 

(a)           any lack of validity or
enforceability of any First Lien Documents or any Second Lien Documents or any
setting aside or avoidance of any Lien on the Collateral;

 

(b)           except as otherwise set forth in this
Agreement, any change in the time, manner or place of payment of, or in any
other terms of, all or any of the First Lien Obligations or Second Lien
Obligations, or any amendment or waiver or other modification, including any
increase in the amount thereof, whether by course of conduct or otherwise, of
the terms of any First Lien Document or any Second Lien Document;

 

(c)           any exchange of any security interest
in any Collateral or any other collateral, or any amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise, of all
or any of the First Lien Obligations or Second Lien Obligations or any
guarantee thereof;

 

(d)           the commencement of any Insolvency or
Liquidation Proceeding in respect of the Company or any other Grantor; or

 

29

 

(e)           any other circumstances which
otherwise might constitute a defense available to, or a discharge of, the
Company or any other Grantor in respect of the First Lien Obligations, or of
the Second Lien Collateral Agent or any Second Lien Claimholder in respect of
this Agreement.

 

SECTION 7.04               Certain
Notices.

 

(a)           Promptly
upon the satisfaction of the conditions set forth in clauses (a) through
(e) of the definition of Discharge of First Lien Obligations, the First
Lien Collateral Agent shall deliver written notice confirming same to the
Second Lien Collateral Agent provided that the failure to give any such notice
shall not result in any liability of the First Lien Collateral Agent or the
First Lien Claimholders hereunder or in the modification, alteration,
impairment, or waiver of the rights of any party hereunder.

 

(b)           Promptly
upon (or as soon as practicable following) the commencement by the First Lien
Collateral Agent of any enforcement action or the exercise of any remedy with
respect to any Collateral (including by way of a public or private sale of
Collateral), the First Lien Collateral Agent shall notify the Second Lien
Collateral Agent of such action; provided that the failure to give any
such notice shall not result in any liability of the First Lien Collateral
Agent or the First Lien Claimholders hereunder or in the modification,
alteration, impairment, or waiver of the rights of any party hereunder.

 

ARTICLE VIII

MISCELLANEOUS

 

SECTION 8.01               Inconsistencies
with Other Documents.  In the event
of any conflict or inconsistency between this Agreement and any First Lien
Collateral Document or any Second Lien Collateral Document, the terms of this
Agreement shall control.  The parties
hereto acknowledge that the terms of this Agreement are not intended (i) to
negate any specific rights granted to the Company in the First Lien Documents
and the Second Lien Documents or (ii) to negate the rights of the
Collateral Agent (as defined in the Shared Collateral Agreement), the Note
Trustee (as defined in the Shared Collateral Agreement) and/or the holders of
the 2014 Notes with respect to assets of the Company and the Grantors (other
than the Collateral) granted pursuant to the Indenture, the Shared Collateral
Agreement or other Collateral Documents (as defined in the Shared Collateral
Agreement).

 

SECTION 8.02               Effectiveness;
Continuing Nature of this Agreement; Severability.  This Agreement shall become effective when
executed and delivered by the parties hereto. 
This is a continuing agreement of lien subordination and the First Lien
Claimholders may continue, at any time and without notice to the Second Lien
Collateral Agent or any Second Lien Claimholder subject to the Second Lien
Documents, to extend credit and other financial accommodations and lend monies
to or for the benefit of the Company or any Grantor constituting First Lien
Obligations in reliance hereof, subject to the provisions of the First Lien
Documents and the Second Lien Documents. 
The Second Lien Collateral Agent (on behalf of itself and the Second
Lien Claimholders), hereby waives any right it may have under applicable law to
revoke this Agreement or any of the provisions of this Agreement, other than as
set forth in this Agreement.  This
Agreement shall survive, and shall continue in full force and effect, in 

 

30

 

any Insolvency or
Liquidation Proceeding.  Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall
not invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remainder of such provision or the remaining provisions hereof
or affecting the validity or enforceability of such provision in any other jurisdiction.  All references to the Company or any other
Grantor shall include the Company or such Grantor as debtor and
debtor-in-possession and any receiver or trustee for the Company or any other
Grantor (as the case may be) in any Insolvency or Liquidation Proceeding.  This Agreement shall terminate and be of no
further force and effect, (a) with respect to the Second Lien Collateral
Agent, the Second Lien Claimholders and the Second Lien Obligations, upon the
later of (i) the date upon which the obligations under the Indenture
terminate and payment has been made in full in cash of all other Second Lien
Obligations outstanding on such date and (ii) if there are other Second
Lien Obligations outstanding on such date, the date upon which such Second Lien
Obligations terminate and (b) with respect to the First Lien Collateral
Agent, the First Lien Claimholders and the First Lien Obligations, the date of
Discharge of First Lien Obligations, subject to the rights of the First Lien
Claimholders under Section 5.06 and Section 6.05.

 

SECTION 8.03               Amendments;
Waivers.  No amendment, modification
or waiver of any of the provisions of this Agreement by the Second Lien
Collateral Agent or the First Lien Collateral Agent shall be deemed to be made
unless the same shall be in writing signed on behalf of each party hereto or
its authorized agent and each waiver, if any, shall be a waiver only with
respect to the specific instance involved and shall in no way impair the rights
of the parties making such waiver or the obligations of the other parties to
such party in any other respect or at any other time.  Notwithstanding the foregoing, neither the
Company nor any Grantor shall have any right to consent to or approve any
amendment, modification or waiver of any provision of this Agreement except to
the extent its rights or obligations are directly affected.

 

SECTION 8.04               Information
Concerning Financial Condition of the Company and its Subsidiaries.

 

(a)           The
First Lien Collateral Agent and the First Lien Claimholders, on the one hand,
and the Second Lien Claimholders and the Second Lien Collateral Agent, on the
other hand, shall each be responsible for keeping themselves informed of (i) the
financial condition of the Company and its Subsidiaries and all endorsers
and/or guarantors of the First Lien Obligations or the Second Lien Obligations
and (ii) all other circumstances bearing upon the risk of nonpayment of
the First Lien Obligations or the Second Lien Obligations.  The First Lien Collateral Agent and the First
Lien Claimholders shall have no duty to advise the Second Lien Collateral Agent
or any Second Lien Claimholder of information known to it or them regarding
such condition or any such circumstances or otherwise.  In the event the First Lien Collateral Agent
or any of the First Lien Claimholders, in its or their sole discretion,
undertakes at any time or from time to time to provide any such information to
the Second Lien Collateral Agent or any Second Lien Claimholder, it or they
shall be under no obligation (w) to make, and the First Lien Collateral
Agent and the First Lien Claimholders shall not make, any express or implied
representation or warranty, including with respect to the accuracy,
completeness, truthfulness or validity of any such information so provided, (x) to
provide any additional information or to provide any such information on any
subsequent occasion, (y) to undertake any investigation or 

 

31

 

(z) to disclose any information which, pursuant to accepted or reasonable
commercial finance practices, such party wishes to maintain confidential or is
otherwise required to maintain confidential.

 

(b)           The
Grantors agree that any information provided to the First Lien Collateral
Agent, the Second Lien Collateral Agent, the Control Agent, any First Lien
Claimholder or any Second Lien Claimholder may be shared by such Person with
any First Lien Claimholder, any Second Lien Claimholder, the Control Agent, the
First Lien Collateral Agent or the Second Lien Collateral Agent notwithstanding
a request or demand by such Grantor that such information be kept confidential.

 

SECTION 8.05               Subrogation.  The Second Lien Collateral Agent (on behalf
of itself and the Second Lien Claimholders), hereby waives any rights of
subrogation it may acquire as a result of any payment hereunder until the
Discharge of First Lien Obligations has occurred.

 

SECTION 8.06               Application
of Payments.  All payments received
by the First Lien Collateral Agent or the First Lien Claimholders with respect
to the Collateral may be applied, reversed and reapplied, in whole or in part,
to such part of the First Lien Obligations provided for in the First Lien
Documents.  The Second Lien Collateral
Agent (on behalf of itself and the Second Lien Claimholders), assents to any
extension or postponement of the time of payment of the First Lien Obligations
or any part thereof and to any other indulgence with respect thereto, to any
substitution, exchange or release of any security which may at any time secure
any part of the First Lien Obligations (it being understood that the First Lien
Collateral Agent shall receive only assets of the type contemplated by the
definition of “Collateral” in consideration for such substitution, exchange or
release and that such assets shall be subject to the Lien of the Second Lien
Collateral Agent) and to the addition or release of any other Person primarily
or secondarily liable therefor.

 

SECTION 8.07               SUBMISSION
TO JURISDICTION.

 

(a)           EACH
PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK SITTING IN THE BOROUGH OF MANHATTAN, NEW YORK AND OF THE UNITED STATES
DISTRICT COURT SITTING IN THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH NEW YORK STATE COURTS OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, IN SUCH FEDERAL COURT.  EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER
FIRST LIEN DOCUMENT OR SECOND LIEN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE
FIRST LIEN COLLATERAL 

 

32

 

AGENT, THE SECOND LIEN COLLATERAL AGENT, ANY FIRST LIEN CLAIMHOLDER OR
SECOND LIEN CLAIMHOLDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER FIRST LIEN DOCUMENT OR SECOND LIEN
DOCUMENT AGAINST THE COMPANY OR ANY OTHER GRANTOR OR ITS PROPERTIES IN THE
COURTS OF ANY JURISDICTION.

 

(b)           EACH
PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY COURT
REFERRED TO IN PARAGRAPH (A) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

(c)           EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 8.08               Notices.  Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing.  Any notice shall be effective if delivered by
hand delivery or sent via telecopy, recognized overnight courier service or
certified mail, return receipt requested, and shall be presumed to be received
by a party hereto (i) on the date of delivery if delivered by hand or by
telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third (3rd) Business Day following the
date sent by certified mail, return receipt requested.  A telephonic notice to the First Lien
Collateral Agent or the Control Agent as understood by the First Lien
Collateral Agent or the Control Agent will be deemed to be the controlling and
proper notice in the event of a discrepancy with or failure to receive a confirming
written notice.

 

SECTION 8.09               Further
Assurances.  The First Lien
Collateral Agent (on behalf of itself and the First Lien Claimholders) and the
Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders), and the Company agree that each of them shall take such further
action and shall execute and deliver such additional documents and instruments
(in recordable form, if requested) as the First Lien Collateral Agent or the
Second Lien Collateral 

 

33

 

Agent may reasonably
request to effectuate the terms of and the lien priorities contemplated by this
Agreement.

 

SECTION 8.10               APPLICABLE
LAW.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.

 

SECTION 8.11               Binding
on Successors and Assigns.  This
Agreement shall be binding upon and inure to the benefit of the First Lien
Collateral Agent, the First Lien Claimholders, the Second Lien Collateral
Agent, the Second Lien Claimholders, the Control Agent and their respective
successors and assigns.

 

SECTION 8.12               Specific
Performance.  Each of the First Lien
Collateral Agent and the Second Lien Collateral Agent may demand specific
performance of this Agreement.  The First
Lien Collateral Agent (on behalf of itself and the First Lien Claimholders) and
the Second Lien Collateral Agent (on behalf of itself and the Second Lien
Claimholders) hereby irrevocably waive any defense based on the adequacy of a
remedy at law and any other defense which might be asserted to bar the remedy
of specific performance in any action which may be brought by any First Lien
Collateral Agent or the Second Lien Collateral Agent, as the case may be.

 

SECTION 8.13               Titles
and Captions.  Titles and Captions of
Articles, Sections and Subsections in this Agreement are for convenience only,
and neither limit nor amplify the provisions of this Agreement.

 

SECTION 8.14               Counterparts;
Integration.  This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract.

 

This
Agreement constitutes the entire contract among the parties relating to the
subject matter hereof and supersedes any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.

 

SECTION 8.15               Authorization.  By its signature, each Person executing this
Agreement on behalf of a party hereto represents and warrants to the other
parties hereto that it is duly authorized to execute this Agreement.

 

SECTION 8.16               No
Third Party Beneficiaries.  Nothing
in this Agreement express or implied shall be construed to confer upon any
Person (other than the parties hereto and their respective successors and
assigns permitted hereby) any legal or equitable right, remedy or claim under
or by reason of this Agreement.

 

SECTION 8.17               Provisions
Solely to Define Relative Rights. 
The provisions of this Agreement are and are intended solely for the
purpose of defining the relative rights with respect to the Collateral of the
First Lien Claimholders on the one hand and the Second Lien Claimholders on the
other hand.  Nothing in this Agreement is
intended to or shall impair the rights of the Company or any other Grantor, or
the obligations of the Company or any other 

 

34

 

Grantor, which are
absolute and unconditional, to pay the First Lien Obligations and the Second
Lien Obligations as and when the same shall become due and payable in
accordance with their terms.

 

[Signature Pages Follow]

 

35

 

IN
WITNESS WHEREOF, the parties hereto have executed this Intercreditor Agreement
as of the date first written above.

 

	
   

  	
  ROYAL BANK OF CANADA, as First Lien Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Ann Hurley

  
	
   

  	
   

  	
  Name: Ann Hurley

  
	
   

  	
   

  	
  Title: Manager, Agency

  

 

 

Notice Address:

 

200 Bay Street, 12th Floor

South Tower, Royal Bank Plaza

Toronto, Ontario

M5J 2W7

 

[Prospect Intercreditor
Agreement]

 

 

	
   

  	
  ROYAL BANK OF CANADA, as Control Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Ann Hurley

  
	
   

  	
   

  	
  Name: Ann Hurley

  
	
   

  	
   

  	
  Title: Manager, Agency

  

 

 

Notice Address:

 

200 Bay Street, 12th Floor

South Tower, Royal Bank Plaza

Toronto, Ontario

M5J 2W7

 

[Prospect Intercreditor
Agreement]

 

 

	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as Second Lien Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Michael M. Hopkins

  
	
   

  	
   

  	
  Name: Michael M. Hopkins

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

Notice Address:

 

Corporate
Trust Services

225
Asylum Street, 23rd Floor

Hartford,
CT  06103

Attention:  Michael M. Hopkins  (Prospect

Medical
Holdings 2009 Collateral Agency)

Telephone:  (860) 241-6820

Telecopier:  (860) 241-6881

 

[Prospect Intercreditor
Agreement]

 

 

	
   

  	
  PROSPECT MEDICAL HOLDINGS, INC., as the Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Samuel S. Lee

  
	
   

  	
   

  	
  Name: Samuel S. Lee

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

 

Notice Address:

 

10780
Santa Monica Blvd., Suite 400

Los
Angeles, CA 90025

Attention:  General Counsel

Telephone:  (310) 943-4500

Telecopier:  (310) 943-4501

 

 

	
   

  	
  SUBSIDIARIES:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALTA HOSPITALS SYSTEM, LLC, as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Samuel S. Lee

  
	
   

  	
   

  	
  Name: Samuel S. Lee

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALTA HOLLYWOOD HOSPITALS, INC., as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Samuel S. Lee

  
	
   

  	
   

  	
  Name: Samuel S. Lee

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALTA LOS ANGELES HOSPITALS, INC., as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Samuel S. Lee

  
	
   

  	
   

  	
  Name: Samuel S. Lee

  
	
   

  	
   

  	
  Title: President

  

 

[Prospect Intercreditor
Agreement]

 

 

	
   

  	
  GENESIS HEALTHCARE OF SOUTHERN CALIFORNIA, INC.,
  A MEDICAL GROUP,
  as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  POMONA VALLEY MEDICAL GROUP,
  INC., as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROMED HEALTH CARE
  ADMINISTRATORS,
  as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROMED HEALTH SERVICES COMPANY, as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT HOSPITAL ADVISORY SERVICES, INC., as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Chief Executive Officer

  

 

[Prospect Intercreditor
Agreement]

 

 

	
   

  	
  PROSPECT HEALTH SOURCE MEDICAL GROUP, INC., as Grantor

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL GROUP, INC., as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT MEDICAL SYSTEMS, INC.,
  as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT NWOC MEDICAL GROUP,
  INC., as
  Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PROSPECT PROFESSIONAL CARE MEDICAL GROUP, INC., as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  

 

[Prospect Intercreditor
Agreement]

 

 

	
   

  	
  STARCARE MEDICAL GROUP, INC., as Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Samuel S. Lee

  
	
   

  	
   

  	
  Name:
  Samuel S. Lee

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UPLAND MEDICAL GROUP, A PROFESSIONAL MEDICAL
  CORPORATION, as
  Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Samuel S. Lee

  
	
   

  	
   

  	
  Name: Samuel S. Lee

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

Notice Address:

 

c/o
Prospect Medical Holdings, Inc.

10780
Santa Monica Blvd., Suite 400

Los
Angeles, CA 90025

Attention:  General Counsel

Telephone:  (310) 943-4500

Telecopier:  (310) 943-4501

 

[Prospect Intercreditor
Agreement]Exhibit 10.6

 

CREDIT AGREEMENT

 

between

 

BROTMAN MEDICAL CENTER, INC.

 

and

 

such other Persons joined hereto as Borrowers from
time to time,

 

as Borrowers,

 

and

 

GEMINO HEALTHCARE FINANCE,
LLC,

 

as Lender

 

 

dated as of April 14, 2009

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  1.    DEFINITIONS, ACCOUNTING TERMS AND PRINCIPLES OF
  CONSTRUCTION

  	
  1

  
	
  1.01

  	
  Terms
  Defined

  	
  1

  
	
  1.02

  	
  Matters
  of Construction

  	
  1

  
	
  1.03

  	
  Accounting
  Principles

  	
  1

  
	
  1.04

  	
  Fiscal
  Quarters

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2.    THE LOANS

  	
  2

  
	
  2.01

  	
  Credit
  Facility - Description

  	
  2

  
	
  2.02

  	
  Funding
  Procedures

  	
  2

  
	
  2.03

  	
  Interest
  and Fees

  	
  3

  
	
  2.04

  	
  Additional
  Interest Provisions

  	
  4

  
	
  2.05

  	
  Payments

  	
  4

  
	
  2.06

  	
  Use
  of Proceeds

  	
  5

  
	
  2.07

  	
  Lockboxes
  and Collections

  	
  5

  
	
  2.08

  	
  Application
  of Proceeds of Collateral

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  3.    COLLATERAL

  	
  6

  
	
  3.01

  	
  Description:

  	
  6

  
	
  3.02

  	
  Extent
  of Security Interests

  	
  7

  
	
  3.03

  	
  Lien
  Documents

  	
  7

  
	
  3.04

  	
  Other
  Actions

  	
  7

  
	
  3.05

  	
  Searches

  	
  8

  
	
  3.06

  	
  Good
  Standing Certificates

  	
  8

  
	
  3.07

  	
  Filing
  Security Agreement

  	
  8

  
	
  3.08

  	
  Power
  of Attorney

  	
  8

  
	
  3.09

  	
  [Reserved]

  	
  8

  
	
  3.10

  	
  [Reserved]

  	
  8

  
	
  3.11

  	
  Credit
  Balances; Additional Collateral

  	
  8

  
	
  3.12

  	
  Reference
  to Other Loan Documents

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  4.    CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

  	
  9

  
	
  4.01

  	
  Resolutions,
  Opinions, and Other Documents

  	
  9

  
	
  4.02

  	
  Additional
  Preconditions to Loans

  	
  10

  
	
  4.03

  	
  Absence
  of Certain Events

  	
  11

  
	
  4.04

  	
  Compliance
  with this Agreement

  	
  11

  
	
  4.05

  	
  Closing
  Certificate

  	
  11

  
	
  4.06

  	
  Closing

  	
  11

  
	
  4.07

  	
  Non-Waiver
  of Rights

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  5.    REPRESENTATIONS AND WARRANTIES

  	
  12

  
	
  5.01

  	
  Organization
  and Validity

  	
  12

  
	
  5.02

  	
  Places
  of Business

  	
  12

  
	
  5.03

  	
  Healthcare
  Matters

  	
  12

  
	
  5.04

  	
  Pending
  Litigation

  	
  15

  

 

i

 

	
  5.05

  	
  Medicaid
  and Medicare Cost Reporting

  	
  15

  
	
  5.06

  	
  Title
  to Collateral

  	
  15

  
	
  5.07

  	
  Governmental
  Consent

  	
  15

  
	
  5.08

  	
  Taxes

  	
  15

  
	
  5.09

  	
  Financial
  Statements

  	
  15

  
	
  5.10

  	
  Full
  Disclosure

  	
  16

  
	
  5.11

  	
  Guarantees,
  Contracts, etc

  	
  16

  
	
  5.12

  	
  Compliance
  with Laws

  	
  16

  
	
  5.13

  	
  Other
  Associations

  	
  16

  
	
  5.14

  	
  Environmental
  Matters

  	
  16

  
	
  5.15

  	
  Capital
  Stock

  	
  17

  
	
  5.16

  	
  Lockboxes

  	
  17

  
	
  5.17

  	
  Borrowing
  Base Reports

  	
  17

  
	
  5.18

  	
  Security
  Interest

  	
  17

  
	
  5.19

  	
  Accounts

  	
  17

  
	
  5.20

  	
  ERISA

  	
  17

  
	
  5.21

  	
  Representations
  and Warranties for each Loan

  	
  18

  
	
  5.22

  	
  Interrelatedness
  of Borrowers

  	
  19

  
	
  5.23

  	
  [Reserved]

  	
  19

  
	
  5.24

  	
  [Reserved]

  	
  19

  
	
  5.25

  	
  Intellectual
  Property

  	
  19

  
	
  5.26

  	
  Solvency

  	
  20

  
	
  5.27

  	
  Schedules

  	
  20

  
	
  5.28

  	
  Location
  of Computerized Billing System; Books and Records

  	
  20

  
	
  5.29

  	
  No
  Documents or Correspondence Regarding CMS Claim

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  6.    AFFIRMATIVE COVENANTS

  	
  20

  
	
  6.01

  	
  Payment
  of Taxes and Claims

  	
  20

  
	
  6.02

  	
  Maintenance
  of Insurance, Financial Records and Existence

  	
  20

  
	
  6.03

  	
  Business
  Conducted

  	
  21

  
	
  6.04

  	
  Litigation

  	
  21

  
	
  6.05

  	
  Taxes

  	
  21

  
	
  6.06

  	
  Financial
  Covenants

  	
  21

  
	
  6.07

  	
  Financial
  and Business Information

  	
  21

  
	
  6.08

  	
  Officers’
  Certificates

  	
  22

  
	
  6.09

  	
  Inspection

  	
  22

  
	
  6.10

  	
  Tax
  Returns and Reports

  	
  23

  
	
  6.11

  	
  Material
  Adverse Developments

  	
  23

  
	
  6.12

  	
  Places
  of Business

  	
  23

  
	
  6.13

  	
  Notice
  of Action

  	
  23

  
	
  6.14

  	
  Verification
  of Information

  	
  23

  
	
  6.15

  	
  Receivables
  Tracking System

  	
  23

  
	
  6.16

  	
  [Reserved]

  	
  23

  
	
  6.17

  	
  Compliance
  with Laws

  	
  23

  
	
  6.18

  	
  Collateral
  Reporting

  	
  24

  
	
  6.19

  	
  Collateral

  	
  24

  
	
  6.20

  	
  [Reserved]

  	
  24

  

 

ii

 

	
  6.21

  	
  Additional
  Capital Infusion

  	
  24

  
	
  6.22

  	
  Potential
  CMS Liability

  	
  24

  
	
  6.23

  	
  Maintenance
  of Computerized Billing System; Books and Records

  	
  24

  
	
  6.24

  	
  Dissolution
  of Southern California Spine Institute, LLC

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  7.    NEGATIVE COVENANTS

  	
  25

  
	
  7.01

  	
  Merger,
  Consolidation, Dissolution or Liquidation

  	
  25

  
	
  7.02

  	
  Liens
  and Encumbrances

  	
  25

  
	
  7.03

  	
  Negative
  Pledge

  	
  25

  
	
  7.04

  	
  Transactions
  With Affiliates or Subsidiaries

  	
  25

  
	
  7.05

  	
  Guarantees

  	
  25

  
	
  7.06

  	
  Investments

  	
  25

  
	
  7.07

  	
  Indebtedness

  	
  26

  
	
  7.08

  	
  Loans
  to Other Persons

  	
  26

  
	
  7.09

  	
  Change
  in Ownership/Management

  	
  26

  
	
  7.10

  	
  Subordinated
  Debt Payments

  	
  27

  
	
  7.11

  	
  Distributions

  	
  27

  
	
  7.12

  	
  No
  Change in Business

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  8.    DEFAULT

  	
  27

  
	
  8.01

  	
  Events
  of Default

  	
  27

  
	
  8.02

  	
  Cure

  	
  29

  
	
  8.03

  	
  Rights
  and Remedies on Default

  	
  30

  
	
  8.04

  	
  [Reserved]

  	
  31

  
	
  8.05

  	
  Nature
  of Remedies

  	
  31

  
	
  8.06

  	
  Set-Off

  	
  31

  
	
  8.07

  	
  Application
  of Proceeds

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9    MISCELLANEOUS

  	
  31

  
	
  9.01

  	
  Governing
  Law

  	
  31

  
	
  9.02

  	
  Integrated
  Agreement

  	
  31

  
	
  9.03

  	
  Waiver
  and Indemnity

  	
  31

  
	
  9.04

  	
  Time

  	
  32

  
	
  9.05

  	
  Expenses
  of Lender

  	
  32

  
	
  9.06

  	
  Confidentiality

  	
  33

  
	
  9.07

  	
  Notices

  	
  33

  
	
  9.08

  	
  Brokerage

  	
  33

  
	
  9.09

  	
  Headings

  	
  33

  
	
  9.10

  	
  Survival

  	
  33

  
	
  9.11

  	
  Successors
  and Assigns

  	
  33

  
	
  9.12

  	
  Duplicate
  Originals

  	
  33

  
	
  9.13

  	
  Modification

  	
  33

  
	
  9.14

  	
  Signatories

  	
  34

  
	
  9.15

  	
  Third
  Parties

  	
  34

  
	
  9.16

  	
  Waivers

  	
  34

  
	
  9.17

  	
  Consent
  to Jurisdiction

  	
  34

  
	
  9.18

  	
  Waiver
  of Jury Trial

  	
  35

  

 

iii

 

	
  9.19

  	
  Publication

  	
  35

  
	
  9.20

  	
  Discharge
  of Taxes, Borrower’s Obligations, Etc

  	
  35

  
	
  9.21

  	
  Injunctive
  Relief

  	
  35

  
	
  9.22

  	
  Assignment
  or Syndication by Lender

  	
  35

  
	
  9.23

  	
  Severability

  	
  35

  
	
  9.24

  	
  Authority

  	
  35

  
	
  9.25

  	
  Usury
  Limit

  	
  36

  
	
  9.26

  	
  Termination

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  10.    SPECIAL INTER-BORROWER PROVISIONS

  	
  36

  
	
  10.01

  	
  Certain
  Borrower Acknowledgments and Agreements

  	
  36

  
	
  10.02

  	
  Maximum
  Amount of Joint and Several Liability

  	
  37

  
	
  10.03

  	
  Authorization
  of Borrower Representative by Borrowers

  	
  37

  
	
  10.04

  	
  Joint and Several Liability

  	
  37

  

 

iv

 

LIST OF EXHIBITS AND ANNEXES

 

	
  Exhibit 2.01(b)

  	
  Form of
  Revolving Note

  
	
  Exhibit 2.02(b)

  	
  Form of
  Borrowing Base Report

  
	
  Exhibit 2.02(c)

  	
  Loan
  Request

  
	
  Exhibit 4.01

  	
  Form of
  Opinion of Counsel

  
	
  Exhibit 4.02(c)

  	
  Notice
  Letter Re: Commercial Obligors

  
	
  Exhibit 4.02(d)

  	
  Notice
  Letter Re: Government Obligors

  
	
  Exhibit 6.08

  	
  Officer’s
  Certificate

  
	
  Exhibit 6.23

  	
  Form of
  Landlord Waiver

  
	
   

  	
   

  
	
  Annex
  A

  	
  Definitions

  

 

v

 

LIST OF
SCHEDULES

 

	
  Schedule
  1

  	
  Accounts

  
	
  Schedule
  5.01

  	
  Borrowers’
  States of Qualifications

  
	
  Schedule
  5.02

  	
  Jurisdictions
  of Organization/Chief Executive Office/Other Locations of Collateral

  
	
  Schedule
  5.03

  	
  Provider
  Identification Numbers

  
	
  Schedule
  5.04

  	
  Pending
  Litigation

  
	
  Schedule
  5.06

  	
  Permitted
  Liens

  
	
  Schedule
  5.09

  	
  Fiscal
  Year End

  
	
  Schedule
  5.11

  	
  Existing
  Guaranties, Investments and Borrowings

  
	
  Schedule
  5.13

  	
  Other
  Associations

  
	
  Schedule
  5.14

  	
  Environmental
  Matters

  
	
  Schedule
  5.15

  	
  Capital
  Stock

  
	
  Schedule
  5.25

  	
  Intellectual
  Property and General Intangibles

  
	
  Schedule
  7.04

  	
  Permitted
  Affiliate Transactions

  
	
  Schedule
  7.06

  	
  Investments

  
	
  Schedule
  7.07

  	
  Indebtedness

  

 

vi

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (“Agreement”) is dated
this 14th day of April, 2009, between BROTMAN MEDICAL CENTER, INC., a
California Corporation (“BMC”), and such other Persons joined hereto as
a Borrower from time to time (together with BMC, “Borrowers” and each
individually a “Borrower”), and GEMINO HEALTHCARE FINANCE, LLC, a
Delaware limited liability company, as lender (“Lender”).

 

RECITALS

 

WHEREAS, Borrowers have requested that Lender make
available to them, on a joint and several basis, a Credit Facility in the
maximum amount of $6,000,000.00 which will be secured by a first priority
perfected security interest in the Collateral (as defined below); and

 

WHEREAS, Lender is willing to make the Credit
Facility available to Borrowers pursuant to the terms and provisions
hereinafter set forth; and

 

WHEREAS, the parties desire to set forth the terms
and conditions of their relationship to writing.

 

NOW, THEREFORE, in consideration of the foregoing
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:

 

ARTICLE
1

 

DEFINITIONS,
ACCOUNTING TERMS AND

PRINCIPLES OF CONSTRUCTION

 

1.01         Terms
Defined. As used in this Agreement, those terms set forth in Annex A shall
have the respective meanings set forth therein.

 

1.02         Matters
of Construction. The terms “herein,” “hereof” and “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. The words “include”, “includes”
and “including” when used in any Loan Document, shall be deemed to be followed
by the phrase “without limitation”. Any pronoun used shall be deemed to cover
all genders. Wherever appropriate in the context, terms used herein in the
singular also include the plural and vice versa. All references to statutes and
related regulations shall include any amendments of same and any successor statutes
and regulations. Unless otherwise provided, all references to any instruments
or agreements to which Lender and/or, where applicable, a Borrower, is a party,
including, without limitation, references to any of the Loan Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.

 

1.03         Accounting
Principles. Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, this shall be done in accordance with GAAP, to the extent
applicable, except as otherwise expressly provided in this Agreement.

 

1.04         Fiscal
Quarters. For the purposes hereof, “fiscal quarter” shall mean each
quarterly accounting period during any fiscal year; provided, that, all
references to the fiscal quarter ending December 31, March 31, June 30
or September 30 shall mean the first, second, third or fourth fiscal quarter
of the applicable fiscal year, respectively, irrespective of the actual date on
which such fiscal quarter may end.

 

 

ARTICLE 2

 

THE LOANS

2.01                           Credit Facility -
Description

 

(a)           Subject
to the terms and conditions of this Agreement, Lender hereby establishes for
the joint and several benefit of Borrowers, a credit facility (“Credit
Facility”) which shall include advances which may be extended by Lender to
or for the benefit of Borrowers from time to time hereunder in the form of
revolving loans (“Revolving Loans”). The aggregate outstanding amount of
all Revolving Loans, shall not at any time exceed the lesser of (i) Maximum
Credit Limit and (ii) the Borrowing Base. In no event shall the initial
principal amount of any Revolving Loan be less than $25,000.00. Subject to such
limitation, the outstanding balance of all Revolving Loans may fluctuate from
time to time, to be reduced by repayments made by Borrowers, to be increased by
future Revolving Loans which may be made by Lender. If the aggregate outstanding
amount of all Revolving Loans exceeds the lesser of (i) the Borrowing Base
or (ii) the Maximum Credit Limit, Borrowers shall immediately repay such
excess in full. Lender has the right at any time, and from time to time, to set
aside cash reserves against the Borrowing Base in such amounts as it may deem
appropriate in Lender’s reasonable discretion (“Reserves”). The
Obligations of Borrowers under the Credit Facility and this Agreement are joint
and several and shall at all times be absolute and unconditional.

 

(b)           At
Closing, Borrowers shall execute and deliver a promissory note to Lender in the
principal amount of Six Million and No/100 Dollars ($6,000,000.00) (as may be
amended, modified or replaced from time to time, the “Revolving Note”).
The Revolving Note shall evidence Borrowers’ joint and several, absolute and
unconditional obligation to repay Lender for all Revolving Loans made by Lender
under the Credit Facility, with interest as herein and therein provided. Each
and every Revolving Loan under the Credit Facility shall be deemed evidenced by
the Revolving Note, which is deemed incorporated herein by reference and made a
part hereof. The Revolving Note shall be substantially in the form set forth in
Exhibit 2.01(b) attached hereto and made a part hereof.

 

(c)           [Reserved]

 

(d)           The
initial term of the Credit Facility (“Initial Term”) shall expire on the
earlier of (i) April 14, 2012, and (ii) the JHA Maturity Date.
All Loans shall be repaid on or before the earlier of the last day of the
Initial Term or upon termination of the Credit Facility or termination of this
Agreement (“Maturity Date”). After the Maturity Date no further
Revolving Loans shall be available from Lender.

 

(e)           From
time to time, upon not less than three (3) Business Days notice to
Borrowers, Lender may adjust the Advance Rate in order to reflect, in Lender’s
sole discretion, the experience with Borrowers (including by way of
illustration, to adjust for any known or potential offsets by Medicare or
Medicaid) or the aggregate amount or percentage of the Collections with respect
to the Accounts.

 

2.02                           Funding Procedures.

 

(a)           Subject
to the terms and conditions of this Agreement and so long as no Event of
Default or Unmatured Event of Default has occurred hereunder, Lender will make
Revolving Loans to Borrowers upon request. Borrowers shall provide Lender with
a signed Borrowing Base Report on a specified Business Day of each week (such
day to be mutually agreeable to Borrowers and Lender (such date shall be
referred to herein as the “Settlement Date”, whether or not Borrowers
have requested a Revolving Loan to be made on such date)). Borrowers may
request a Revolving Loan on the Settlement Date or any other day of the week
(such day along with the Settlement Date are referred to herein as the “Funding
Date”). Whether or not Borrowers have requested a Revolving Loan to be made
on such date, Lender may at any time deduct from the Borrowing Base an amount
equal to all fees, Expenses, interest or other amounts due and payable to
Lender hereunder, and such deduction shall be deemed to be a Revolving Loan
hereunder.

 

(b)           Not
later than 2:00 p.m. (Eastern Time) two (2) Business Days prior to
each Settlement Date (“Download Date”), Borrowers will deliver to Lender
the computer file data associated with the Accounts, 

 

2

 

which shall include without limitation, the
information (including changes in the Obligor reimbursement rates and changes
in federal or state laws or regulations affecting payment for medical
services), required by Lender to enable Lender to process and value the
outstanding Accounts of Borrowers, as well as bill and collect such Accounts
following an Event of Default (“Accounts Detail File”). Upon completion
of the processing of the data with respect to such Accounts, Lender or its
agent will prepare and deliver to Borrowers by no later than 12:00 p.m.
(Eastern Time) on the second Business Day following the Download Date (or if
such Accounts Detail File is not delivered until after 2:00 p.m. (Eastern
Time) on the Download Date, the third Business Day following the Download
Date), a report regarding the Borrowing Base then in effect, which shall be
substantially in the form of Exhibit 2.02(b) hereto (a “Borrowing
Base Report”). No later than 2:00 p.m. (Eastern Time) one (1) Business
Day prior to the Settlement Date, Borrowers will deliver to Lender a cash
posting file.

 

(c)           If
Borrowers request that a Revolving Loan be made on any date other than the
Settlement Date, Borrowers shall deliver to Lender an executed Borrowing Base
Report and a written request for such Loan substantially in the form of Exhibit 2.02(c) hereto
(a “Loan Request”). The Borrowing Base Report and Loan Request may be
delivered via telecopy and Borrowers acknowledge that Lenders may rely on
Borrowers signatures by facsimile, which shall be legally binding upon
Borrowers.

 

(d)           Subject
to the terms and conditions of this Agreement, if the Borrowing Base Report (if
applicable) and Loan Request are delivered to Lender before 3:00 p.m.
(Eastern Time) on the Funding Date, Lender will advance on the Funding Date (or
the next Business Day if the Borrowing Base Report and Loan Request are
delivered after 3:00 p.m. (Eastern Time)) to Borrowers a Revolving Loan in
the amount equal to the lesser of (i) the amount of the Revolving Loan
requested by Borrowers in the Loan Request, or (ii) the Borrowing Base
Excess as of such date.

 

(e)           Lender’s
determination of the Estimated Net Value of the Eligible Accounts and other
amounts to be determined or calculated under this Agreement shall, in the
absence of manifest error, be binding and conclusive.

 

2.03                           Interest and Fees.

 

(a)           Each
Revolving Loan shall bear interest on the outstanding principal amount thereof
from the date made until such Revolving Loan is paid in full, at a rate per
annum equal to the LIBOR Rate plus seven percent (7.0%) (the “Interest Rate”).
The interest rate on all amounts outstanding under the Credit Facility shall be
adjusted daily based on the LIBOR Rate. If at any time the outstanding balance
of the Revolving Loans is less than $2,000,000.00 (the “Minimum Balance”),
Borrowers shall pay interest at a rate per annum equal to the Interest Rate
times the Minimum Balance until such time as the outstanding balance of the
Revolving Loans is $2,000,000.00 or more.

 

(b)           If
any Event of Default shall occur and be continuing, the rate of interest
applicable to each Loan then outstanding shall be the Default Rate. The Default
Rate shall apply from the date of the Event of Default until the date such
Event of Default is waived, and interest accruing at the Default Rate shall be
payable upon demand.

 

(c)           Should
the Credit Facility be terminated for any reason on or prior to the last day of
the Initial Term, in addition to repayment of all Obligations then outstanding
and termination of Lender’s commitment hereunder, Borrowers shall
unconditionally be obligated to pay at the time of such termination, a fee (“Revolving
Termination Fee”) in an amount equal to the following percentage of the
Revolving Loan Commitment: three
percent (3%), if such early termination occurs on or prior to the first
anniversary of the date of this Agreement; two percent (2%) if such early
termination occurs after the first anniversary date of this Agreement but on or
prior to the second anniversary of the date of this Agreement; and one percent
(1%) if such early termination occurs after the second anniversary of the date
of this Agreement but on or prior to 180 days after the second anniversary of
the date of this Agreement.

 

Borrowers acknowledge that the Revolving Termination
Fee is an estimate of Lender’s damages in the event of early termination and is
not a penalty. In the event of termination of the Credit Facility, all of the
Obligations shall be immediately due and payable upon the termination date
stated in any notice of termination. All

 

3

 

 

 

undertakings, agreements, covenants,
warranties and representations of Borrowers contained in the Loan Documents
shall survive any such termination, and Lender shall retain its security
interests in the Collateral and all of its rights and remedies under the Loan
Documents notwithstanding such termination until Borrowers have paid the
Obligations to Lender, in full, in immediately available funds, together with
the applicable Revolving Termination Fee, if any. Notwithstanding the payment
in full of the Obligations, Lender shall not be required to terminate its
security interests in the Collateral unless, with respect to any loss or damage
Lender may incur as a result of dishonored checks or other items of payment
received by Lender from Borrowers or any Obligor and applied to the
Obligations, Lender shall, at its option, (i) have received a written
agreement executed by Borrowers and by any Person whose loans or other advances
to Borrowers are used in whole or in part to satisfy the Obligations,
indemnifying Lender from any such loss or damage; or (ii) have retained
such monetary reserves and security interests on the Collateral for such period
of time as Lender, in its reasonable discretion, may deem necessary to protect
Lender from any such loss or damage.

 

(d)           Borrowers shall unconditionally pay to Lender a fee
(“Unused Line Fee”) equal to one-half percent (0.5%) per annum of the
unused portion of the Credit Facility. The unused portion of the Credit
Facility shall be the difference between the Revolving Loan Commitment and the
Average Outstanding Balance of the Revolving Loans during each month (or
portion thereof, as applicable), which fees shall be calculated and payable
monthly, in arrears, and shall be due and payable on the first calendar day of
each month.

 

(e)           Borrowers shall unconditionally pay to Lender a collateral monitoring fee
(“Collateral Monitoring Fee”) equal to one-half percent (0.5%) per annum
of the Average Outstanding Balance of the Revolving Loans. The Collateral
Monitoring Fee shall be calculated and payable monthly, in arrears, and shall
be due and payable on the first calendar day of each month.

 

(f)            Lender has
fully earned a non-refundable commitment fee (“Commitment Fee”) equal to
One Hundred Twenty Thousand and No/Dollars ($120,000.00). Borrowers agree and
acknowledge that the Commitment Fee in its entirety is due and payable upon
Closing.

 

2.04         Additional Interest Provisions.

 

(a)           Calculation of Interest. Interest on
the Loans shall be based on a year of three hundred sixty (360) days and
charged for the actual number of days elapsed.

 

(b)           Continuation of Interest Charges. All
contractual rates of interest chargeable on outstanding Loans shall continue to
accrue and be paid even after default, maturity, acceleration, termination of the
Credit Facility, judgment, bankruptcy, insolvency proceedings of any kind or
the happening of any event or occurrence similar or dissimilar.

 

(c)           Applicable Interest Limitations. In no
contingency or event whatsoever shall the aggregate of all amounts deemed
interest hereunder and charged or collected pursuant to the terms of this
Agreement exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such court determines Lender has charged or received interest
hereunder in excess of the highest applicable rate, Lender shall, in its sole
discretion, apply and set off such excess interest received by Lender against
other Obligations due or to become due and such rate shall automatically be
reduced to the maximum rate permitted by such law.

 

2.05         Payments.

 

(a)           All accrued interest on the Revolving Loans shall be
due and payable monthly in arrears on the first calendar day of each month. Any
accrued Unused Line Fees and Collateral Monitoring Fees shall be due and
payable monthly on the first calendar day of the following calendar month.

 

(b)           If at any time the aggregate principal amount of all
Revolving Loans outstanding exceeds the lesser of (i) the Borrowing Base
then in effect, or (ii) the Maximum Credit Limit, Borrowers shall
immediately make such principal prepayments of the Revolving Loans in the
amount of such excess.

 

4

 

(c)           The entire principal balance of all of the Revolving
Loans, together with all unpaid accrued interest thereon and the Revolving
Termination Fee, if any, and any unpaid Unused Line Fees, shall be due and
payable on the Maturity Date.

 

(d)           Subject to the terms of Sections 2.03(c) and
2.03(d) hereof, Borrowers may prepay the principal of the Loans and
terminate the Credit Facility on any Settlement Date by giving Lender written
notice of the proposed prepayment at least two (2) Business Days prior to
such Settlement Date.

 

(e)           [Reserved]

 

(f)            If any Borrower sells any of the Collateral, such
Borrower shall pay to Lender a sum equal to the proceeds received by such
Borrower from such sale, net of all reasonable costs, expenses and taxes
incurred by such Borrower in connection with such sale, as approved by Lender
in its sole discretion, or as otherwise expressly authorized by this Agreement,
as and when received by such Borrower and as a mandatory prepayment of the
outstanding Loans, until all Obligations are paid and satisfied in full.

 

(g)           Monthly, on the first calendar day of each month,
all payments and prepayments shall be applied first to any unpaid interest,
fees, and thereafter to the principal of the Loans and to other amounts due
Lender, in the order provided in Section 2.07(f) hereof. Except as
otherwise provided herein, all payments of principal, interest, fees, or other
amounts payable by Borrowers hereunder shall be remitted to Lender in
immediately available funds not later than 11:00 a.m. (Eastern Time) on
the day due. Whether or not Borrowers have requested a Revolving Loan to be
made on such date, Borrowers authorize Lender to charge interest, fees and all
other amounts due to Lender, to Borrowers’ account, and such charge shall be
deemed to be a Revolving Loan as of the date such payment is due.

 

2.06         Use of Proceeds. The extensions of credit
under and proceeds of the Credit Facility shall be used (a) to repay existing Indebtedness of Borrowers, (b) to
make payments as provided under the Plan of Reorganization, (c) to pay amounts
owing under the Credit Facility, and (d) for working capital and general
business purposes.

 

2.07         Lockboxes and Collections.

 

(a)           Borrowers will enter into Depository Agreements in
respect of the Government Lockbox and Commercial Lockbox in such form and with
the Lockbox Bank or such other bank as is acceptable to Lender. Borrowers shall
instruct the Lockbox Bank maintaining the Government Lockbox that all
collections sent to the Government Lockbox shall be deposited into a bank
account at the Lockbox Bank in which Lender has a first priority perfected
security interest. Borrower shall instruct the Lockbox Bank maintaining the
Commercial Lockbox that all Collections sent to the Commercial Lockbox shall be
deposited into a bank account at the Lockbox Bank in the name of Lender.
Borrowers shall also instruct the Lockbox Bank as described further in the
Depository Agreements to initiate a daily transfer of all available funds to an
account of Lender to be designated by Lender (“Collection Account”).

 

(b)           Borrowers will cause all Collections with respect to
all of the Accounts, other than Government Accounts and Accounts which pay into
the Risk Pool Account, to be sent directly to the Commercial Lockbox, and will
cause all Collections with respect to all of the Government Accounts to be sent
directly to the Government Lockbox (which may be effectuated by electronic
transfer directly to the Government Lockbox). In the event that any Borrower
receives any Collections that should have been sent to the Commercial Lockbox
or the Government Lockbox, such Borrower will, promptly upon receipt and in any
event within one Business Day of receipt, forward such Collections directly to
the Commercial Lockbox or Government Lockbox, as applicable, in the form
received, and if requested by Lender, promptly notify Lender of such event.
Until so forwarded, such Collections not generated from Government Accounts
shall be held in trust for the benefit of Lender.

 

(c)           No Borrower shall withdraw any amounts from the
accounts into which the Collections remitted to the Commercial Lockbox are
deposited nor shall any Borrower change the procedures under the agreements
governing the Commercial Lockbox and related accounts.

 

5

 

(d)           Borrowers will cooperate with Lender in the
identification and reconciliation on a daily basis of all amounts received in
the Commercial Lockbox and the Government Lockbox. If more than five percent
(5%) of the Collections since the most recent Settlement Date is not identified
or reconciled to the satisfaction of Lender within ten (10) Business Days
of receipt, Lender shall not be obligated to make further Loans until such
amount is identified or is reconciled to the reasonable satisfaction of Lender,
as the case may be. In addition, if any such amount cannot be identified or
reconciled to the satisfaction of Lender, Lender may utilize its own staff or,
if it deems necessary, engage an outside auditor, in either case at Borrowers’
expense (which in the case of Lender’s own staff shall be in accordance with
Lender’s then prevailing customary charges (plus expenses), to make such
examination and report as may be necessary to identify and reconcile such
amount.

 

(e)           No Borrower will send to or deposit in the
Commercial Lockbox or the Government Lockbox any funds other than payments made
with respect to Accounts.

 

(f)            So long as no Event of Default has occurred and is
continuing, once a week, Lender shall cause all Collections deposited and/or
transferred to the Collection Account to be applied in the following order of
priority:

 

(i)            to Lender, any interest due and payable hereunder;

 

(ii)           to Lender, any fees, costs and Expenses of Lender
required to be paid or reimbursed by Borrowers under this Agreement or under
any of the other Loan Documents;

 

(iii)          to Lender, the amount of any Borrowing Base
Deficiency, if any; and

 

(iv)          to Lender, to be applied to the principal amount
outstanding of the Revolving Loans.

 

In addition, promptly upon request of Borrowers,
Lender shall disburse to Borrowers the amount, if any, by which the collected
balance in the Collection Account exceeds the aggregate outstanding principal
amount of the Revolving Loans and all interest and other amounts that will be
payable on or before the next Settlement Date.

 

2.08         Application of Proceeds of Collateral.

 

(a)           Unless this Agreement expressly provides otherwise,
so long as no Event of Default shall have occurred and remain outstanding,
Lender agrees to apply all Collections as set forth in Section 2.07(f) hereof.

 

(b)           If an Event of Default shall have occurred and
remain outstanding, Lender may apply Collections, any other proceeds of
Collateral and all other payments received by Lender to the payment of the
Obligations in such manner and in such order as Lender may elect in its sole
discretion.

 

ARTICLE
3

 

COLLATERAL

 

3.01         Description.

 

To secure the prompt payment and performance in full
when due, whether by lapse of time, acceleration, mandatory prepayment or
otherwise, of the Obligations, each Borrower hereby grants to the Lender a
continuing security interest in, and a right to set off against, any and all
right, title and interest of such Borrower in and to all of the following,
whether now owned or existing or owned, acquired, or arising hereafter (collectively,
the “Collateral”): (a) all Accounts; (b) all cash and currency
(other than cash and currency deposited in the Excluded Deposit Accounts); (c) all
Documents and General Intangibles directly related to the Accounts; (d) all
Deposit Accounts (other than the Excluded Deposit Accounts); and (e) all
Proceeds of any and all of the foregoing.

 

All capitalized terms in this Section 3.01
shall have the meanings set forth in the Uniform Commercial Code unless
otherwise defined herein.

 

Notwithstanding anything to the contrary
contained herein, the security interests granted under this Agreement shall not
extend to any lease, license or other contract of a Borrower if the grant of a
security interest in such lease, license or contract in the manner contemplated
by this Agreement is prohibited by the terms of such 

 

6

 

lease, license or contract
or by Applicable Law and would result in the termination of such lease, license
or contract or give the other parties thereto the right to terminate,
accelerate or otherwise adversely alter such Borrower’s rights, titles and
interests thereunder (including upon the giving of notice or the lapse of time
or both); provided that (i) any such limitation described in the
foregoing clause on the security interests granted hereunder shall only apply
to the extent that any such prohibition could not be rendered ineffective
pursuant to the UCC or any other Applicable Law (including Debtor Relief Laws)
or principles of equity and (ii) in the event of the termination or
elimination of any such prohibition or the requirement for any consent
contained in such lease, license or contract or in any Applicable Law, to the
extent sufficient to permit any such item to be Collateral hereunder, or upon
the granting of any such consent, or waiving or terminating any requirement for
such consent, a security interest in such lease, license or contract shall be
automatically and simultaneously granted hereunder and shall be included as
Collateral hereunder.

 

Borrowers and the Lender hereby acknowledge and
agree that the security interest created hereby in the Collateral (i) constitutes
continuing collateral security for all of the Obligations, whether now existing
or hereafter arising and (ii) is not to be construed as an assignment of
any copyrights, copyright licenses, patents, patent licenses, trademarks or
trademark licenses.

 

3.02         Extent of Security Interests. The security
interest granted in Section 3.01 hereof shall extend and attach to all Collateral
which is presently in existence or hereafter acquired and which is owned by any
Borrower or in which any Borrower has any interest, whether held by such
Borrower or by others for such Borrower’s account, and wherever located.

 

3.03         Lien Documents. At Closing and thereafter
as Lender deems necessary, each Borrower shall execute (if required) and
deliver to Lender, or shall have executed (if required) and delivered (all in
form and substance reasonably satisfactory to Lender):

 

(a)           Financing Statements. Financing statements
pursuant to the UCC, which Lender may file in the jurisdiction where any
Borrower is organized and in any other jurisdiction that Lender deems
appropriate; and

 

(b)           Other Agreements. Any other agreements,
documents, instruments and writings, including, without limitation, security
agreements, deposit account control agreements, deeds of trust, mortgages, and
assignment agreements, reasonably required by Lender to evidence, perfect or
protect Lender’s liens and security interest in the Collateral or as Lender may
reasonably request from time to time, including, without limitation, a waiver
agreement from each landlord with respect to any real property of any Borrower,
in form and substance satisfactory to Lender.

 

3.04         Other Actions.

 

(a)           In addition to the foregoing, each Borrower shall do
anything further that may be lawfully and reasonably required by Lender to
perfect its security interests and to effectuate the intentions and objectives
of this Agreement, including, but not limited to, the execution (if required)
and delivery of continuation statements, amendments to financing statements,
security agreements, contracts and any other documents required hereunder. At
Lender’s request, each Borrower shall also immediately deliver (with execution
by such Borrower of all necessary documents or forms to reflect Lender’s
security interest therein) to Lender, all items for which Lender must or may
receive possession to obtain a perfected security interest.

 

(b)           Lender is hereby authorized to file financing
statements naming any Borrower as debtor, in accordance with the Uniform
Commercial Code, and if necessary, to the extent applicable, to otherwise file
financing statements without any Borrower’s signature if permitted by law. Each
Borrower hereby authorizes Lender to file all financing statements and
amendments to financing statements describing the Collateral in any filing
office as Lender, in its sole, discretion may determine, containing language
indicating that the acquisition by a third party of any right, title or
interest in or to the Collateral without Lender’s consent shall be a violation
of Lender’s rights. Borrowers agree to comply with the requirements of all
federal and state laws and requests of Lender in order for Lender to have and
maintain a valid and perfected first priority security interest in the
Collateral including, without limitation, executing and causing any other
Person to execute such documents as Lender may require to obtain Control (as
defined in the UCC) over all Deposit Accounts (as defined in the UCC), other
than the Excluded Deposit Accounts.

 

7

 

3.05         Searches. Lender shall, prior to or
at Closing, and thereafter as Lender may reasonably determine from time to time,
at Borrowers’ expense, obtain the following searches (the results of which are
to be consistent with the warranties made by Borrowers in this Agreement):

 

(a)           UCC Searches. With respect to each
Borrower, UCC searches with the Secretary of State and local filing office of
each state where such Borrower maintains its chief executive office, its
jurisdiction of organization and/or a place of business or assets;

 

(b)           Judgments, Etc. Judgment, federal tax lien
and corporate tax lien searches against each Borrower, in all applicable filing
offices of each state searched under Section 3.05(a) hereof.

 

3.06         Good Standing Certificates. Borrowers
shall, prior to or at Closing and at its expense, obtain and deliver to Lender
good standing or equivalent certificates showing each Borrower to be in good
standing in its state of incorporation or organization and authorized to
transact business as a foreign corporation or entity in each other state or
foreign country in which it is doing and presently intends to do business for
which such Borrower’s failure to be so qualified could reasonably be expected
to cause a Material Adverse Effect.

 

3.07         Filing Security Agreement. A carbon,
photographic or other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of a financing
statement.

 

3.08         Power of Attorney. Each of the officers of
Lender is hereby irrevocably made, constituted and appointed the true and
lawful attorney for each Borrower (without requiring any of them to act as
such) with full power of substitution to do the following (such power to be
deemed coupled with an interest): (a) endorse the name of such Borrower
upon any and all checks, drafts, money orders and other instruments for the
payment of monies that are payable to such Borrower and constitute collections
on the Collateral; (b) execute in the name of such Borrower any financing
statements, schedules, assignments, instruments, documents and statements that
such Borrower is obligated to give Lender hereunder or is necessary to perfect
Lender’s security interest or lien in the Collateral; (c) to verify
validity, amount or any other matter relating to the Collateral by mail,
telephone, telecopy or otherwise; and (d) do such other and further acts
and deeds in the name of such Borrower that Lender may reasonably deem
necessary or desirable to enforce its right with respect to any Collateral.

 

3.09         [Reserved]

 

3.10         [Reserved]

 

3.11         Credit Balances; Additional
Collateral.

 

(a)           The rights and security interests granted to the
Lender hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that the Revolving Loans may from
time to time be temporarily in a credit position, until the termination of this
Agreement and the full and final payment and satisfaction of the Obligations.
Any reserves or balances to the credit of the Borrowers, and any other Property
of the Borrowers (or any of them) in the possession of Lender, may be held by
Lender, and applied in whole or partial satisfaction of such Obligations when
due, subject to the terms of this Agreement. The liens and security interests
granted to Lender herein and any other lien or security interest which Lender
may have in any other assets of the Borrowers secure payment and performance of
all present and future Obligations.

 

(b)           Notwithstanding Lender’s security interests in the
Collateral, to the extent that the Obligations are now or hereafter secured by
any assets or Property other than the Collateral, or by the guaranty,
endorsement, assets or property of any other Person, Lender shall have the
right in its sole discretion to determine which rights, security, liens,
security interests or remedies Lender shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of such rights, security, liens,
security interests or remedies, or any of Lenders’ rights under this Agreement

 

8

 

3.12         Reference to Other Loan Documents.  Reference is hereby made to the other Loan
Documents for additional representations, covenants and other agreements of the
Borrowers regarding the Collateral covered by such Loan Documents.

 

ARTICLE
4

 

CLOSING
AND CONDITIONS PRECEDENT TO REVOLVING LOANS

 

Closing under this Agreement and the making of each
Loan are subject to the following conditions precedent (all documents to be in
form and substance satisfactory to Lender and Lender’s counsel):

 

4.01         Resolutions, Opinion, and Other Documents. At the
Closing, Borrowers shall have delivered to Lender the following:

 

(a)           this Agreement, the Revolving Note and the Perfection Certificate, each
properly executed;

 

(b)           each document and agreement required to be executed
under any provision of this Agreement or any of the other Loan Documents;

 

(c)           certified copies of (i) resolutions of each
Borrower’s board of director(s), or manager(s), as applicable authorizing the
execution of this Agreement, the Revolving Note, the other Loan Documents and
each other document to which it is a party, required to be delivered by any Section hereof
and (ii) each Borrower’s Organizational Documents;

 

(d)           incumbency certificates identifying all Authorized
Officers of each Borrower, with specimen signatures;

 

(e)           a written opinion of Borrowers’ independent counsel
addressed to Lender in the form attached hereto as Exhibit 4.01,
which shall include, without limitation, an opinion that Lender has a first
priority perfected security interest in the Collateral;

 

(f)            payment by Borrowers of all Expenses associated with
the Credit Facility incurred to the Closing Date and the Commitment Fee;

 

(g)           the Business Associate Agreement properly executed;

 

(h)           the Depository Agreements required pursuant to Section 2.07
hereof and the Wells Fargo Depository Agreements;

 

(i)            Uniform Commercial Code, judgment, federal and state
tax lien searches pursuant to Section 3.05 hereof, which searches shall
reflect no liens in the Collateral, other than the Lender’s lien and Permitted
Liens;

 

(j)            an initial borrowing base report dated the Closing
Date evidencing Borrower’s availability under the Borrowing Base;

 

(k)           an as-filed copy of the confirmation order entered
by the Bankruptcy Court with respect to the Plan of Reorganization, which order
shall provide for the release of all security interests in the Collateral;

 

(l)            certification by Borrowers that all past due payroll
and unemployment taxes have been paid in full and that Borrowers remain current
on such taxes;

 

(m)          copies of each of the accreditations, licenses,
permits and certifications related to the representations in Section 5.03
hereof, and all Contracts requested by Lender;

 

9

 

(n)           the fully executed Subordination Agreements;

 

(o)           monthly and year to date consolidated and
consolidating financial statements for the month ending January 31, 2009;

 

(p)           background checks on the senior management of
Borrowers;

 

(q)           evidence satisfactory to Lender that the Required
Insurance is in full force and effect and that Lender has been named as a
lender’s loss payee or additional insurer with respect to such Required
Insurance in a manner satisfactory to Lender;

 

(r)            all UCC financing statements and similar documents
required to be filed in order to create in favor of Lender a first priority
perfected security interest in the Collateral (to the extent that such a
security interest may be perfected by a filing under the UCC or Applicable
Law), shall have been properly filed in each office in each jurisdiction
required;

 

(s)           all information necessary for Lender to issue wire
transfer instructions on behalf of each Borrower for the initial and subsequent
Loans, including disbursement authorizations in form acceptable to Lender;

 

(t)            evidence satisfactory to Lender in its sole discretion that a payment in
the amount of $2,500,000.00 has been made by BMC to the Creditor Trust;

 

(u)           an IRS Form 8821, complete in all respects and
satisfactory to Lender in its sole discretion, for each Borrower;

 

(v)           an order of the Bankruptcy Court confirming the Plan
of Reorganization that is in full force and effect and is unstayed, such order
being satisfactory to Lender in its sole discretion;

 

(w)          an Eagle 9 UCC insurance policy issued by First
American Title Company insuring the perfection of the Lender’s lien in the
Collateral;

 

(x)            the Negative Pledge Agreement properly executed; and

 

(y)           all other documents, information and reports
required or requested to be executed and/or delivered by Borrowers under any
provision of this Agreement or any of the Loan Documents.

 

4.02         Additional Preconditions to Loans. Lender’s
obligation to make the initial Revolving Loan and each subsequent Revolving
Loan shall be subject to the satisfaction of each of the following conditions:

 

(a)           After giving effect to each such Revolving Loan:

 

(i)            the aggregate principal amount of all Revolving
Loans outstanding shall not exceed the Borrowing Base then in effect and the
aggregate amount of all Loans outstanding shall not exceed the Maximum Credit
Limit;

 

(ii)           the ENV of all Eligible Accounts shall not exceed
any of the Concentration Limits; and

 

(iii)          the amount of outstanding Revolving Loans supported
by the ENV of all Eligible Accounts included in the Borrowing Base which have
not been billed shall at no time exceed an amount equal to fifty percent (50%)
of outstanding Revolving Loans supported by the ENV of all Eligible Accounts
included in the Borrowing Base which have been billed.

 

(b)           All representations and warranties of Borrowers
shall be deemed reaffirmed as of the making of such Loan and shall be true both
before and after giving effect to such Loan, and no Event of Default or
Unmatured Event of Default shall have occurred and be continuing, no Material
Adverse Effect shall have occurred, Borrowers shall be in compliance with this
Agreement and the other Loan Documents, and Borrowers shall have certified such
matters to Lender.

 

10

 

(c)           Each Borrower shall have signed and delivered to
Lender notices, in the form of Exhibit 4.02(c), directing the
Obligors (other than Obligors with respect to Government Accounts and Obligors
that pay into the Risk Pool Account) to make payment to the Commercial Lockbox.

 

(d)           Each Borrower shall have signed and delivered to
Lender notices, in the form of Exhibit 4.02(d), directing the
Obligors with respect to Government Accounts to make payment to the Government
Lockbox.

 

(e)           Borrowers shall have taken all actions necessary to
permit Lender to record all of the Eligible Accounts in Lender’s accounts
receivable monitoring system.

 

(f)            The lockbox arrangements required by Section 2.07
hereof shall be in effect, and the amounts received in the lockboxes shall have
been identified or reconciled to Lender’s satisfaction, as required by Section 2.07(e) hereof.

 

(g)           All JHA Loan Documents shall be acceptable to Lender
in its sole discretion, the transactions contemplated by the JHA Loan Documents
shall have closed and such JHA Loan Documents shall be in full force and
effect.

 

(h)           Borrowers shall have permitted Lender to access and
interface with any of Borrowers’ collateral monitoring systems, and provided
assistance with such access and interface as Lender requests.

 

(i)            No later than five (5) Business Days prior to
the initial Revolving Loan, Lender shall have been provided with sufficient
access to conduct a final on-site management meeting on the premises of BMC
with such officers of BMC as Lender requires.

 

(j)            On the Closing Date, the Borrowing Base less
the amount of the initial Revolving Loan shall be greater than $1,000,000.00.

 

(k)           Borrowers shall have taken such other actions,
including the delivery of documents and opinions as Lender may reasonably
request.

 

4.03         Absence of Certain Events. As of the
Closing Date and prior to each Loan, no Event of Default or Unmatured Event of
Default hereunder shall have occurred and be continuing.

 

4.04         Compliance with this Agreement. Borrowers
shall have performed and complied with all agreements, covenants and conditions
contained herein including, without limitation, the provisions of Sections 6
and 7 hereof, which are required to be performed or complied with by Borrowers
before or at the Closing Date and as of the date of each Revolving Loan.

 

4.05         Closing Certificate. Lender shall have received
a certificate dated the Closing Date and signed by the chief executive officer
or chief financial officer of Borrowers certifying that all of the conditions
specified in this Section have been fulfilled and that there has not
occurred any material adverse change in the operations and conditions
(financial or otherwise) of Borrowers since September 30, 2008.

 

4.06         Closing. Subject to the conditions
of this Article 4, the Credit Facility shall be made available on the date
(“Closing Date”) this Agreement is executed and all of the conditions
contained in Section 4.01 and Section 4.02 hereof are completed (“Closing”).

 

4.07         Non-Waiver of Rights. By completing the Closing
hereunder, or by making Revolving Loans hereunder, Lender does not thereby
waive a breach of any warranty, representation or covenant made by Borrowers
hereunder or under any agreement, document, or instrument delivered to Lender
or otherwise referred to herein, and any claims and rights of Lender resulting
from any breach or misrepresentation by Borrowers are specifically reserved by
Lender.

 

11

 

ARTICLE
5

 

REPRESENTATIONS
AND WARRANTIES

 

To induce Lender to complete the Closing and make
the Loans under the Credit Facility to Borrowers, Borrowers warrant and
represent to Lender that, subject to such exceptions or qualifications as are
disclosed in any disclosure schedules delivered pursuant to this Article 5:

 

5.01         Organization and Validity.

 

(a)           Each Borrower is duly organized as either a
partnership, corporation or limited liability company and validly existing
under the laws of its state of organization, incorporation or formation, is
duly qualified, validly existing and, to the extent applicable, in good
standing and has lawful power and authority to engage in the business it
conducts in each state and other jurisdiction where the nature and extent of
its business requires qualification, except where the failure to so qualify could
not reasonably be expected to cause a Material Adverse Effect. A list of all
states and other jurisdictions where each Borrower is qualified to do business
is attached hereto as Schedule 5.01 and made a part hereof.

 

(b)           The making and performance of this Agreement and
related agreements, and each document required by any Section hereof will
not violate (i) any law, government rule, regulation, order, judgment or
award applicable to such Borrower or its Property, (ii) any provision of
such Borrower’s Organizational Documents, or (iii) violate or result in a
default (immediately, with the passage of time or with the giving of notice)
under any contract, agreement or instrument to which such Borrower is a party,
or by which such Borrower is bound. No Borrower is in violation of any term of
any agreement or instrument to which it is a party or by which it may be bound
or of its Organizational Documents or minutes, which violation could reasonably
be expected to cause a Material Adverse Effect.

 

(c)           Each Borrower has all requisite power and authority
to enter into and perform this Agreement and the other Loan Documents and to
incur the Obligations herein provided for, and has taken all proper and
necessary action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents.

 

(d)           This Agreement, the Revolving Note and the other
Loan Documents required to be executed and delivered by any Borrower hereunder,
when delivered, will be valid and binding upon such all Borrowers a party
thereto and enforceable in accordance with their respective terms.

 

5.02         Places of Business; Borrower Names. Each Borrower’s
jurisdiction of organization is set forth in Schedule 5.02 hereto and (a) each
Borrower’s chief executive office, (b) all other places of business of
each such Borrower and (c) any other locations of any Collateral are
located at the corresponding addresses set forth on Schedule 5.02
hereto. Except as disclosed on Schedule 5.02 hereto: (a) no
Borrower has been organized in any other jurisdiction nor changed any such
location in the last five (5) years, (b) no Borrower has changed its
name in the last five (5) years, and (c) during such period no
Borrower used, nor does any Borrower now use, any fictitious or trade name.

 

5.03         Healthcare Matters.

 

(a)           Operation of Facilities. Each Borrower owns or leases Healthcare
Facilities in which it provides healthcare services and with respect to the
operations of the Healthcare Facilities (i) maintains Medicare and
Medicaid provider status and is the holder of the provider identification
numbers, including but not limited to, Medicare, Medicaid and other third party
payor provider numbers and National Provider Identifiers, identified on Schedule
5.03 hereto, all of which are current and valid and such Borrower has not
allowed, permitted, authorized or caused any other Person to use any such
provider identification number, and (ii) has obtained all material Permits
necessary for such Borrower to own its assets, to carry on its business, to
execute, deliver and perform the Loan Documents, and to receive payments from
the Obligors and, if organized as a not-for-profit entity, has and maintains
its status, if any, as an organization exempt from federal taxation under Section 501(c)(3) of
the Internal Revenue

 

12

 

Code. No Borrower has been notified by any such governmental authority
or other Person during the immediately preceding 24 month period that such
party has rescinded, limited or not renewed, or intends to rescind, limit or
not renew, any such license or approval.

 

(b)           Healthcare Permits. With respect to the
Healthcare Facilities, each Borrower has (i) each Permit and other rights
from, and have made all declarations and filings with, all applicable
Governmental Authorities, all self regulatory authorities and all courts and
other tribunals necessary to engage in the ownership and operation of the
Healthcare Facilities, except where such failure could not reasonably be
expected to have a Material Adverse Effect and (ii) no knowledge that any
Governmental Authority is considering limiting, suspending or revoking any such
Permit. All such Permits are valid and in full force and effect and each
Borrower is in material compliance with the terms and conditions of all such
Permits except where failure to be in such compliance or for a Permit to be
valid and in full force and effect could not reasonably be expected to have a
Material Adverse Effect.

 

(c)           Specific Licensing. Each Healthcare Facility
is duly licensed under the Applicable Laws of the state where the Healthcare
Facility is located, in order to operate as currently operated.

 

(d)           Participation
Agreements/Provider Status/Cost Reports.

 

(i)            Each Borrower has the requisite participation
agreement or provider number or other Permit to bill the respective Medicaid
program in the state or states in which such Borrower operates (to the extent
such Borrower participates in the Medicare or Medicaid program in such state or
states) and all other Third Party Payor Programs (including Medicare) which
account for any portion of the revenues of such Healthcare Facility.

 

(ii)           There is no investigation, audit, claim review, or
other action pending or, to the knowledge of any Borrower, threatened which
could result in a revocation, suspension, termination, probation, material
restriction, limitation, or non-renewal of any participation agreements with
Third Party Payors with respect to the business of each Borrower (collectively,
“Participation Agreements”) or provider number or other Permit or result
in a Borrower’s exclusion from any Third Party Payor Program, nor has any Third
Party Payor Program made any decision not to renew any Participation Agreement
or provider agreement or other Permit related to any Healthcare Facility, nor
has any Borrower made any decision not to renew any Participation Agreement or
provider agreement or other Permit, nor is there any action pending or, to the
knowledge of Borrowers, threatened to impose material intermediate or alternative
sanctions with respect to any Healthcare Facility.

 

(iii)          Each Borrower, and, to the knowledge of such
Borrower, its contractors, have properly and legally billed all intermediaries
and Third Party Payors for services rendered with respect to the Healthcare
Facilities and have maintained their records to reflect such billing practices.
No funds relating to any Borrower are now, or, to the knowledge of any Borrower
will be, withheld by any Third Party Payor.

 

(iv)          All Medicare, Medicaid, and private insurance cost
reports and financial reports submitted by each Borrower are and will be
materially accurate and complete and have not been and will not be misleading
in any material respects. There are no current, pending or outstanding
Medicare, Medicaid or Third Party Payor Program reimbursement audits or appeals
pending with respect to the Healthcare Facilities or any Borrower.

 

(v)           With respect to the operation of the Healthcare
Facilities, each Borrower is properly enrolled in the Medicare program and is
not experiencing any material payment delays or denials as a result of the
Medicare program’s use and adoption of the National Provider Identifier.

 

(vi)          Each Borrower and Healthcare Facility is currently
enrolled as a participating provider in the Medicare program or is otherwise
not subject to the moratorium on the establishment of new long term care
hospitals and long term care hospital satellites contained in the Medicare,
Medicaid and SCHIP Extension Act of 2007.

 

(e)           No Violation of Healthcare
Laws.

 

(i)            None of the Healthcare Facilities or any Borrower
is, to the knowledge of any Borrower, in violation of any Healthcare Laws,
except where any such violation could not reasonably be expected to have a
Material Adverse Effect.

 

(ii)           Each Borrower is, to the knowledge of each Borrower,
HIPAA Compliant with respect to the operations of the Healthcare Facilities.

 

(iii)          No Healthcare Facility has received a statement of
deficiencies or survey violation of a “Level A” (or equivalent) or worse (with
respect to assisted living facilities), or a tag level of “G” or

 

13

 

higher with respect to any skilled nursing
facility, within the past three years for which a plan of correction has not
been filed with the applicable state authority. No Healthcare Facility is
currently subject to any plan of correction that has not been accepted by or is
currently the subject of a review by the applicable state authority. No
Borrower has received notice of any charges of patient abuse at any Healthcare
Facility.

 

(f)            Proceedings. No Borrower or Healthcare
Facility is subject to any proceeding, suit or, to Borrowers’ knowledge,
investigation by any federal, state or local government or quasi-governmental
body, agency, board or authority or any other administrative or investigative
body (including the Office of the Inspector General of the United States
Department of Health and Human Services): (i) which may result in the
imposition of a fine, alternative, interim or final sanction, a lower
reimbursement rate for services rendered to eligible patients at the Healthcare
Facilities; (ii) which could result in the revocation, transfer,
surrender, suspension or other material impairment of the operating certificate
provider agreement or Permits of any Healthcare Facility; (iii) which
pertains to any state or federal Medicare or Medicaid cost reports or claims
filed by any Borrower (including, but not limited to, any reimbursement
audits), or any disallowance by any commission, board or agency in connection
with any audit of such cost reports; or (iv) which pertains to or requests
any voluntary disclosure pertaining to a potential overpayment matter involving
the submission of claims to such payor by any Borrower, which, in each case
with respect to clauses (i), (iii) and (iv) above, has not been
provided for on their respective financials statements, or which could
reasonably be expected to have a Material Adverse Effect on any Borrower or the
operation of any individual Healthcare Facility.

 

(g)           Fraud & Abuse.

 

(i)            No Borrower has, or to its knowledge has been
threatened to have, and, to the knowledge of Borrower, no owner, officer,
manager, employee or person with a “direct or indirect ownership interest” (as
that phrase is defined in 42 C.F.R. §420.201) in any Borrower has, engaged in
any of the following: (A) knowingly and willfully making or causing to be
made a false statement or representation of a material fact in any application
for any benefit or payment under any Healthcare Laws; (B) knowingly and
willfully making or causing to be made any false statement or representation of
a material fact for use in determining rights to any benefit or payment under
any Healthcare Laws; (C) failing to disclose knowledge by a claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment under any Healthcare Laws on its own behalf or on behalf of
another, with intent to secure such benefit or payment fraudulently; (D) knowingly
and willfully soliciting or receiving any remuneration (including any kickback,
bribe or rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay such remuneration (1) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by any
Healthcare Laws, or (2) in return for purchasing, leasing or ordering or
arranging for or recommending the purchasing, leasing or ordering of any good,
facility, service, or item for which payment may be made in whole or in part by
any Healthcare Laws; (E) presenting or causing to be presented a claim for
reimbursement for services that is for an item or services that was known or
should have been known to be (1) not provided as claimed, or (2) false
or fraudulent; or (F) knowingly and willfully making or causing to be made
or inducing or seeking to induce the making of any false statement or
representation (or omitting to state a fact required to be stated therein or
necessary to make the statements contained therein not misleading) of a
material fact with respect to (1) a facility in order that the facility
may qualify for Governmental Authority certification, or (2) information
required to be provided under 42 U.S.C. § 1320a-3.

 

(ii)           No Borrower has been, or to its knowledge has been
threatened to be, and, to the knowledge of Borrower, no owner, officer,
manager, employee or person with a “direct or indirect ownership interest” (as
that phrase is defined in 42 C.F.R. §420.201) in any Borrower: (A) has had
a civil monetary penalty assessed against him or her pursuant to 42 U.S.C.
§1320a-7a or is the subject of a proceeding seeking to assess such penalty; (B) has
been excluded from participation in a Federal Health Care Program (as that term
is defined in 42 U.S.C. §1320a-7b) or is the subject of a proceeding seeking to
assess such penalty, or has been “suspended” or “debarred” from selling
products to the U.S. government or its agencies pursuant to the Federal
Acquisition Regulation, relating to debarment and suspension applicable to
federal government agencies generally (48 C.F.R. Subpart 8.4), or other
Applicable Laws or regulations; (C) has been convicted (as that term is
defined in 42 C.F.R. §1001.2) of any of those offenses described in 42 U.S.C.
§1320a-7b or 18 U.S.C. §§669, 1035, 1347, 1518 or is the subject of a proceeding
seeking to assess such penalty; (D) has been involved or named in a U.S.
Attorney complaint made or any other action taken pursuant to the False Claims
Act under 31 U.S.C. §§3729-3731 or qui tam action brought pursuant to 31 U.S.C.
§3729 et seq.; (E) has been made a party to any other action by any
governmental authority that may prohibit it from selling products to any
governmental or other purchaser pursuant to any law; or

 

14

 

(F) was or has become subject to any
federal, state, local governmental or private payor civil or criminal
investigations or inquiries, proceedings, validation review, program integrity
review or statement of charges involving and/or related to its compliance with
Healthcare Laws or involving or threatening its participation in Medicare,
Medicaid or other Third Party Payor Programs or its billing practices with
respect thereto.

 

5.04         Pending Litigation. There are no judgments or
judicial or administrative orders, proceedings or investigations (civil or
criminal) pending, or to the knowledge of any Borrower, threatened, against any
Borrower in any court or before any governmental authority or arbitration board
or tribunal, other than as set forth on Schedule 5.04 hereto, which, if
adversely determined could reasonably be expected to cause a Material Adverse
Effect. No Borrower is in default with respect to any order of any court,
governmental authority, regulatory agency or arbitration board or tribunal. No
Shareholder or executive officer of any Borrower has been indicted or convicted
in connection with or is engaging in any criminal conduct, or is currently
subject to any lawsuit or proceeding or under investigation in connection with
any anti-racketeering or other conduct or activity.

 

5.05         Medicaid and Medicare Cost Reporting. The Medicaid
and Medicare cost reports of each facility and of the home office of each
Borrower for all cost reporting periods have been submitted when and as
required to (a) as to Medicaid, the state agency, or other CMS-designated
agent or agent of such state agency, charged with such responsibility or (b) as
to Medicare, the Medicare intermediary or other CMS-designated agent charged
with such responsibility.

 

5.06         Title to Collateral. Each Borrower has good and
marketable title to all the Collateral it respectively purports to own, free
from co-owners, liens, claims and encumbrances, except those of Lender and
those listed on Schedule 5.06 hereto (“Permitted Liens”). The
possession and use of the Collateral does not and will not infringe,
misappropriate or otherwise violate the intellectual property rights of any
Person.

 

5.07         Governmental Consent. Neither the nature of any
Borrower or of any Borrower’s business or Property, nor any relationship between
any Borrower and any other Person, nor any circumstance affecting any Borrower
in connection with the execution, issuance and/or delivery of this Agreement or
the Revolving Note is such as to require a consent, approval or authorization
of, or filing, registration or qualification with, any governmental authority
on the part of any such Borrower in connection with the execution and delivery
of this Agreement or the issuance or delivery of the Revolving Note or other
Loan Documents.

 

5.08         Taxes. All tax returns required
to be filed by Borrowers, or any of them, in any jurisdiction have in fact been
filed, and all Taxes, assessments, fees and other governmental charges upon
Borrowers, or any of them, or upon any of their respective Property, income or
franchises, which are shown to be due and payable on such returns have been
paid, except for those Taxes being contested in good faith with due diligence
by appropriate proceedings and for which appropriate reserves have been
maintained under GAAP. No Borrower is aware of any proposed additional tax
assessment or tax to be assessed against or applicable to any Borrower that
could reasonably be expected to cause a Material Adverse Effect.

 

5.09         Financial Statements.

 

(a)           Borrowers’ annual consolidated and consolidating
balance sheet as of September 30, 2008 and the quarterly consolidated
balance sheet, the related income statements and statements of cash flows, each
as of September 30, 2008 (complete copies of which have been delivered to
Lender), have been prepared in accordance with GAAP (other than the absence of
footnotes) and present fairly, accurately and completely (subject to audit
adjustments) the financial position of Borrowers as of such dates and the
results of their operations for such periods.

 

(b)           Since the date of the last annual consolidated and
consolidating balance sheet and related income statements and statements of
cash flows, there has been no event or circumstance that has had or could
reasonably be expected to have a Material Adverse Effect.

 

(c)           The fiscal year for each Borrower currently ends on
the date set forth on Schedule 5.09 hereto. Each Borrower’s federal tax
identification number and organization number are as set forth on Schedule
5.09 hereto.

 

15

 

5.10         Full Disclosure. Neither the financial
statements referred to in Section 5.09 hereof, nor this Agreement or
related agreements and documents or any written statement furnished by any
Borrower to Lender in connection with the negotiation of the Credit Facility
and contained in any financial statements (subject to audit adjustments) or
documents relating to any Borrower contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading.

 

5.11         Guarantees, Contracts, etc.

 

(a)           No Borrower owns or holds partnership interests or
equity or long term debt investments in, has any outstanding advances to, or
serves as guarantor, surety or accommodation maker for the obligations of, any
Person except as described in Schedule 5.11 hereto.

 

(b)           No Borrower is a party to any contract or agreement,
or subject to any charter or other entity restriction which could reasonably be
expected to cause a Material Adverse Effect.

 

(c)           Except as otherwise specifically provided in this
Agreement, no Borrower has agreed or consented to cause or permit any of the
Collateral whether now owned or hereafter acquired to be subject in the future
(upon the happening of a contingency or otherwise) to a lien or encumbrance not
permitted by this Agreement.

 

5.12         Compliance with Laws.

 

(a)           No Borrower is in violation of, or has received
written notice that it is in violation of, any applicable statute, regulation
or ordinance of the United States of America, or of any state, city, town,
municipality, county or of any other jurisdiction, or of any agency, or
department thereof, (including, without limitation, environmental laws and
regulations), which could reasonably be expected to cause a Material Adverse
Effect.

 

(b)           Each Borrower is current with all reports and
documents required to be filed with any state or federal securities commission
(if any) or similar agency and is in full compliance with all applicable rules and
regulations of such commissions, except where such failure to so comply could
not reasonably be expected to cause a Material Adverse Effect.

 

5.13         Other Associations. No Borrower is engaged in
nor has an interest in any joint venture or partnership with any other Person
or has any Subsidiaries or Affiliates, except as described on Schedule 5.13
hereto.

 

5.14         Environmental Matters. Except as disclosed on Schedule
5.14 hereto, no Borrower has knowledge:

 

(a)           of violations of any Environmental Laws on any of
the real property where any Borrower maintains operations or has its personal
property, or where any Collateral is located;

 

(b)           of any claims or actions pending or threatened, or
claims or actions in the past during Borrower’s period of ownership, against
Borrower or any of such real property by any governmental entity or agency or
by any other person or entity relating to Hazardous Substances or pursuant to
any Environmental Laws;

 

(c)           of the presence of any Hazardous Substances on any
of such real property, other than solid or biohazardous wastes generated in the
diagnosis or treatment of patients as are commonly found in hospitals similar
to the hospital operated by BMC;

 

(d)           of any such real property ever having been used by
any of the Borrowers or, to the best of Borrowers’ knowledge any other person,
to refine, produce, store, handle, transfer, process, transport, or dispose of
Hazardous Substances other than in full compliance with Environmental Laws,
except with respect to any such use which would not reasonably be expected to
result in a Material Adverse Effect;

 

(e)           of storage tanks (including, without limitation,
petroleum or heating oil storage tanks), underground or above-ground, present
on or under any of such real property, or that have been on or under any such
real property but removed therefrom;

 

16

 

(f)            of any on-site spills, releases, discharges,
disposal, or storage of Hazardous Substances, other than solid or biohazardous
wastes generated in the diagnosis or treatment of patients as are commonly
found in hospitals similar to the hospital operated by BMC, that have occurred
or are presently occurring on any of such real property, which spills,
releases, discharges, disposal or storage could be reasonably expected to have
a Material Adverse Effect; or

 

(g)           of any spills, releases, discharges, disposal, or
storage of Hazardous Substances, other than solid or biohazardous wastes
generated in the diagnosis or treatment of patients as are commonly found in
hospitals similar to the hospital operated by BMC, that have occurred or are
presently occurring on any other real property as a result of the conduct,
action, or activities of any Borrower, which spills, releases, discharges,
disposal or storage could be reasonably expected to have a Material Adverse
Effect.

 

5.15         Capital Stock. The authorized and
outstanding Capital Stock of each Borrower is as set forth on Schedule 5.15
hereto. All of the Capital Stock and equity interests of each Borrower have
been duly and validly authorized and issued and is fully paid and
non-assessable and have been sold and delivered to the holders thereof in
compliance with, or under valid exemption from, all federal and state laws and
the rules and regulations of all regulatory bodies thereof governing the
sale and delivery of securities. Except for the rights and obligations set
forth in Schedule 5.15  hereto,
there are no subscriptions, warrants, options, calls, commitments, rights or
agreements by which any Borrower or any of the Shareholders of any Borrower is
bound relating to the issuance, transfer, voting or redemption of its Capital
Stock or any preemptive rights held by any Person with respect to the Capital
Stock of any such Borrower. Except as set forth in Schedule 5.15 hereto,
no Borrower has issued any securities convertible into or exchangeable for its
Capital Stock or any options, warrants or other rights to acquire such Capital
Stock or securities convertible into or exchangeable for such Capital Stock.

 

5.16         Lockboxes. The Government Lockbox and
the Commercial Lockbox are the only lockbox accounts maintained by Borrowers,
and each Obligor of an Eligible Account has been directed by the notice
attached as Exhibit 4.02(c) to this Agreement, and is required
to, remit all payments with respect to such Account for deposit in the
Commercial Lockbox (other than the Obligors of Government Accounts which have
been directed by the notice attached as Exhibit 4.02(d) to
this Agreement to remit all payments with respect to such Accounts for deposit
in the Government Lockbox).

 

5.17         Borrowing Base Reports. Each
Borrowing Base Report signed by Borrowers, on behalf of Borrowers, contains and
will contain an accurate summary of all Eligible Accounts of Borrowers
contained in the Borrowing Base as of its date.

 

5.18         Security Interest. The Borrowers represent
and warrant to Lender that except for the Permitted Liens, (a) upon the
filing of UCC financing statements covering the Collateral in all required
jurisdictions, this Agreement creates a valid, perfected, first priority
security interest in the Collateral as to which perfection may be achieved by
filing, (b) Lender’s security interests in the Collateral constitute, and
will at all times constitute, first priority and exclusive liens on the
Collateral, and (c) each Borrower is, or will be at the time additional
Collateral is acquired by such Borrower, the absolute owner of such additional
Collateral with full right to pledge, sell, transfer and create a security
interest therein, free and clear of any and all claims or liens other than
Permitted Liens.

 

5.19         Accounts.

 

(a)           No Borrower has done nor shall do anything to
interfere with the collection of the Accounts and no Borrower shall amend or
waive the terms or conditions of any Account or any related Contract in any
material adverse manner without Lender’s prior written consent.

 

(b)           Each Borrower has made and will continue to make all
payments to Obligors necessary to prevent any Obligor from offsetting any
earlier overpayment to such Borrower against any amounts such Obligor owes on
an Account.

 

5.20         ERISA. Borrowers and each other
member of its Controlled Group has fulfilled its obligations under the minimum
funding standards of, and is in compliance in all material respects with, ERISA
and the Code to

 

17

 

the extent applicable to it and, other than a
liability for premiums under Section 4007 of ERISA, has not incurred any
liability to the PBGC or a Plan under Title IV of ERISA. Borrowers and their
Subsidiaries and/or Affiliates have no contingent liabilities with respect to
any post-retirement benefits under a welfare plan, as defined in Section 3(1) of
ERISA, other than liability for continuation coverage described in Article 6
of Title 1 of ERISA.

 

5.21         Representations and Warranties for each Loan. As of each
date that Borrowers shall request any Loan, each Borrower shall be deemed to
make, with respect to each Eligible Account included in the Borrowing Base,
each of the following representations and warranties:

 

(a)           Such Account satisfies each of the conditions of an
Eligible Account.

 

(b)           All information relating to such Account that has
been delivered to Lender is true, complete and correct in all material
respects. With respect to each such Account that has been billed, the
corresponding Borrower has delivered to the Obligor all requested supporting
claim documents and all information set forth in the bill and supporting claim
documents is true, complete and correct in all material respects.

 

(c)           Other than the CMS Claim, there is no lien or
adverse claim in favor of any third party, nor any filing against any Borrower,
as debtor, covering or purporting to cover any interest in such Account.

 

(d)           Such Account is (i) payable in an amount not
less than its Estimated Net Value by the Obligor identified by Borrowers as
being obligated to do so, (ii) to the knowledge of Borrowers the legally
enforceable obligation of such Obligor, and (iii) an account or general
intangible within the meaning of the UCC, or is a right to payment under a
policy of insurance or proceeds thereof, and is not evidenced by any instrument
or chattel paper. To the knowledge of Borrowers, there is no payor other than
the Obligor identified by Borrowers as the payor primarily liable on such
Account.

 

(e)           No such Account (i) requires the approval of
any third person for such Account to be assigned to Lender hereunder, (ii) is
subject to any legal action, proceeding or investigation (pending or
threatened), dispute, set-off, counterclaim, defense, abatement, suspension,
deferment, deductible, reduction or termination by the Obligor, or (iii) is
past the statutory limit for collection applicable to the Obligor.

 

(f)            Such Borrower does not have any guaranty of, letter
of credit support for, or collateral security for, such Account, other than any
such guaranty, letter of credit or collateral security as has been assigned to
Lender.

 

(g)           The services constituting the basis of such Account (i) were
medically necessary for the patient and (ii) at the time such services
were rendered, were fully covered by the insurance policy or Contract
obligating the applicable Obligor to make payment with respect to such Account
(and the corresponding Borrower has verified such determination), and (iii) the
patient received such services in the ordinary course of such Borrower’s
business.

 

(h)           The fees and charges charged for the services
constituting the basis for such Account were when rendered consistent with (i) the
usual, customary and reasonable fees charged by Borrowers or (ii) pursuant
to negotiated fee contracts, or imposed fee schedules, with or by the
applicable Obligors.

 

(i)            The Obligor with respect to such Account is located
in the United States, and is (i) a party which in the ordinary course of
its business or activities agrees to pay for healthcare services received by
individuals, including, commercial insurance companies and non-profit insurance
companies issuing health, or other types of insurance, employers or unions,
self-insured healthcare organizations, preferred provider organizations, and
health insured, prepaid maintenance organizations, (ii) a state, an agency
or instrumentality of a state or a political subdivision of a state, or (iii) the
United States or an agency or instrumentality of the United States.

 

(j)            The insurance policy or Contract obligating an
Obligor to make payment (i) does not prohibit the transfer of such payment
obligation from the patient to the corresponding Borrower and (ii) is and
was in full force and effect and applicable to the patient at the time the
services constituting the basis for such Account were performed.

 

18

 

(k)           The representations and warranties made by Borrowers
in the Loan Documents and all financial or other information delivered to
Lender with respect to Borrowers and such Account do not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statement made not misleading.

 

(l)            If requested by Lender, a copy of each related
Contract to which each Borrower is a party has been delivered to Lender unless
any such Borrower shall have, prior to the related Funding Date, certified in
an Officer’s Certificate that such delivery is prohibited by the terms of the
Contract or by law, and the circumstances of such prohibition.

 

(m)          If such Account has not been billed, the services
giving rise to such Account have been properly recorded in the corresponding
Borrower’s accounting system.

 

(n)           Such Account was (or if unbilled, will be) in any
event billed no later than forty-five
(45) days after the date the services or goods giving rise to such
Account were rendered as provided, as applicable, and each bill contains an
express direction requiring the Obligor to remit payments to either the
Government Lockbox or Commercial Lockbox, as applicable.

 

(o)           Such Account has an Estimated Net Value which, when
added to the Estimated Net Value of all other Accounts owing by the same
Obligor and which constitute Eligible Accounts hereunder, does not exceed any
applicable Concentration Limit.

 

(p)           Neither such Account nor the related Contract
contravenes any laws, rules or regulations applicable thereto (including,
without limitation, laws, rules and regulations relating to usury,
consumer protection, truth-in-lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy) and Borrowers are not and, to the knowledge of Borrowers, no party to
such related Contract is in violation of any such law, rule or regulation
in connection with such Contract.

 

(q)           As of the applicable Funding Date, to the Borrowers’
knowledge, no Obligor on such Account is bankrupt, insolvent, or is unable to
make payment of its obligations when due, and no other fact exists which would
cause any Borrower reasonably to expect that the amount billed to the related
Obligor for such Account will not be paid in full when due.

 

5.22         Interrelatedness of Borrowers. The business
operations of each Borrower are interrelated and complement one another, and
such companies have a common business purpose, with intercompany bookkeeping
and accounting adjustments used to separate their respective Properties,
liabilities and transactions. To permit their uninterrupted and continuous
operation, such companies now require and will from time to time hereafter
require funds for general business purposes. The proceeds of Revolving Loans
under the Credit Facility will directly or indirectly benefit each Borrower
hereunder severally and jointly, regardless of which Borrower requests or
receives part or all of the proceeds of such Loan.

 

5.23         [Reserved]

 

5.24         [Reserved]

 

5.25         Intellectual Property. Except for “shrink-wrapped”
software and as shown on Schedule 5.25 hereto and made part hereof, (a) Borrowers
do not require any copyrights, patents, trademarks, other intellectual property
or other general intangibles (as defined in the UCC), or any license(s) to
use any patents, trademarks or other intellectual property in order to (i) provide
services to their customers, (ii) bill Obligors and collect therefrom, in
the ordinary course of business or (iii) otherwise conduct Borrowers’
business as presently conducted, and (b) Borrowers have not granted an
exclusive license to any party that relates to Borrower’s intellectual
property. All of Borrower’s rights in its intellectual property are
enforceable, valid and subsisting. No action, suit, demand, charge or claim has
been made or threatened which challenges the enforceability or validity of Borrower’s
intellectual property.

 

19

 

5.26         Solvency. On the Closing Date and
immediately prior to and after giving effect to each borrowing hereunder and
the use of the proceeds thereof, with respect to each Borrower (a) the
fair value of its assets is greater than the amount of its liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated, (b) the present fair saleable value
of its assets is not less than the amount that will be required to pay the
probable liability on its debts as they become absolute and matured, (c) it
is able to realize upon its assets and pay its debts and other liabilities
(including disputed, contingent and unliquidated liabilities) as they mature in
the normal course of business, (d) it does not intend to, and does not
believe that it will, incur debts or liabilities beyond its ability to pay as
such debts and liabilities mature, and (e) it is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which its property would constitute unreasonably small capital.

 

5.27         Schedules. Each of the Schedules
attached to this Agreement sets forth a true, correct and complete description
of the matter or matters covered thereby.

 

5.28         Location of Computerized Billing System; Books and
Records.  Any and all computer hardware,
software and electronic data, as well as any books, records or other
information, necessary to bill for services provided by Borrowers and collect
payments for such services are stored and maintained in good working condition
at the Healthcare Facility located at 3828 Delmas Terrace, Culver City, CA
90231, which is owed in fee simple by Borrowers.

 

5.29         No Documents or Correspondence Regarding CMS Claim. As of the
Closing Date, Borrowers have not received any notice, correspondence or
documentation of any kind from CMS regarding any CMS Claim.

 

ARTICLE
6

 

AFFIRMATIVE
COVENANTS

 

Each Borrower covenants that until all of Borrowers’
Obligations to Lender are paid and satisfied in full and the Credit Facility
has been terminated:

 

6.01         Payment of Taxes and Claims. Each Borrower
shall pay, before they become delinquent, all Taxes, assessments and
governmental charges or levies imposed upon it or upon such Borrower’s
Property, except for those being contested in good faith with due diligence by
appropriate proceedings and for which appropriate reserves have been maintained
under GAAP.

 

6.02         Maintenance of Insurance,
Financial Records and Existence.

 

(a)           Required Insurance. Borrowers shall maintain
or cause to be maintained insurance on its Property against fire, casualty,
public liability, business interruption and such other hazards, as well as
general liability, medical malpractice insurance and other liability insurance
related to the business of the Borrowers required by the Lender, all in such
amounts, with such deductibles and with such insurers as are at all times
reasonably satisfactory to Lender (the “Required Insurance”). The
policies relating to the Required Insurance shall contain standard “lender loss
payable” clauses with respect to property insurance and “additional insured”
clauses with respect to general liability or automobile insurance issued in
favor of Lender pursuant to which all losses thereunder shall be paid to Lender
as Lender’s interests may appear. Such policies shall expressly provide that
the carrier of any Required Insurance will endeavor to provide ten (10) days’
prior written notice of cancelation of such policy for non-payment to Lender
and shall insure Lender notwithstanding the act or neglect of the insured. At
or prior to Closing, Borrowers shall furnish Lender with insurance certificates
certified as true and correct and being in full force and effect as of the
Closing Date or such other evidence of the Required Insurance as Lender may
require. In the event Borrowers fail to procure or cause to be procured any of
the Required Insurance or to timely pay or cause to be paid the premium(s) on
any of the Required Insurance, Lender may do so for Borrowers, but Borrowers
shall continue to be liable for the same. Borrowers further covenant that all
insurance premiums owing under its current casualty policy have been paid.
Borrowers also agree to notify Lender, promptly, upon any Borrower’s receipt of
a notice of termination, cancellation or non-renewal from its insurance company
of any of the Required Insurance. Each Borrower hereby appoints Lender as its
attorney-in-fact, exercisable at Lender’s option, upon the

 

20

 

occurrence and during the continuation of an
Event of Default, to endorse any check which may be payable to such Borrower in
order to collect the proceeds of the Required Insurance.

 

(b)           Financial Records. Borrowers shall keep
current and accurate books of records and accounts in which full and correct
entries will be made of all of its business transactions, and will reflect in
its financial statements adequate accruals and appropriations to reserves, all
in accordance with GAAP. No Borrower shall change its respective fiscal year
end date without the prior written notice to Lender.

 

(c)           Existence and Rights. Each Borrower shall do (or
cause to be done) all things necessary to preserve and keep in full force and
effect its legal existence, good standing, rights and franchises.

 

6.03         Business Conducted. Each Borrower shall
continue in the business presently operated by it using its best efforts to
maintain its customers. No Borrower shall engage, directly or indirectly, in
any line of business substantially different from the businesses conducted by
it immediately prior to the Closing Date.

 

6.04         Litigation. Borrowers shall give
prompt notice to Lender of any litigation claiming in excess of $500,000.00
from Borrowers, or any of them, or which could reasonably be expected to cause
a Material Adverse Effect.

 

6.05         Taxes. Borrowers shall pay all
Taxes when due (other than taxes based upon or measured by Lender’s income or
revenues), if any, in connection with the Loans and/or the recording of any
financing statements or other Loan Documents. The Obligations of Borrowers
under this section shall survive the payment of Borrowers’ Obligations under
this Agreement and the termination of this Agreement.

 

6.06         Financial Covenants.

 

(a)           Maximum Loan Turn Days. Borrowers
shall at all times maintain a Maximum Loan Turn Days calculation, measured at
the end of the fiscal quarter ending June 30, 2009 and the end of each
fiscal quarter thereafter, of not greater than thirty (30) days.

(b)           Fixed Charge Coverage Ratio. Borrowers
shall maintain a Fixed Charge Coverage Ratio, measured quarterly at the end of
each fiscal quarter, of not less than (i) 1.10:1.00 for the fiscal quarter
ending June 30, 2009; (ii) 1.15:1.00 for the fiscal quarter ending September 30,
2009; and (iii) 1.20:1.00 for each fiscal quarter ending thereafter. The
Fixed Charge Coverage Ratio shall be calculated for the four quarters
immediately preceding the quarter being measured, provided,
however, that for the first three
quarters of testing following the Closing, the Fixed Charge Coverage Ratio
shall be calculated on a cumulative annualized basis. The first calculation of
the Fixed Charge Coverage Ratio shall be for the quarter ending June 30,
2009.

 

6.07         Financial and Business Information. Borrowers
shall deliver to Lender the following (all to be in form and substance
satisfactory to Lender):

 

(a)           Financial Statements and Collateral Reports.

 

(i)            as soon as available but in any event within one hundred
twenty (120) days after the end of each fiscal year of Borrowers, financial
statements of Borrowers for such year which present fairly Borrowers’ financial
condition, including the balance sheet of Borrowers as at the end of such
fiscal year and a statement of cash flows and income statement for such fiscal
year, all on a consolidated and consolidating basis, setting forth in the
consolidated statements in comparative form, the corresponding figures as of
the end of and for the previous fiscal year, all in reasonable detail,
including all supporting schedules, and audited
by independent public accountants of recognized standing, selected by Borrowers
and reasonably satisfactory to Lender, and prepared in accordance with GAAP;

 

(ii)           as soon as available but in any event on the earlier
of (i) the date upon which Prospect Medical Holdings, Inc. files a Form 10-Q
for such fiscal quarter with the Securities and Exchange Commission and (ii) forty-five
(45) days after the end of each fiscal quarter, Borrowers’ internally prepared
quarterly consolidated and consolidating financial statements, for such fiscal
quarter, along with year to date information, including a balance sheet, income
statement and statement of cash flows with respect to the periods measured,
operating statistics and a quarterly compliance certificate;

 

21

 

(iii)          promptly upon request, such other information
concerning Borrowers as Lender may from time to time request, including
Medicare and Medicaid cost reports and audits, annual reports, security law
filings and reports to any security holders;

 

(iv)          as soon as possible and no later than thirty (30)
days prior to the first day of each fiscal year, an annual operating budget
along with annual consolidated and consolidating projections for Borrowers for
such year, including a balance sheet, income statement and statement of cash
flow, all prepared on a monthly basis;

 

(v)           contemporaneously with delivery of the annual
financial statements referred to in clause (i) above, a good standing
certificate from each Borrower’s jurisdiction of organization evidencing that
such Borrower remains in good standing in, and continues to be organized under
the laws of, such jurisdiction;

 

(vi)          as soon as available but in any event within one
hundred twenty (120) days after the effective date of the Plan of
Reorganization, audited balance sheets for Borrowers for the fiscal year ended September 30,
2008, all on a consolidated and consolidating basis, setting forth in the
consolidated statements in comparative form, the corresponding figures as of
the end of and for the previous fiscal year, all in reasonable detail,
including all supporting schedules, and audited
by independent public accountants of recognized standing, selected by Borrowers
and reasonably satisfactory to Lender;

 

(vii)         as soon as available but in any event within one
hundred twenty (120) days after the effective date of the Plan of
Reorganization, an audited income statement for the fiscal year ended September 30,
2008, on a consolidated and consolidating basis, audited by independent public
accountants of recognized standing, selected by Borrowers and reasonably
satisfactory to Lender, and prepared in accordance with GAAP; and

 

(viii)        such other data, reports, statements and information
(financial or otherwise), as Lender may reasonably request.

 

(b)           Notice of Event of Default or Unmatured Event of
Default- promptly (but at least within 2 Business Days) upon becoming aware of
the existence of any condition or event which constitutes an Event of Default
or Unmatured Event of Default under this Agreement, a written notice specifying
the nature and period of existence thereof and what action Borrowers are taking
(and propose to take) with respect thereto;

 

(c)           Notice of Claimed Default - promptly
upon receipt by any Borrower, notice of default, oral or written, given to such
Borrower by any creditor for borrowed money in excess of $100,000.00.

 

6.08         Officer’s Certificate. Along with the set of
financial statements delivered to Lender at the end of each fiscal quarter and
fiscal year pursuant to Section 6.07(a) hereof, deliver to Lender a
certificate (in the form of Exhibit 6.08 hereto and made a part
hereof) from the chief financial officer of Borrowers setting forth:

 

(a)           Covenant Compliance - the information
(including detailed calculations) required in order to establish whether
Borrowers are in compliance with the requirements of Section 6.06 as of
the end of the period covered by the financial statements then being furnished
(and any exhibits appended thereto) under Section 6.07 hereof; and

 

(b)           Event of Default - that the signer in his
capacity as an officer of Borrowers has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his supervision) a review
of the transactions and conditions of Borrowers from the beginning of the
accounting period covered by the financial statements being delivered therewith
to the date of the certificate, and that such review has not disclosed the
existence during such period of any condition or event which constitutes an
Event of Default or Unmatured Event of Default or if any such condition or
event existed or exists, specifying the nature and period of existence thereof
and what action Borrowers have taken or propose to take with respect thereto.

 

6.09         Inspection. No more than two times per
calendar year so long as no Event of Default or Unmatured Event of Default has
occurred and is continuing, Borrowers will permit any of Lender’s officers or
other representatives to visit and inspect any Borrower’s location(s) or
where any Collateral is kept during regular business hours to examine and audit
all of such Borrower’s books of account, records, reports and other papers, to
make copies and extracts therefrom and to discuss its affairs, finances and
accounts with its officers, employees and independent certified public
accountants and attorneys. Borrowers shall pay to Lender all reasonable fees
based on standard rates for such inspections, currently at the rate of
$1,000.00 per day, per person (plus reasonable out-of-pocket expenses payable
monthly in arrears on the first day at the immediately successive calendar
month at the

 

22

 

inspection). All reasonable costs, fees and
expenses incurred by Lender in connection with such inspections shall
constitute Expenses for purposes of this Agreement.

 

6.10         Tax Returns and Reports. At Lender’s
request from time to time, Borrowers shall promptly furnish Lender with copies
of any annual federal and state income tax returns, any other tax returns of
Borrowers or any other documents related to Taxes of the Borrowers

 

6.11         Material Adverse Developments. Each Borrower
agrees that immediately (but at least within 2 Business Days) upon it or any of
its officers becoming aware of any development or other information which would
reasonably be expected to have a Material Adverse Effect, it shall give to
Lender telephonic or facsimile notice specifying the nature of such development
or information and such anticipated effect. In addition, such verbal
communication shall be confirmed by written notice thereof to Lender on the
next Business Day after such verbal notice is given.

 

6.12         Places of Business. Each Borrower shall give
thirty (30) days prior written notice to Lender of any changes to (a) its
jurisdiction of organization, (b) the location of any of its chief
executive office or any other places of business, or the establishment of any
new, or the discontinuance of any existing place of business, and (c) its
name.

 

6.13         Notice of Action. Each Borrower will
promptly notify Lender in the event of any legal action, dispute, setoff,
counterclaim, defense or reduction that is or may be asserted by an Obligor
with respect to any Account that may have a Material Adverse Effect on the
collectability of such Account or all Accounts collectively.

 

6.14         Verification of Information. At the request
of Lender, Borrowers will promptly provide and verify the accuracy of
information concerning Borrowers and their Affiliates of the type provided to
Lender in connection with Lender’s decision to enter into this Agreement and
such other information concerning Borrowers and their Affiliates as Lender may
reasonably request in connection with any offering documents with respect to
the sale of securities backed by the Eligible Accounts (the “Securities”), including, without limitation, all
information necessary to provide full and complete disclosure of all material
facts pertaining to an investment in the Securities in compliance with federal
and state securities and blue sky laws, and such information may be published
in such offering documents and relied upon by Lender and any party arranging
the offering of such Securities by Lender or its assignee. Such information
will be true and complete in all material respects and will not omit to state a
material fact necessary to make the statements contained in such information,
in light of the circumstances under which they were made, not misleading.

 

6.15         Accounts Receivables Monitoring System. Borrowers
shall permit Lender or its agents to interface its accounts receivables
monitoring system to Borrowers’ data files and will assist Lender or its agent
in completing and maintaining such interface such that the interface can
interpret, track and reconcile the Accounts Detail File provided by Borrowers.

 

6.16         [Reserved]

 

6.17         Compliance with Laws.

 

(a)           Borrowers agree to comply with all Applicable Laws,
and all orders of any federal, state or local legislative, administrative or
judicial body or official, provided that Borrowers may contest any acts,
rules, regulations, orders and directions of such bodies or officials in any
reasonable manner which Lender determines will not materially and adversely
effect Lender’s rights or priorities in the Collateral.

 

(b)           Without limiting the generality of the foregoing,
each Borrower agrees to comply with all environmental statutes, acts, rules,
regulations or orders, as presently existing or as adopted or amended in the
future, applicable to the ownership and/or use of such Borrower’s real property
and operation of its business, if the failure to so comply could reasonably be
expected to have a Material Adverse Effect. No Borrower shall be deemed to have
breached any provision of this Section 6.17(b) if (i) the
failure to comply with the requirements of this Section 6.17(b) resulted
from good faith error or innocent omission, (ii) such Borrower promptly
commences and

 

23

 

diligently pursues a cure of such breach and (iii) such
failure is cured within thirty (30) days following such Borrower’s receipt of
notice from Lender of such failure, or if such breach cannot in good faith be
cured within thirty (30) days following such Borrower’s receipt of such notice,
then such breach is cured within a reasonable time frame based on the extent
and nature of the breach and the necessary remediation, and in conformity with
any applicable consent order, consensual agreement and Applicable Law.

 

(c)           Borrowers will (i) maintain in full force and
effect, and free from restrictions, probations, conditions or known conflicts
which would materially impair the use or operation of any Healthcare Facility
for its current use, all Permits necessary under Healthcare Laws to continue to
receive reimbursement under all Third Party Payor Programs in which any
Borrower or any Healthcare Facility participates as of the date of this
Agreement, and (ii) provide to Lender upon request, an accurate, complete
and current list of all participation agreements with Third Party Payors with
respect to the business of each Borrower (collectively, “Participation
Agreements”). Borrowers will at all times comply with all requirements,
contracts, conditions and stipulations applicable to such Borrower in order to
maintain in good standing and without default or limitation all such
Participation Agreements.

 

6.18         Collateral Reporting.  Borrowers agree to furnish to Lender such
information as Lender reasonably requires in connection with monitoring the
Collateral, at the times and in the manner determined by Lender, including
Medicare and Medicaid cost reports and audits.

 

6.19         Collateral. Borrowers, at their
expense, agree to forever warrant and defend the Collateral from any and all
claims and demands of any other person, other than holders of Permitted Liens.

 

6.20         [Reserved]

 

6.21         Additional Creditor Trust Payment. On or prior
to 180 days after the Closing Date, Borrowers shall deliver to Lender evidence
satisfactory to Lender in its sole discretion that payment in the amount of
$1,000,000.00 has been made by BMC to the Creditors Trust.

 

6.22         Potential CMS Liability.

 

(a)           No later than five (5) Business Days after the
first calendar day of each month, Borrowers shall provide a description to
Lender in writing, acceptable to Lender in its sole discretion, detailing the
status of any actual or potential claims by CMS against Borrowers or any actual
or potential liability of Borrowers to CMS.

 

(b)           Borrowers shall immediately (but within 2 Business
Days of knowledge) upon Borrowers or any of its officers becoming aware of any
claim asserted by CMS, deliver a written notice specifying the nature and
amount of such claim, and provide copies of any documentation related to such claim,
to Lender.

 

6.23         Maintenance of Computerized Billing System; Books
and Records.  Any and all
computer hardware, software and electronic data, as well as any books, records
or other information, necessary to bill for services provided by Borrowers and collect
payments for such services shall be maintained in good working condition at its
records location (the “Records Location”), which, as of the Closing
Date, is located at 3847 Delmas Terrace, Culver City, CA 90231 (the “3847
Delmas Terrace Facility”). Until all Obligations have been paid in full,
Borrowers shall either (i) maintain the Records Location at the 3847
Delmas Terrace Facility and continue to own the 3847 Delmas Terrace Facility in
fee simple, or, if the 3847 Delmas Terrace Facility is no longer owned in fee
simple, (ii) obtain a landlord waiver in form and substance similar to the
form attached hereto as Exhibit 6.23, and reasonably satisfactory
to Lender, simultaneously with the transfer of ownership of the 3847 Delmas
Terrace Facility or (iii) move the Records Location to another property
owned in fee simple by Borrower and provide written notice to Lender of such
move and the address of the subsequent location at least fifteen (15) Business
Days prior to such move.

 

6.24         Dissolution of Southern California Spine Institute,
LLC. On or prior to sixty (60) days after the Closing Date, BMC shall (i) cause
Southern California Spine Institute, LLC., a California limited liability
company (“SCSI”), which is a wholly-owned subsidiary of BMC, to transfer
all of the assets and liabilities of SCSI to BMC,

 

24

 

and (ii) dissolve SCSI and provide to
Lender evidence of such dissolution from the appropriate Governmental Authority
in California.

 

ARTICLE
7

 

NEGATIVE
COVENANTS

 

Each Borrower covenants that until all of Borrowers’
Obligations to Lender are paid and satisfied in full and the Credit Facility
has been terminated:

 

7.01         Merger, Consolidation,
Dissolution or Liquidation.

 

(a)           No Borrower shall sell, lease, license, transfer or
otherwise dispose of any material portion of its Property other than inventory
sold to patients/customers in the ordinary course or ordinary operation of such
Borrower’s business or pursuant to the JHA Loan Documents, without Lender’s
prior written consent.

 

(b)           No Borrower shall merge or consolidate with, or
acquire any Capital Stock or substantially all of the assets of any other
Person, or commence a dissolution or liquidation, other than through a merger
with another Borrower, without Lender’s prior written consent.

 

7.02         Liens and Encumbrances. No Borrower
shall: (a) execute a negative pledge agreement with any Person covering
any of the Collateral, or (b) cause or permit or agree or consent to cause
or permit in the future (upon the happening of a contingency or otherwise) the
Collateral, whether now owned or hereafter acquired, to be subject to any lien,
claim or encumbrance other than those of Lender and Permitted Liens.

 

7.03         Negative Pledge. No Borrower shall pledge
or permit a lien or security interest to exist on the Capital Stock of its
Subsidiaries.

 

7.04         Transactions With Affiliates
or Subsidiaries.

 

(a)           Except as set forth on Schedule 7.04, no
Borrower shall enter into any transaction with any Subsidiary or other Affiliate
(other than another Borrower) including, without limitation, the purchase,
sale, lease or exchange of Property, or the loaning, capitalization or giving
of funds to any such Affiliate or any Subsidiary, unless (i) such
Subsidiary or Affiliate is engaged in a business substantially related to the
business conducted by such Borrower, (ii) the transaction is in the
ordinary course of and pursuant to the reasonable requirements of such Borrower’s
business and upon terms substantially the same and no less favorable to such
Borrower as it would obtain in a comparable arm’s length transaction with any
Person not an Affiliate or a Subsidiary, and (iii) such transaction is not
prohibited hereunder.

 

(b)           Except with the prior written consent of Lender, no
Borrower shall create or acquire any Subsidiary or own any Capital Stock in any
Person.  In the event that Lender permits
the foregoing, Lender may, in its reasonable discretion, require that such
Person becomes a Borrower hereunder.

 

7.05         Guarantees. No Borrower shall become
or be liable, directly or indirectly, primary or secondary, matured or
contingent, in any manner, whether as guarantor, surety, accommodation maker,
or otherwise, for the existing or future indebtedness of any kind of any other
Person, except endorsements in the ordinary course of business of negotiable
instruments for deposit or collection.

 

7.06         Investments.         Without Lender’s prior written consent, no Borrower
shall make any Investments, except:

 

(a)           Investments consisting of
cash or Cash Equivalents;

 

25

 

(b)           Investments consisting of
Accounts and promissory notes created, acquired or made and trade credit
extended in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms;

 

(c)           Investments consisting of
Capital Stock, obligations, securities or other property received in settlement
of Accounts from financially troubled obligors in the ordinary course of
business;

 

(d)           Investments existing as of the
Closing Date and set forth on Schedule 7.06 hereto;

 

(e)           Guarantees permitted by Section 7.05
hereof;

 

(f)            Investments in any other
Borrower that is a Borrower prior to giving effect to such Investment; and

 

(g)           Investments permitted under Section 7.04.

 

7.07         Indebtedness.  Without Lender’s prior written consent, no
Borrower shall create, incur or suffer to exist any Indebtedness (exclusive of
trade debt) except (subject to compliance with Section 6.06 hereof):

 

(a)           Indebtedness to Lender;

 

(b)           Indebtedness specifically
identified on Schedule 7.07 hereto;

 

(c)           Indebtedness constituting
purchase money indebtedness for financing of capital expenditures or a Capital
Lease so long as such Indebtedness is secured only by a security interest in
the equipment being financed, and so long as such Indebtedness does not cause,
or result in, an Event of Default or Unmatured Event of Default;

 

(d)           Indebtedness of any Borrower
to any other Borrower;

 

(e)           Indebtedness constituting
Subordinated Debt;

 

(f)            Indebtedness existing under
the JHA Loan Documents;

 

(g)           Indebtedness incurred to
finance the design and construction of a new emergency room and related
facilities;

 

(h)           Indebtedness issued pursuant
to the Plan of Reorganization, in an amount not to exceed $4,000,000; and

 

(i)            Indebtedness that refinances
any Indebtedness permitted under Sections 7.07(f) or 7.07(g) (the “Refinanced
Indebtedness”) so long as (i) such Refinanced Indebtedness does not
exceed the original principal amount of the Indebtedness it refinances on the
date of its incurrence, (ii) no Event of Default has occurred and is
continuing, and (iii) Borrowers are in pro forma compliance for the twelve
(12) month period immediately preceding the refinancing with the financial
covenants set forth in Section 6.06 after giving effect to such Refinanced
Indebtedness.

 

7.08         Loans to Other Persons. No Borrower
shall make or be permitted to have outstanding any loans, advances or
extensions of credit to any Person (other than as permitted under Section 7.06(f)).
Borrowers may make intercompany loans to other Borrowers pursuant to Section 7.06(f),
but such loans shall be documented prior to the disbursement of the loan
proceeds with such promissory notes, loan agreements and collateral documents
as Lender may require in its sole discretion.

 

7.09         Change in Ownership/Management. No Borrower
shall permit Prospect Hospital Advisory Services, Inc. to at any time own,
legally or beneficially, less than fifty-one percent (51%) of the aggregate
voting interest of all classes of Capital Stock of such Borrower entitled to
vote generally. No Borrower shall replace its

 

26

 

chief executive officer unless a replacement
acceptable to Lender is employed within ninety (90) days of any termination.

 

7.10         Subordinated Debt Payments. No Borrower
shall make (i) any payment in contravention of the terms and conditions of
the Subordination Agreements or (ii) any payment pursuant to any
management agreement, or any similar agreement, if an Event of Default or
Unmatured Event of Default has occurred and is continuing or if such payment
would cause an Event of Default or Unmatured Event of Default.

 

7.11         Distributions. Borrowers shall not
declare or pay or make any forms of Distributions to its Shareholders,
Affiliates, officers or directors or their respective successors or assigns,
nor may any Borrower declare to pay or make any form of Distribution, except to
the extent that a Distribution can be made without causing an Event of Default
or an Unmatured Event of Default and only so long as no Event of Default has
occurred and is continuing.

 

7.12         No Change in Business. No Borrower shall engage
in any line of business which has not been disclosed in writing to Lender prior
to the date hereof without Lender’s prior written consent.

 

ARTICLE
8

 

DEFAULT

 

8.01         Events of Default. Each of the following
events shall constitute an event of default (“Event of Default”) and
Lender shall thereupon have the option to declare the Obligations immediately
due and payable, all without demand, notice, presentment or protest or further
action of any kind (it also being understood that the occurrence of any of the
events or conditions set forth in Sections 8.01(i), (j), (k), (l), (q) or (x) shall
automatically cause an acceleration of the Obligations without notice or
demand):

 

(a)           Payments. if Borrowers fail to make
any payment of principal, interest, or any other charges, fees, Expenses or
other monetary obligations owing to Lender, arising out of or incurred in
connection with this Agreement on the date when such payment is due and payable
and such failure continues for a period of one (1) Business Day; provided,
however, that the one (1) Business Day grace period shall not be
applicable if such payments are due and payable due to maturity, acceleration
or demand, whether following an Event of Default or otherwise;

 

(b)           Particular Covenant Defaults. if any
Borrower fails to perform, comply with or observe any covenant or undertaking
contained in this Agreement or any other Loan Document not otherwise described
in this Section 8.01, and such failure continues for a period of ten (10) Business
Days after the earlier of a Borrower becoming aware of such failure or a
Borrower receiving written notice of such failure;

 

(c)           Financial Information. if any statement, report,
financial statement, or certificate made or delivered by a Borrower or any of
their officers, employees or agents, to Lender is not true and correct, in all
material respects, when made;

 

(d)           Uninsured Loss. if there shall occur any
uninsured damage to or loss, theft, or destruction in excess of $100,000.00
with respect to any portion of any Borrower’s Property;

 

(e)           Warranties or Representations. if any
warranty, representation or other statement by or on behalf of Borrowers, or
any of them, contained in or pursuant to this Agreement, any Loan Document, or
in any document, agreement or instrument furnished in compliance with, relating
to, or in reference to this Agreement, is false, erroneous, or misleading in any
material respect when made;

 

(f)            Agreements with Others. if Borrowers,
or any of them, shall default beyond any grace period under any agreement with
respect to any Indebtedness or Subordinated Debt and (i) such default
consists of the failure to pay any principal, premium or interest with respect
to such Indebtedness or (ii) such default consists of the failure to
perform any covenant or agreement with respect to such Indebtedness, if the
effect of such default is to

 

27

 

cause or permit such Indebtedness to become
due prior to its maturity date or prior to its regularly scheduled date of
payment;

 

(g)           Other Agreements with Lender.

 

(i)            the occurrence of any default or event of default
(after giving effect to any applicable grace cure period) under any of the
other Loan Documents;

 

(ii)            any of the other Loan Documents ceases to be valid,
binding and enforceable in accordance with its terms; and

 

(iii)          Borrowers, or any of them, breach or violate the
terms of, or if a default or an event of default, occurs under, any other
existing or future agreement (related or unrelated) between or among Borrowers,
or any of them and Lender, including, without limitation, any lease agreements
or finance agreements with any affiliate of Lender;

 

(h)           Judgments. if any final judgment for
the payment of money in excess of $100,000.00 shall be rendered against
Borrowers, or any of them, which is not fully and unconditionally covered by
insurance (such coverage to be acknowledged by a financially sound and
reputable insurance company in writing) or an appeal bond, or for which such
Person has not established a cash or cash equivalent reserve in the amount of
such judgment each in the form, substance and amount satisfactory to Lender in
its reasonable discretion;

 

(i)            Assignment for Benefit of Creditors, etc. if Borrowers,
or any of them, call a meeting of the creditors of any Borrower for the purpose
of compromising such Borrower’s debts or obligations, or make or propose an
assignment for the benefit of creditors generally, offers a composition or
extension to creditors, or makes or sends notice of an intended bulk sale of
any business or assets now or hereafter owned or conducted by any Borrower
which might materially and adversely affect such Person;

 

(j)            Bankruptcy, Dissolution, etc. upon the
commencement of any action for the bankruptcy, insolvency, receivership,
assignment for the benefit of creditors, dissolution or liquidation, or similar
proceeding under any federal or state law, of Borrowers, or any of them, or the
commencement of any proceeding to avoid any transaction entered into by
Borrowers, or any of them, or the commencement of any case or proceeding for
reorganization or liquidation of Borrowers’, or any of their debts under the
United States Bankruptcy Code or any other state or federal law now or
hereafter enacted for the relief of debtors, whether instituted by or against
any Borrower; provided, however, that Borrowers shall have ten (10) days
to contest such proceeding and thirty (30) days from the commencement of the
action to obtain the dismissal or discharge of involuntary proceedings filed
against a Borrower, it being understood that during such ten (10) and
thirty (30) day periods, respectively, Lender shall be not obligated to make
Revolving Loans hereunder and Lender may seek adequate protection, stay relief,
right to setoff or recoupment, and/or any other right or remedy deemed
necessary in the sole discretion of Lender in any bankruptcy proceeding;

 

(k)           Receiver.  upon the appointment of a receiver,
liquidator, custodian, trustee or similar official or fiduciary for Borrowers,
or any of them, or for any of any such Borrower’s Property;

 

(l)            Execution Process, Seizure, etc.  the issuance of any execution or distraint
process against any Borrower, or any of them, or any Property of any such
Borrower is seized by any governmental entity, federal, state or local;

 

(m)          Termination of Business. if Borrowers,
or any of them, cease any material portion of their business operations as
presently conducted or any Borrower fails to generally meet its debts as those
debts mature;

 

(n)           Plans, etc. any Borrower or ERISA
Affiliate shall (i) engage in any “prohibited transaction” as defined in
ERISA, (ii) incur any “accumulated funding deficiency” as defined in
ERISA, (iii) incur any “reportable event” as defined in ERISA, (iv) an
event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan
or Multiemployer Plan, (v) become subject to the assertion of a material
claim (other than routine claims for benefits) against any “plan” (as defined
in ERISA) or against any Borrower or ERISA Affiliate in connection with any
such plan, (vi) receive from the Internal Revenue Service notice of the
failure of any “plan” (as defined in ERISA) intended to be qualified under Section 401(a) of
the Code to qualify under such section or (vii) the imposition of any
liability under

 

28

 

Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon any
Borrower or ERISA Affiliate, and with respect to this Section 8.01(n),
such event or condition either (i) remains uncured for a period of thirty
(30) days from date of occurrence or (ii) could, in Lender’s reasonable
business judgment, subject any Borrower to any tax, penalty or other liability
having a Material Adverse Effect;

 

(o)           Investigations. any indication or evidence
received by Lender that reasonably leads it to believe Borrowers, or any of
them, may have directly or indirectly been engaged in any type of activity
which would be reasonably likely to result in the forfeiture of any Property of
Borrowers, or any of them, to any Governmental Authority, which would
reasonably be expected to have a Material Adverse Effect;

 

(p)           Material Adverse Events.

 

(i)            Lender reasonably determines that an event which
adversely affects the collectability of a material portion of the Accounts has
occurred; or

 

(ii)           a Material Adverse Effect has occurred;

 

(q)           Lockbox Instructions. any instruction or
agreement regarding the Commercial Lockbox or the Government Lockbox or the
bank accounts related thereto, including the Depository Agreements and any
standing transfer instructions, is amended or terminated without the written
consent of Lender, or if any Borrower fails, within one (1) Business Day
of receipt, to forward Collections it receives with respect to any Accounts to
the Commercial Lockbox or the Government Lockbox, as the case may be;

 

(r)            Modification of Subordinated Debt. Borrowers (or
any of them) shall modify the terms or provisions of any agreement, instrument
or other document relating to any Subordinated Debt without Lender’s prior
written consent, unless such modification is permitted by the applicable
Subordination Agreement;

 

(s)           Change in Ownership/Management. any Borrower
fails to perform, comply with or observe the covenants and undertakings
contained in Section 7.09 hereof;

 

(t)            Restraint on Business. any Borrower
shall be prohibited or otherwise restrained from conducting the business
theretofore conducted by it at any of the Healthcare Facilities in any manner
that has or could reasonably be expected to have or result in a Material
Adverse Effect by virtue of any determination, ruling, decision, decree,
ordinance, or order of any court of competent jurisdiction, Governmental
Authority, or municipality;

 

(u)           Revocation of Permits.  a Governmental Authority shall have revoked
any material Permit, including any license, permit, certificate or Medicaid or
Medicare qualification pertaining to any Healthcare Facility, regardless of
whether such material Permit was held by or originally issued for the benefit
of any Borrower;

 

(v)           Taxes. If Borrowers fail to pay
any obligation related to any Taxes no later than the date that such
obligations become due and payable, unless the Borrowers are challenging the
Taxes in good faith and are maintaining adequate reserves;

 

(w)          CMS Claims.  If (i) CMS asserts a CMS Claim in an
amount that exceeds Excess Availability and is not approved by CMS for
repayment under an extended repayment plan, or (ii) Borrowers enter into a
settlement agreement and/or extended repayment plan with CMS that would result
in Borrowers’ violating the Fixed Charge Coverage Ratio calculated as of the
prior quarter-end on a pro forma basis, assuming that payments due under any
such settlement agreement and/or extended repayment plan in the following 12
month period shall be deemed paid in the prior 12 month period.

 

8.02         Cure. Nothing contained in this
Agreement or the Loan Documents shall be deemed to compel Lender to accept a
cure of any Event of Default hereunder beyond any cure period specifically
provided in this Agreement.

 

29

 

8.03         Rights and Remedies on
Default.

 

(a)           In addition to all other rights, options and
remedies granted or available to Lender under this Agreement or the Loan
Documents, or otherwise available at law or in equity, upon or at any time
after the occurrence of an Event of Default, Lender may, in its discretion,
charge Borrowers’ Default Rate on all then outstanding or thereafter incurred
Obligations and/or withhold or cease making Revolving Loans under the Credit
Facility, unless such Event of Default is cured to Lender’s satisfaction or
waived in accordance herewith.

 

(b)           In addition to all other rights, options and
remedies granted or available to Lender under this Agreement or the Loan
Documents (each of which is also then exercisable by Lender), Lender may, in
its discretion, upon or at any time after the occurrence of an Event of
Default, terminate the Credit Facility (it also being understood that the
occurrence of any of the events or conditions set forth in Sections 8.01(i),
(j), (k) or (q) hereof shall automatically cause a termination of the
Credit Facility without notice or demand).

 

(c)           The Lender will be entitled to take any and all
actions to enforce its claims against Borrowers to recover the balance of the
Indebtedness then due, including, without limitation, being entitled to pursue
all remedies provided for by law, equity, or otherwise, and to exercise the
warrants of attorney to confess judgment against Borrowers, or any of them,
contained in this Agreement or the other Loan Documents;

 

(d)           The Lender will be entitled to take any and all
actions permitted by this Agreement, the other Loan Documents, and/or by law,
equity or otherwise;

 

(e)           In addition to all other rights, options and remedies
granted or available to Lender under this Agreement or the Loan Documents (each
of which is also then exercisable by Lender), Lender may, upon or at any time
after the occurrence of an Event of Default, exercise all rights under the UCC
and any other applicable law or in equity, by contract or otherwise, and under
all Loan Documents permitted to be exercised after the occurrence of an Event
of Default, including the following rights and remedies (which list is given by
way of example and is not intended to be an exhaustive list of all such rights
and remedies):

 

(i)            Subject to all applicable laws and regulations
governing payment of Medicare and Medicaid receivables, the right to “take
possession” of or foreclose on the Collateral (including removing from any
premises where same may be located any and all books and records, computers,
electronic media and software programs associated with any Collateral
(including electronic records, contracts and signatures pertaining thereto),
documents, instruments and files, and any receptacles or cabinets containing
same, relating to the Accounts) by any available judicial procedure, or without
judicial process, and to enter any premises where any Collateral may be located
for the purpose of taking possession of or removing the same, and notify all
Obligors of Lender’s security interest in the Collateral and require payment
under the Accounts to be made directly to Lender and Lender may, in its own
name or in the name of the applicable Borrower, exercise all rights of a
secured party with respect to the Collateral and collect, sue for and receive
payment on all Accounts, and settle, compromise and adjust the same on any
terms as may be satisfactory to Lender, in its sole and absolute discretion for
any reason or without reason and Lender may do all of the foregoing with or
without judicial process (including, without limitation, notifying the United
States postal authorities to redirect mail addressed to Borrowers, or any of
them, to an address designated by Lender) and may use, at Borrowers’ expense,
such of the Borrowers’ personnel, supplies or space as may be necessary to
manage such Accounts;

 

(ii)           Require Borrowers, at Borrowers’ expense, to
assemble all or any part of the Collateral and make it available to Lender at
any place designated by Lender, which may include providing Lender or any
entity designated by Lender with access (either remote or direct) to Borrowers’
information system for purposes of monitoring, posting payments and rebilling
Accounts to the extent deemed desirable by Lender in its sole discretion;

 

(iii)          The right to reduce or modify the Revolving Loan
Commitment, Borrowing Base or any portion thereof or the Advance Rates or to
modify the terms and conditions upon which Lender may be willing to consider
making Revolving Loans under the Credit Facility or to take additional Reserves
in the Borrowing Base for any reason; or

 

(iv)          The right to sell, assign and deliver all or any
part of the Collateral, in the name of the Borrowers (or any of them) or
Lender, or in the name of such other party as Lender may designate, with or
without advertisement, at public or private sale, for cash, on credit or
otherwise, at Lender’s sole discretion, with or

 

30

 

without warranties or representations
(including warranties of title, possession, quiet enjoyment and the like), and
upon such other terms and conditions as Lender in its sole discretion may deem
advisable, and Lender may bid or become a purchaser at any such sale, free from
any right of redemption, which right is hereby expressly waived by the
Borrowers.

 

(f)            Borrowers hereby agree that a notice received by
them at least ten (10) days before the time of any intended public sale or
of the time after which any private sale or other disposition of the Collateral
is to be made, shall be deemed to be reasonable notice of such sale or other
disposition. If permitted by applicable law, any Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrowers. Each Borrower
covenants and agrees not to interfere with or impose any obstacle to Lender’s
exercise of its rights and remedies with respect to the Collateral.

 

8.04         [Reserved]

 

8.05         Nature of
Remedies. All rights and remedies granted
Lender hereunder and under the Loan Documents, or otherwise available at law or
in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time
until all Obligations are satisfied in full. The exercise of any one right or
remedy shall not be deemed a waiver or release of any other right or remedy,
and Lender, upon or at any time after the occurrence of an Event of Default,
may proceed against Borrowers, or any of them, at any time, under any
agreement, with any available remedy and in any order.

 

8.06         Set-Off. Upon the occurrence of an
Event of Default, Lender and/or any Affiliate of Lender and/or participant with
Lender shall have and be deemed to have, without notice to Borrowers, the
immediate right of set-off and may apply the funds or other amounts or Property
thus set off against any of Borrowers’ Obligations hereunder.

 

8.07           Application of Proceeds. The net cash
proceeds resulting from Lender’s exercise of any of Lenders rights pursuant to
this Article 8 (after deducting all Expenses relating thereto) shall be
applied by Lender to the payment of the Obligations as set forth in Section 2.08(b) hereof,
and the Borrowers shall remain liable to Lender for any deficiencies, and
Lender in turn agrees to remit to the Borrowers or their successors or assigns,
any surplus resulting therefrom.

 

ARTICLE
9

 

MISCELLANEOUS

 

9.01         GOVERNING LAW. THIS AGREEMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS, AND SHALL BE CONSTRUED WITHOUT THE AID OF ANY CANON, CUSTOM
OR RULE OF LAW REQUIRING CONSTRUCTION AGAINST THE DRAFTSMAN.

 

9.02         Integrated Agreement. The Revolving Note, the other Loan Documents, all related agreements,
and this Agreement shall be construed as integrated and complementary of each
other, and as augmenting and not restricting Lender’s rights and remedies. If,
after applying the foregoing, an inconsistency still exists, the provisions of
this Agreement shall constitute an amendment thereto and shall control.

 

9.03         Waiver and Indemnity.

 

(a)           No omission or delay by Lender in exercising any
right or power under this Agreement or any related agreements and documents
will impair such right or power or be construed to be a waiver of any default,
or Event of Default or an acquiescence therein, and any single or partial
exercise of any such right or power will not preclude other or further exercise
thereof or the exercise of any other right, and as to any Borrower no waiver
will be valid unless in writing and signed by Lender and then only to the
extent specified.

 

31

 

(b)           Each Borrower releases and shall indemnify, defend
and hold harmless Lender, and its respective officers, directors, employees,
attorneys and agents (each, an “Indemnified Party”), of and from any
claims, demands, liabilities, obligations, judgments, injuries, losses, damages
and costs and expenses (including, without limitation, Expenses and reasonable
legal fees) of any kind or nature, which at any time may be imposed on, incurred
by, or asserted against any Indemnified Party, resulting from (i) acts or
conduct of a Borrower under, pursuant or related to this Agreement and the
other Loan Documents, (ii) as a result of Lender’s exercise of (or failure
to exercise) any of Lender’s rights and remedies hereunder, including (A) any
sale or transfer of the Collateral, (B) the preservation, repair,
maintenance, preparation for sale or securing of any Collateral, and (C) the
defense of Lender’s interests in the Collateral (including the defense of
claims brought by the Borrowers (or any of them) as a debtor-in-possession or
otherwise, any secured or unsecured creditors of the Borrowers (or any of
them), or any trustee or receiver in bankruptcy); (ii) as a result of any
environmental pollution, hazardous material or environmental clean-up and the
Borrowers’ off-site disposal practices; (iii) in connection with any
regulatory investigation or proceeding by any regulatory authority or agency
having jurisdiction over the Borrowers (or any of them); (iv) otherwise
relating to or arising out of the transactions contemplated by this Agreement
and the other Loan Documents, or any action taken (or failure to act) by any
Indemnified Party with respect thereto; (v) any Borrower’s breach, or
alleged breach, or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and (vi) any
Borrower’s failure, or alleged failure, to comply with any or all laws,
statutes, ordinances, governmental rules, regulations or standards, whether
federal, state or local, or court or administrative orders or decrees
(including, without limitation, environmental laws, etc.), and all costs,
expenses, fines, penalties or other damages resulting therefrom, unless resulting
from acts or conduct of Lender constituting willful misconduct or gross
negligence, as finally determined by a court of competent jurisdiction. This
indemnification shall survive the termination of this Agreement and the payment
in full and satisfaction of the Obligations.

 

(c)           Lender shall not be liable for, and Borrowers hereby
agree that Lender’s liability in the event of a breach by Lender of this
Agreement shall be limited to Borrowers’ direct damages suffered and shall not
extend to, any consequential or incidental damages. In the event Borrowers
bring suit against Lender in connection with the transactions contemplated
hereunder, and Lender is found not to be liable, Borrowers shall indemnify and hold
Lender harmless from all costs and expenses, including attorneys’ fees,
incurred by Lender in connection with such suit.

 

9.04         Time. Whenever Borrowers, or any
of them, shall be required to make any payment, or perform any act, on a day
which is not a Business Day, such payment may be made, or such act may be
performed, on the next succeeding Business Day. Time is of the essence in
Borrowers’ performance under all provisions of this Agreement and all related
agreements and documents.

 

9.05         Expenses of Lender.

 

(a)           At Closing and from time to time thereafter,
Borrowers will pay all reasonable expenses of Lender on demand (including,
without limitation, search costs, audit fees, appraisal fees, and the fees and
expenses of legal counsel for Lender) relating to this Agreement, and all
related agreements and documents, including, without limitation, expenses
incurred in the analysis, negotiation, preparation, closing, administration and
enforcement of this Agreement and the other Loan Documents, the enforcement,
protection and defense of the rights of Lender in and to the Loans and
Collateral or otherwise hereunder, and any reasonable expenses relating to
extensions, amendments, waivers or consents pursuant to the provisions hereof,
or any related agreements and documents or relating to agreements with other
creditors, or termination of this Agreement (collectively, the “Expenses”).
Any Expenses not paid upon demand by Lender shall bear interest at the highest
per annum rate of interest applicable to the Loans.

 

(b)           In addition, at any time following the date of this
Agreement, Borrowers effect any changes which results in a change in the format
or sequence of Borrowers’ data, Borrowers shall pay to Lender its reasonable
charge for implementing such changes as are necessary to accommodate the
changes in the format or sequence of the data such that Lender’s accounts
receivable monitoring system is capable of importing such data, including an
hourly fee of $150.00.

 

32

 

9.06         Confidentiality. Except as provided in Section 9.19
hereof or to the extent required by law or applicable regulations, Borrowers
and Lender agree to maintain the confidentiality of this Agreement and not to
disclose the contents hereof or provide a copy hereof to any third party,
except (i) disclosures made in the Bankruptcy Case, (ii) accountants,
lawyers and financial advisers of the parties who are informed of and agree to
be bound by this Section 9.06, and (iii) that copies hereof may be
provided to any assignee or participant (or potential assignee or participant)
of Lender’s interests herein, any investors or prospective investors who
acquire or may acquire Securities backed by Accounts and any parties which
facilitate the issuance of such Securities, including rating agencies,
guarantors and insurers, who are informed of and agree to be bound by this Section 9.06.
Lender agrees to maintain the confidentiality of patient information obtained
as a result of its interests in, or duties with respect to, the Accounts and as
otherwise may be required pursuant to the Business Associate Agreement.

 

9.07         Notices.

 

(a)           Any notices or consents required or permitted by
this Agreement shall be in writing and shall be deemed given if delivered in
person or if sent by facsimile or by nationally recognized overnight courier,
or via first class, certified or registered mail, postage prepaid, to the
address of such party set forth on the signature pages hereof, unless such
address is changed by written notice hereunder;

 

(b)           Any notice sent by Lender or Borrowers, or any of
them, by any of the above methods shall be deemed to be given when so received;
and

 

(c)           Lender shall be fully entitled to rely upon any
facsimile transmission or other writing purported to be sent by any Authorized
Officer (whether requesting a Revolving Loan or otherwise) as being genuine and
authorized.

 

9.08         Brokerage. Borrowers represent that
Borrowers have not committed Lender to the payment of any brokerage fee,
commission or charge in connection with this transaction. If any such claim is
made on Lender by any broker, finder or agent or other Person, each Borrower
hereby indemnifies, defends and saves Lender harmless against such claim and
further will defend, with counsel satisfactory to Lender, any action or actions
to recover on such claim, at Borrowers’ own cost and expense, including Lender’s
reasonable counsel fees. Each Borrower further agrees that until any such claim
or demand is adjudicated in Lender’s favor, the amount demanded shall be deemed
an Obligation of Borrowers under this Agreement.

 

9.09         Headings. The headings of any
paragraph or section of this Agreement are for convenience only and shall not
be used to interpret any provision of this Agreement.

 

9.10         Survival. All warranties,
representations, and covenants made by any or all Borrowers and/herein, or in
any agreement referred to herein or on any certificate, document or other
instrument delivered by it or on its behalf under this Agreement, shall be
considered to have been relied upon by Lender, and shall survive the delivery
to Lender of the Revolving Note, regardless of any investigation made by Lender
or on its behalf. All statements in any such certificate or other instrument
prepared and/or delivered for the benefit of Lender shall constitute warranties
and representations by Borrowers hereunder. Except as otherwise expressly
provided herein, all covenants made by any or all Borrowers hereunder or under
any other agreement or instrument shall be deemed continuing until all
Obligations are satisfied in full.

 

9.11         Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties. No Borrower may transfer, assign or delegate
any of its duties or obligations hereunder.

 

9.12         Duplicate Originals. Two or more duplicate
originals of this Agreement may be signed by the parties, each of which shall
be an original but all of which together shall constitute one and the same
instrument. This Agreement may be executed in counterparts, all of which
counterparts taken together shall constitute one completed fully executed
document.

 

9.13         Modification. No modification hereof or
any agreement referred to herein shall be binding or enforceable unless in
writing and signed by Borrowers and Lender.

 

33

 

9.14         Signatories. Each individual signatory
hereto represents and warrants that he is duly authorized to execute this
Agreement on behalf of his principal and that he executes the Agreement in such
capacity and not as a party.

 

9.15         Third Parties. No rights are intended to
be created hereunder, or under any related agreements or documents for the
benefit of any third party donee, creditor or incidental beneficiary of any
Borrower. Nothing contained in this Agreement shall be construed as a
delegation to Lender of any Borrower’s duty of performance, including, without
limitation, such Borrower’s duties under any account or contract with any other
Person.

 

9.16         Waivers.

 

(a)           Borrowers hereby waive diligence, demand,
presentment, protest and any notices thereof as well as notices of nonpayment,
intent to accelerate and acceleration. Borrowers each hereby irrevocably,
unconditionally and fully subordinate in favor of Lender, any and all rights
they or any of them, may have at any time (whether arising directly or
indirectly, by operation of law or contract) to assert or receive payment on
any claim against each other or any of them, on account of payments made under
this Agreement, including, without limitation, any and all rights of
subrogation, reimbursement, exoneration, contribution or indemnity. Each
Borrower waives any event or circumstances which might constitute a legal or
equitable defense of, or discharge of, such Borrower. Furthermore, each
Borrower agrees that if any payment on the Obligations is recovered from or
repaid by Lender in whole or in part in any bankruptcy, insolvency or similar
proceeding instituted by or against any Borrower, the remaining Borrowers
and/shall be obligated to the same extent as if the recovered or repaid payment
had never been originally made on such Obligation. Each Borrower consents and
agrees that Lender shall be under no obligation to marshal any assets or
Collateral in favor of such Borrower or against or in payment of any or all of
the Obligations.

 

(b)           Each Borrower hereby consents and agrees that
Lender, at any time or from time to time in its discretion may: (i) settle,
compromise or grant releases for liabilities of other Borrowers, and/or any
other Person or Persons liable for any Obligations, (ii) exchange, release,
surrender, sell, subordinate or compromise any Collateral of any party now or
hereafter securing any of the Obligations, and (iii) following an Event of
Default, apply any and all payments received at any time against the
Obligations in any order as Lender may determine; all of the foregoing in such
manner and upon such terms as Lender may see fit, without notice to or further
consent from such Borrower who hereby agrees and shall remain bound upon this
Agreement notwithstanding any such action on Lender’s part.

 

(c)           The liability of each Borrower hereunder is absolute
and unconditional and shall not be reduced, impaired or affected in any way by
reason of (i) any failure to obtain, retain or preserve, or the lack of
prior enforcement of, any rights against any Person or Persons (including other
Borrowers), or in any Property, (ii) the invalidity or unenforceability of
any Obligations or rights in any Collateral, (iii) any delay in making
demand upon other Borrowers or any delay in enforcing, or any failure to
enforce, any rights against other Borrowers or in any Collateral even if such
rights are thereby lost, (iv) any failure, neglect or omission to obtain,
perfect or retain any lien upon, protect, exercise rights against, or realize
on, any Property of any Borrower, or any other party securing the Obligations, (v) the
existence or nonexistence of any defenses which may be available to the other
Borrowers with respect to the Obligations, or (vi) the commencement of any
bankruptcy, reorganization, liquidation, dissolution or receivership proceeding
or case filed by or against any Borrower.

 

9.17         CONSENT TO JURISDICTION. EACH BORROWER
AND LENDER HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE JURISDICTION OF, AND
VENUE IN, ANY STATE OR FEDERAL COURT LOCATED IN THE COMMONWEALTH OF
PENNSYLVANIA IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER
OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING. BORROWERS WAIVE ANY OBJECTION TO
IMPROPER VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT OR COURTS
AND ALL RIGHTS TO TRANSFER FOR ANY REASON. EACH BORROWER IRREVOCABLY AGREES TO
SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS
OF THE APPROPRIATE PARTY SET FORTH HEREIN.

 

34

 

9.18         WAIVER OF JURY TRIAL. EACH BORROWER AND LENDER
HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION
WITH ANY LITIGATION COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS, WHETHER SOUNDING
IN TORT, CONTRACT OR OTHERWISE.

 

9.19         Publication. Borrowers grant Lender the
right to publish and/or advertise information to the effect that this
transaction has closed, which information may include, without limit, (a) the
names of Borrowers and Lender, (b) the size of the transaction and (c) those
items of information commonly included within a “tombstone advertisement” of
the type customarily published in financial or business periodicals.

 

9.20         Discharge of Taxes, Borrowers’ Obligations, Etc. Lender, in
its reasonable discretion, shall have the right at any time, and from time to
time, with prior notice to Borrowers, if Borrowers fail to do so five (5) Business
Days after requested in writing to do so by Lender, to: (a) pay for the
performance of any of Borrowers’ Obligations hereunder, and (b) discharge
taxes or liens, at any time levied or placed on any of Borrowers’ Property in
violation of this Agreement unless Borrowers are in good faith with due
diligence by appropriate proceedings contesting such taxes or liens and have
established appropriate reserves therefor under GAAP. Expenses and advances
shall be deemed Revolving Loans hereunder and shall be deemed Revolving Loans
hereunder and shall bear interest at the highest rate applied to the Loans
until reimbursed to Lender. Such payments and advances made by Lender shall not
be construed as a waiver by Lender of an Event of Default under this Agreement.

 

9.21         Injunctive Relief. The parties acknowledge
and agree that, in the event of a breach or threatened breach of any party’s
obligations hereunder, the other party may have no adequate remedy in money
damages and, accordingly, shall be entitled to an injunction (including,
without limitation, a temporary restraining order, preliminary injunction, writ
of attachment, or order compelling an audit) against such breach or threatened
breach, including, without limitation, maintaining the cash management and
collection procedure described herein. However, no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a
waiver or prohibition against any other legal or equitable remedies in the
event of a breach or threatened breach of any provision of this Agreement.

 

9.22         Assignment or Syndication by Lender. Lender may,
at its sole discretion, assign in whole or in part any and all of its rights
and/or obligations herein to any other person (other than Prime), including but
not limited to any assignment by Lender to an Affiliate of Lender or any
assignment in part or in whole of its rights herein to another party (other
than Prime) as collateral security for Lender’s obligation(s) to such
other party.

 

9.23         Severability. If any provision hereof or
of any other Loan Document is held to be illegal or unenforceable, such
provision shall be fully severable, and the remaining provisions of the
applicable agreement shall remain in full force and effect and shall not be
affected by such provision’s severance. Furthermore, in lieu of any such
provision, there shall be added automatically as a part of the applicable
agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.

 

9.24         Authority.  Without limiting the powers granted to Lender
in Section 8.03 hereof, if an Event of Default shall have occurred, the
Borrowers hereby authorize Lender, or any person or agent which Lender may
designate, at the Borrowers’ cost and expense, to exercise all of the following
powers, which authority shall be irrevocable until the termination of this
Agreement and the full and final payment and satisfaction of the Obligations
to: (a) receive, take, endorse, sign, assign and deliver, all in the name
of Lender or the Borrowers (or any of them), any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; (b) receive,
open and dispose of all mail addressed to the Borrowers (or any of them), and
to notify postal authorities to change the address for delivery thereof to such
address as Lender may designate; (c) request from customers indebted on
Accounts at any time, in the name of Lender, information concerning the amounts
owing on the Accounts; (d) request from customers indebted on Accounts at
any time, in the name of the Borrowers (or any of them), any certified public
accountant designated by Lender or any other designee of Lender, information
concerning the amounts owing on the Accounts; (e) transmit to customers
indebted on Accounts notice of Lender’s interest therein and to notify
customers indebted on Accounts to make payment directly to Lender for the
Borrowers’ account (subject to all applicable laws and regulations governing
payment of Medicare and Medicaid receivables); and/or (f)

 

35

 

take or bring, in the name of Lender or the
Borrowers (or any of them), all steps, actions, suits or proceedings deemed by
Lender necessary or desirable to enforce or effect collection of the Accounts.

 

9.25         Usury Limit.   In no event shall the Borrowers, upon demand
by Lender for payment of any indebtedness relating hereto, by acceleration of
the maturity thereof, or otherwise, be obligated to pay interest and fees in
excess of the amount permitted by law. Regardless of any provision herein or in
any agreement made in connection herewith, Lender shall never be entitled to
receive, charge or apply, as interest on any indebtedness relating hereto, any
amount in excess of the maximum amount of interest permissible under Applicable
Law. If Lender ever receives, collects or applies any such excess, it shall be
deemed a partial repayment of principal and treated as such. If as a result,
the entire principal amount of the Obligations is paid in full, any remaining
excess shall be refunded to Borrowers. This Section 9.25 shall control
every other provision of this Agreement, the other Loan Documents and any other
agreement made in connection herewith.

 

9.26         Termination.  Except as otherwise provided in Article 8
hereof, Lender may terminate this Agreement only as of the Maturity Date.
Borrowers, or any one of them, may terminate this Agreement at any time prior
to the Maturity Date only in accordance with the terms of Section 2.03(c).
A termination by one Borrower shall be deemed to be a termination by all
Borrowers.

 

ARTICLE 10

 

SPECIAL
INTER-BORROWER PROVISIONS

 

10.01       Certain Borrower
Acknowledgments and Agreements.

 

(a)           Each Borrower acknowledges that it will enjoy
significant benefits from the business conducted by the other Borrowers because
of, inter alia, their combined ability to bargain with other Persons including,
without limitation, their ability to receive the Credit Facility on favorable
terms granted by this Agreement and other Loan Documents which would not have
been available to an individual Borrower acting alone. Each Borrower has
determined that it is in its best interest to procure the Credit Facility which
each Borrower may utilize directly and which receive the credit support of the
other Borrowers as contemplated by this Agreement and the other Loan Documents.

 

(b)           Lender has advised Borrowers that it is unwilling to
enter into this Agreement and the other Loan Documents and make available the
Credit Facility extended hereby to any Borrower unless each Borrower agrees,
among other things, to be jointly and severally liable for the due and proper
payment of the Obligations of each Borrower under this Agreement and other Loan
Documents. Each Borrower has determined that it is in its best interest and in
pursuit of its purposes that it so induce Lender to extend credit pursuant to
this Agreement and the other documents executed in connection herewith (i) because
of the desirability to each Borrower of the Credit Facility, the interest rates
and the modes of borrowing available hereunder, (ii) because each Borrower
may engage in transactions jointly with other Borrowers and (iii) because
each Borrower may require, from time to time, access to funds under this
Agreement for the purposes herein set forth.

 

(c)           Each Borrower has determined that it has and, after
giving effect to the transactions contemplated by this Agreement and the other
Loan Documents (including, without limitation, the inter-Borrower arrangement
set forth in this Section 10.01) will have, assets having a fair saleable
value in excess of the amount required to pay its probable liability on its
existing debts as they fall due for payment and that the sum of its debts is
not and will not then be greater than all of its Property at a fair valuation,
that such Borrower has, and will have, access to adequate capital for the
conduct of its business and the ability to pay its debts from time to time
incurred in connection therewith as such debts mature and that the value of the
benefits to be derived by such Borrower from the access to funds under this
Agreement (including, without limitation, the inter-Borrower arrangement set
forth in this Section 10.01) is reasonably equivalent to the obligations
undertaken pursuant hereto.

 

(d)           Borrower Representative (on behalf of each Borrower)
shall maintain records specifying (i) all Obligations incurred by each
Borrower, (ii) the date of such incurrence, (iii) the date and amount
of any payments made in respect of such Obligations and (iv) all
inter-Borrower obligations pursuant to this Section 10. Borrower Representative
shall make copies of such records available to Lender, upon request.

 

36

 

10.02       Maximum Amount of Joint and Several Liability.  Notwithstanding any provisions of this
Agreement to the contrary, it is the intent of the parties hereto that the
primary and secondary nature of the liabilities of the Borrowers, and the
security interests granted by the Borrowers to secure the Obligations directly
incurred by any Borrower not constitute a fraudulent conveyance under Section 548
of Chapter 11 of Title II of the United States Code (11 U.S.C.
§ 101, et seq.), as amended, or a fraudulent conveyance or fraudulent
transfer under the applicable provisions of any fraudulent conveyance,
fraudulent transfer or similar law of any state, nation or other governmental
unit, as in effect from time to time or otherwise be rendered invalid or
unenforceable due to the nature of the joint and several liability.
Accordingly, Lender and Borrowers agree that if the Obligations of any
Borrower, or any security interests granted by such Borrower securing the
Obligations would, but for the application of this sentence, constitute a
fraudulent conveyance or fraudulent transfer under Applicable Law, or would
otherwise render such Borrower’s Obligations or the security interests granted
herein invalid or unenforceable, the Obligations of such Borrower hereunder, as
well as the security interests securing such Obligations, shall be valid and
enforceable only to the maximum extent that would not cause such Obligations or
security interests to constitute a fraudulent conveyance or fraudulent transfer
under Applicable Law or otherwise result in such invalidity or
unenforceability; provided  however that each Borrower’s
Obligations shall be presumptively valid and enforceable to their fullest
extent in accordance with the terms hereof or thereof, as if this Section 10.02
were not a part of this Agreement.

 

10.03       Authorization of Borrower
Representative by Borrowers.

 

(a)           Each of Borrowers hereby irrevocably authorizes
Borrower Representative to give notices, make requests, make payments, receive
payments and notices, give receipts and execute agreements, make agreements or
take any other action whatever on behalf of such Borrower under and with
respect to any Loan Document and each Borrower shall be bound thereby. This
authorization is coupled with an interest and shall be irrevocable, and Lender
may rely on any notice, request, information supplied by Borrower
Representative, every document executed by Borrower Representative, every
agreement made by Borrower Representative or other action taken by Borrower
Representative in respect of Borrowers or any thereof as if the same were
supplied, made or taken by any or all Borrowers. Without limiting the
generality of the foregoing, the failure of one or more Borrowers to join in
the execution of any writing in connection herewith shall not, unless the
context clearly requires, relieve any such Borrower from obligations in respect
of such writing.

 

(b)           Borrowers acknowledge that the credit provided
hereunder is on terms more favorable than any Borrower acting alone would
receive and that each Borrower benefits directly and indirectly from all
Revolving Loans hereunder. Each of Borrowers, shall be jointly and severally
liable for all Obligations, regardless of, inter alia, which Borrower requested
(or received the proceeds of) a particular Revolving Loan.

 

10.04       Joint and Several Liability.        The
Loans made to the Borrowers shall be deemed jointly funded to, and received by,
all of the Borrowers. Each Borrower jointly and severally agrees to pay, and
shall be joint and severally liable for the payment and performance of, all
Obligations directly incurred by any other Borrower, regardless of whether such
Borrower actually receives the proceeds of the indebtedness governed hereby or
the benefit of any other extensions of credit hereunder. Each Borrower
acknowledges and agrees that the joint and several liability of the Borrowers
is provided as an inducement to Lender to provide loans and other financial
accommodations to the Borrowers, and that each such Loan or other financial
accommodation shall be deemed to have been done or extended by Lender in
consideration of, and in reliance upon, the joint and several liability of the
Borrowers. The joint and several liability of each Borrower hereunder is
absolute, unconditional and continuing, regardless of the validity or
enforceability of any of the Obligations, or the fact that a security interest
or lien in any Collateral may not be enforceable or subject to equities or
defenses or prior claims in favor of others, or may be invalid or defective in
any way and for any reason. Each Borrower hereby waives: (a) all notices
to which such Borrower may be entitled as a co-obligor with respect to the
Obligations, including notice of (i) acceptance of this Agreement, (ii) the
making of Loans or other financial accommodations under this Agreement, or the
creation or existence of the Obligations, and (iii) presentment, demand,
protest, notice of protest and notice of non-payment; and (b) all defenses
based on (i) any modification (or series of modifications) of this
Agreement, the other Loan Documents, that may create a substituted contract, or
that may fundamentally alter the risks imposed on such Borrower hereunder, (ii) the
release of any other Borrower  from
its duties this Agreement, the other Loan Documents, or the extension of the
time of performance of any other Borrower’s duties hereunder or thereunder, (iii) the
taking, releasing, impairment or abandonment of any Collateral, or the
settlement, release or compromise of

 

37

 

the Obligations or any other Borrower’s
liabilities with respect to all or any portion of the Obligations, or (iv) any
other act (or any failure to act) that fundamentally alters the risks imposed
on such Borrower by virtue of its joint and several liability hereunder. It is
the intent of each Borrower by this paragraph to waive any and all suretyship
defenses available to such Borrower with respect to the Obligations, whether or
not specifically enumerated above. Borrowers acknowledge that the credit
provided hereunder is on terms more favorable than any Borrower acting alone
would receive and that each Borrower benefits directly and indirectly from the
Loans made hereunder. Each Borrower shall be jointly and severally liable for
all Obligations regardless of, inter alia, which Borrower received proceeds of
the Loans.

 

[Remainder of Page Intentionally
Left Blank]

 

38

 

IN WITNESS WHEREOF, this
Agreement has been duly executed as of the day and year first above written

 

 

	
  BORROWERS:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address for notices to Borrowers:

  	
   

  	
  BROTMAN MEDICAL CENTER, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  Brotman
  Medical Center, Inc.

  	
   

  	
   

  	
   

  
	
  3828
  Delmas Terrace

  	
   

  	
   

  	
   

  
	
  Culver
  City, CA 90231

  	
   

  	
   

  	
   

  
	
  Attn:
  Michael Lane, Chief Restructuring Officer

  	
   

  	
  By:

  	
  /s/ Stanley Otake

  
	
  Fax:
  (310) 202-4125

  	
   

  	
  Name:

  	
  Stanley Otake

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LENDER:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address for notices to Lender:

  	
   

  	
  GEMINO HEALTHCARE FINANCE, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
  Gemino Healthcare Finance, LLC

  	
   

  	
   

  	
   

  
	
  1
  International Plaza, Suite 220

  	
   

  	
  By:

  	
  /s/ Stacy L. Allen

  
	
  Philadelphia,
  PA 19113

  	
   

  	
  Name:

  	
  Stacy L. Allen

  
	
  Attn:
  Tom Schneider

  	
   

  	
  Title:

  	
  Vice
  President

  
	
  Fax:
  (610) 870-5401

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  With
  a copy to (which shall not constitute notice):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Waller Lansden Dortch & Davis, LLP

  	
   

  	
   

  	
   

  
	
  511
  Union Street, Suite 2700

  	
   

  	
   

  	
   

  
	
  Nashville
  City Center

  	
   

  	
   

  	
   

  
	
  Nashville,
  TN 37219

  	
   

  	
   

  	
   

  
	
  Attn:

  	
  Robert
  L. Harris

  	
   

  	
   

  	
   

  
	
   

  	
  J.
  Kevin Kidd

  	
   

  	
   

  	
   

  
	
  Fax:
  (615) 244-6804

  	
   

  	
   

  	
   

  

 

Signature Page to Credit
Agreement

 

 

ANNEX
I

 

DEFINITIONS

 

“Account(s)” means (a) all of Borrowers’
present and future Accounts, Payment Intangibles, Instruments, Chattel Paper
(including Electronic Chattel Paper) (all as defined in the UCC) and all other
rights of each Borrower to receive payments including, without limitation, the
third party reimbursable portion of accounts receivable owing to a Borrower
arising out of the delivery by such Borrower of medical, surgical, diagnostic,
treatment or other professional or medical or healthcare related services
and/or the supply of goods related to any of such services (whether such
services are supplied by a Borrower or a third party), including, without
limitation all Health-Care-Insurance-Receivables (as defined in the UCC) and
all other rights to reimbursement under any agreements with an Obligor, (b) all
Accounts, General Intangibles, rights, remedies, guarantees, Supporting
Obligations, Letter-of-Credit Rights, and security interests in respect of the
foregoing and, all rights of enforcement and collection, all books and records
evidencing or related to the foregoing, and all rights under this Agreement in
respect of the foregoing, (c) all information and data compiled or derived
by such Borrower in respect of such Accounts (other than any such information
and data subject to legal restrictions of patient confidentiality), and (d) all
Proceeds of any of the foregoing.

 

“Accounts Detail File” has the meaning set
forth in Section 2.02(b) hereof.

 

“Advance Rate” means (a) seventy-five percent (75%), provided,
however, that (i) if no Event
of Default or Unmatured Event of Default has occurred on or prior to Lender’s
receipt of the Officer’s Certificate delivered pursuant to Section 6.08
for the fiscal quarter ending September 30, 2009, the Advance Rate shall
be increased to eighty percent (80%) as of the date such Officer’s Certificate
is received; and (ii) if no Event of Default or Unmatured Event of Default
has occurred on or prior to Lender’s receipt of the Officer’s Certificate
delivered pursuant to Section 6.08 for the fiscal quarter ending December 31,
2009, the Advance Rate shall be increased to eighty-five (85%) as of the date
such Officer’s Certificate is received; or (b) such other
percentage(s) resulting from an adjustment pursuant to Section 2.01(e).

 

“Affiliate” means with respect to any Person
(the “Specified Person”), (a) any Person which directly or
indirectly controls, or is controlled by, or is under common control with, the
Specified Person, whether by way of equity ownership or through a management
agreement and (b) any partner, director or officer (or, in the case of a
Person which is not a corporation, any individual having analogous powers) of
the Specified Person. For purposes of the preceding sentence, “control” of a
Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person, or
direct or indirect ownership (beneficially or of record) of, or direct or
indirect power to vote, five percent (5%) or more of the Capital Stock of such
Person. Notwithstanding the foregoing, Lender shall not be deemed to be an
Affiliate of any Borrower or any Affiliate thereof.

 

“Applicable Law” shall mean, as to any
Borrower or its assets, any law, ordinance, policy, manual provision,
administrative guidance, statute, rule or regulation, or any determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Borrower or any of its assets, or to which
such Borrower or any of its assets is subject.

 

“Authorized Officer” means any officer,
member or partner of a Borrower authorized by specific resolution of Borrower
to request Loans as set forth in the incumbency certificate referred to in Section 4.01(d) of
this Agreement.

 

“Average Outstanding Balance” means an amount
calculated each month equal to a fraction the numerator of which is equal to
the sum of the outstanding balances of all Revolving Loans hereunder for each
day of such month and the denominator of which is the number of actual days in
such month.

 

A-1

 

“Bankruptcy Case” means Case number 07-19705
commenced by BMC under chapter 11 of title 11 of the United States Code in the
Bankruptcy Court.

 

“Bankruptcy Court” means the United States
Bankruptcy Court for the Central Division of California.

 

“Billing Date” means (a) the last
Business Day of the week in which goods or the services giving rise to the
corresponding Account were rendered or provided in the case of out- patient
services and (b) the earlier of the discharge date or the regular monthly
billing date for billing the respective Obligor, or if none, the last Business
Day of a calendar month, in the case of inpatient services.

 

“Borrower Representative” shall mean Brotman
Medical Center, Inc.

 

“Borrowing Base” means, at any date, an
amount equal to the lesser of (a) the Revolving Loan Commitment, or (b) the
product of (i) the applicable Advance Rate then in effect, times (ii) the
Estimated Net Value of all Eligible Accounts as of such date, minus (iii) an
amount equal to any Reserves, minus (iv) unposted cash.

 

“Borrowing Base Deficiency” means, as of any
date, the amount, if any, by which (a) the aggregate amount of all
Revolving Loans outstanding as of such date exceeds (b) the Borrowing Base
as of such date.

 

“Borrowing Base Excess” means, as of any
date, the amount, if any, by which (a) the Borrowing Base as of such date
exceeds (b) the aggregate amount of all Revolving Loans outstanding as of
such date.

 

“Borrowing Base Report” has the meaning set
forth in Section 2.02(b) hereof.

 

“Business Associate Agreement” means that
certain Business Associate Agreement among Borrowers and Lender of even date
herewith, as the same may be modified, amended, restated or replaced from time
to time.

 

“Business Day” means any day other than a
Saturday, Sunday or any day on which banking institutions in Philadelphia,
Pennsylvania or New York City, New York are permitted or required by law,
executive order or governmental decree to remain closed or a day on which
Lender is closed for business.

 

“Capital Lease” means, with respect to
any Person, any lease of any property (whether real, personal or mixed) by such
Person as lessee which would, in accordance with GAAP, be required to be
accounted for as a capital lease on the balance sheet of such person.

 

“Capital Stock” means (a) in the case of
a corporation, capital stock, (b) in the case of an association or
business entity, any and all shares, units, interests, participations, rights
or other equivalents (however designated) of capital stock, (c) in the
case of a partnership, partnership interests (whether general or limited), (d) in
the case of a limited liability company, membership interests and (e) 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 assets of, the issuing
Person.

 

“Cash Equivalents” means, as at any date:

 

(a)           securities
issued or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than twelve (12) months from the date of acquisition;

 

(b)           dollar
denominated time deposits and certificates of deposit of (i) any Lender, (ii) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $500,000,000.00 or (iii) any bank whose short-term commercial
paper rating from S&P is at least A-1 or the equivalent thereof or from
Moody’s is at least P-1 or the equivalent thereof (any such bank being an “Approved
Institution”), in each case with maturities of not more than two hundred
seventy (270) days from the date of acquisition;

 

A-2

 

(c)           commercial
paper and variable or fixed rate notes issued by any Approved Institution (or
by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof)
or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s
and maturing within six (6) months of the date of acquisition;

 

(d)           repurchase
agreements entered into by any Person with a bank or trust company (including
any of the Lenders) or recognized securities dealer having capital and surplus
in excess of $500,000,000.00 for direct obligations issued by or fully
guaranteed by the United States in which such Person shall have a perfected
first priority security interest (subject to no other Liens) and having, on the
date of purchase thereof, a fair market value of at least one hundred percent
(100%) of the amount of the repurchase obligations;

 

(e)           debt
obligations issued by any domestic corporation or any domestic government
instrumentality, in each case rated A-1 (or the equivalent thereof) or better
by S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing
within six (6) months of the date of acquisition; and

 

(f)            Investments,
classified in accordance with GAAP as current assets, in money market
investment programs registered under the Investment Company Act of 1940 which
are administered by reputable financial institutions having capital of at least
$500,000,000.00 and the portfolios of which are limited to Investments of the
character described in the foregoing clauses (a) through (e).

 

“Closing” has the meaning set forth in Section 4.06
hereof.

 

“Closing Date” has the meaning set forth in Section 4.06
hereof.

 

“CMS” means the Centers for Medicare and
Medicaid Services of the United States Department of Health and Human Services
and any successor thereof and any predecessor thereof, including the United
States Health Care Financing Administration.

 

“CMS Claim” means any claim held by CMS
against BMC in respect of potential overpayments made to BMC by CMS.

 

“Code” means the Internal Revenue Code
of 1986, as amended from time to time.

 

“Collateral” has the meaning set forth in Section 3.01
hereof.

 

“Collateral Monitoring Fee” has the meaning
set forth in Section 2.03(e) hereof.

 

“Collections” means with respect to
any Account, all cash collections on such Account.

 

“Collection Account” has the meaning set
forth in Section 2.07(a) hereof.

 

“Commercial Lockbox” means a lockbox in the
name of Lender (or a nominee of Lender) and maintained at the Lockbox Bank, or
such other bank as is acceptable to Lender, to which Collections on all
Accounts, other than Government Accounts, are sent.

 

“Commitment Fee” has the meaning set forth in
Section 2.03(f) hereof.

 

“Concentration Limits” means the various
financial tests, expressed as percentages of the then current ENV of all
Eligible Accounts, described on Schedule 1 hereto as in effect from time
to time.

 

“Contract” means an agreement by which an Obligor
is obligated to pay for services rendered to patients of Borrower.

 

A-3

 

“Controlled Group” means all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with Borrowers, are treated
as a single employer under Section 414 of the Code.

 

“Credit Facility” has the meaning set forth
in Section 2.01(a) hereof.

 

“Creditor Trust” has the meaning ascribed to
such term in the Plan of Reorganization.

 

“Debtor Relief Laws” means the
Bankruptcy Code of the United States, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, 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 Rate” means three percent (3%) above
the Interest Rate otherwise applicable on the Loans.

 

“Defaulted Account” means an Account as to
which (a) the initial ENV has not been received in full as Collections
within one hundred fifty (150) days of the Billing Date, or (b) Lender
reasonably deems uncollectible because of the bankruptcy or insolvency of the
Obligor or any other reason.

 

“Depository Agreement(s)” means those certain
Depository Agreements entered into in connection with this Agreement among
Borrowers, Lender and the Lockbox Bank, relating to the Commercial Lockbox and
the Government Lockbox, as applicable.

 

“Distribution” means (a) dividends
or other distributions on Capital Stock of a Borrower in cash, equity or any
other form of consideration, including without limitation distributions for the
payment of Taxes; (b) the redemption, repurchase or acquisition of such
Capital Stock or of warrants, rights or other options to purchase such Capital
Stock; and (c) loans made to any Shareholders, officers, directors and/or
Affiliates of such Borrower.

 

“Download Date” has the meaning set forth in Section 2.02(b) hereof.

 

“EBITDAC” means the sum of net income plus
interest expense, plus taxes, plus depreciation and amortization, plus
consulting fee expense.

 

“Eligible Account” means an Account of a
Borrower:

 

(a)           which
is a liability of an Obligor which is (i) a commercial insurance company
acceptable to Lender, organized under the laws of any jurisdiction in the
United States, having its principal office in the United States, other than
those listed on Schedule 1 hereto as ineligible, (ii) a Blue
Cross/Blue Shield Plan other than those listed on Schedule 1 hereto as
ineligible, (iii) Medicaid, (iv) an HMO, PPO, or an institutional
Obligor acceptable to Lender or (v) any other type of obligor, not
included in the categories of obligors listed in the foregoing clauses (i) -
(iv), organized under the laws of any jurisdiction in the United States, having
its principal office in the United States, and listed on Schedule 1
hereto as an eligible Obligor,

 

(b)           the
Obligor of which is not an Affiliate of Borrower;

 

(c)           the
Obligor of which has received a letter substantially in the form of Exhibit 4.02(c),
(in the case of all Accounts other than Government Accounts), or a letter
substantially in the form of Exhibit 4.02(d) (in the case of
all Government Accounts);

 

(d)           in
an amount, as relating to an individual patient, not less than $5.00 nor more
than $250,000.00, denominated and payable in dollars in the United States;

 

(e)           as
to which the representations and warranties of Section 5.21 hereof are true;

 

A-4

 

(f)            which,
if such Account is in the form of a cost report receivable owing from any
governmental agency, Lender has agreed to include it in the Borrowing Base;

 

(g)           which
(i) does not arise from the delivery of cosmetic surgery services, (ii) is
not a workers’ compensation claim (unless the Obligor on such Account is a type
of Obligor permitted pursuant to clause (a) of this definition), (iii) does
not arise from any services delivered for injury sustained in a motor vehicle
accident (unless the Obligor on such Account is a type of Obligor permitted
pursuant to clause (a) of this definition) and (iv) is not an
Individual Payor Account;

 

(h)           which
is not outstanding more than (i) one hundred fifty (150) days past the
discharge date of the patient in the case of Accounts that have been billed,
and (ii) thirty (30) days past the date the corresponding services and/or
goods were provided in the case of Accounts that have not been billed; provided
however that in no event may the Account be outstanding more than one hundred
eighty (180) days past the date the corresponding services and/or goods were
provided;

 

(i)            the
Obligor on which does not have fifty percent (50%) or more of its Accounts
owing to Borrowers constituting Defaulted Accounts;

 

(j)            to
the extent such Account does not include late charges or finance charges;

 

(k)           which
is not subject to a dispute between the Obligor and applicable Borrower;

 

(l)            which
is not an Account for Health Net Medicare Advantage enrollees, which gets paid
into the Risk Pool Account; and

 

(m)          which
complies with such other criteria and requirements as may be specified from
time to time by Lender in its reasonable discretion.

 

“Emergency Room Account” means
any account established, or to be established, by Borrower pursuant to the JHA
Loan Documents at a financial institution approved by JHA West 16, LLC to
reserve for all soft and hard costs of design and construction of the new
emergency room facility as required by the JHA Loan Documents.

 

“Environmental Laws” means,
collectively, any local, state or federal law, rule or regulation or
common law duty pertaining to the environment, natural resources, pollution,
health (including any environmental clean up statutes and all regulations
adopted by any local, state, federal or other governmental authority, and any
statute, ordinance, code, order, decree, law rule or regulation all of
which pertain to or impose liability or standards of conduct concerning medical
waste or medical products, equipment or supplies), safety or clean-up,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. § 5101 et seq.), the
Clean Air Act (42 U.S.C. § 7401 et seq.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. § 136 et seq.), the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.),
the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. § 4851 et
seq.), any analogous state or local laws, any amendments thereto, and the
regulations promulgated pursuant to said laws, together with all amendments
from time to time to any of the foregoing.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.

 

“ERISA Affiliate” means any trade or
business (whether or not incorporated) that, together with any Borrower, is
treated as a single employer under Sections 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of
the Code, is treated as a single employer under Section 414 of the Code.

 

“Escrow Accounts” means any account
established, or to be established, by Borrower with Old Republic Title Company  in connection with the JHA Loan Documents.

 

A-5

 

“Estimated Net Value” or “ENV” means
on any date of calculation with respect to any Account an amount equal to the
anticipated cash collections as calculated by Lender in its reasonable discretion,
except that if Lender determines in its reasonable discretion that all Obligor
payments with respect to an Account have been made or if an Account has become
a Defaulted Account, the ENV of such Account shall be zero.

 

“Event of Default” has the meaning set forth
in Section 8.01 hereof.

 

“Excess Availability” means, as of any date,
the amount, if any, by which (a) the Borrowing Base as of such date
exceeds (b) the greater of (i) the aggregate amount of all Revolving
Loans outstanding as of such date and (ii) the Minimum Balance.

 

“Excluded Deposit Accounts” means Borrowers’
Emergency Room Account, Reserve Accounts, Tax and Insurance Deposit
Accounts and Escrow Accounts, the Risk Pool Account and the Letter of Credit
Account.

 

“Expenses” has the meaning set forth in Section 9.05(a) hereof.

 

“Fixed Charge Coverage Ratio” means
the ratio of (a) EBITDAC, to (b) the sum of (i) the current
portion of any long-term Indebtedness, plus (ii) the current
portion of lease payments under capitalized leases, plus (iii) cash
interest paid, plus (iv) income taxes paid, plus (v) any
unfinanced capital expenditures paid in cash by Borrower, plus (vi) any
Distributions paid in cash, plus (vii) any management fees
(including without limitation the Prospect Consulting Fee) paid, plus (viii) current
portion of any amount due to CMS under any extended repayment plan in
connection with any CMS Claim, in accordance with generally accepted accounting
principles consistently applied, on a rolling four quarter basis; provided, however,
that such calculation as of the fiscal quarter ending June 30, 2009 shall
be for the most recent fiscal quarterly period ending on such date on a
cumulative, annualized basis; such calculation for the fiscal quarter ending September 30,
2009 shall be for the two (2) most recent fiscal quarterly periods ending
on such date on a cumulative, annualized basis and such calculation for the
fiscal quarter ending December 31, 2009 shall be for the three (3) most
recent fiscal quarterly periods ending on such date on a cumulative, annualized
basis.

 

“Funded Indebtedness” means, as to any
Person at a particular time, without duplication, all of the following, whether
or not included as indebtedness or liabilities in accordance with GAAP:

 

(a)           all obligations for borrowed money, whether current or
long-term (including the Obligations, the Subordinated Debt) and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

 

(b)           all purchase money indebtedness;

 

(c)           the principal portion of all obligations under conditional
sale or other title retention agreements relating to Property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of business);

 

(d)           the maximum amount available to be drawn under letters of
credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments;

 

(e)           all obligations in respect of the deferred purchase price
of Property or services (other than trade accounts payable in the ordinary
course of business);

 

(f)            all indebtedness in respect of Capital Leases;

 

(g)           all preferred stock or other equity interests providing
for mandatory redemptions, sinking fund or like payments prior to the Maturity
Date;

 

(h)           all Funded Indebtedness of others secured by (or for which
the holder of such Funded Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of

 

A-6

 

the proceeds of production
from, Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed; and

 

(i)            all guarantees with respect to Funded Indebtedness of the
types specified in clauses (a) through (h) above of another Person.

 

“Funding Date” has the meaning set forth in Section 2.02(a) hereof.

 

“GAAP” means generally accepted accounting
principles, consistently applied.

 

“Government Accounts” means Accounts on which
any federal or state governmental unit or any intermediary for federal or state
governmental unit is the Obligor.

 

“Government Lockbox” means a lockbox and/or
deposit account in the name of Borrower(s) maintained at the Lockbox Bank,
or such other bank as is acceptable to Lender, to which Collections on all
Government Accounts are sent.

 

“Governmental Authority” means any nation or
government, any state or other political subdivision thereof, and any agency,
department or person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any corporation or
other person owned or controlled (through Capital Stock or capital ownership or
otherwise) by any of the foregoing, whether domestic or foreign.

 

“Hazardous Substances” means any substances
defined or designated as hazardous or toxic waste, hazardous or toxic material,
hazardous or toxic substance or similar term, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to
such real property.

 

“Healthcare Facility” or “Healthcare
Facilities”, as applicable, shall mean any one or more of the hospitals and
other healthcare facilities operated by a Borrower, including the healthcare
facilities described on Schedule 5.03 hereto.

 

“Healthcare Laws” shall mean: (a) any
and all federal, state and local fraud and abuse laws, including (i) the
federal Anti-Kickback Statute (42 U.S.C. § 1320a-7(b)), (ii) the
Stark Law (42 U.S.C. § 1395nn and §1395(q)), (iii) the civil False
Claims Act (31 U.S.C. § 3729 et seq.), (iv) Sections 1320a-7 and
1320a-7a of Title 42 of the United States Code, and (v) the
regulations promulgated pursuant to such statutes; (b) the federal Food,
Drug & Cosmetic Act (21 U.S.C. §§ 301 et seq.) and the
regulations promulgated pursuant thereto; (c) the Health Insurance
Portability and Accountability Act of 1996 (Pub. L. No. 104-191) and the
regulations promulgated pursuant thereto; (d) laws, rules and
regulations governing Medicare and Medicaid; (e) the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173) and
the regulations promulgated pursuant thereto; (f) quality, safety, life
safety, and accreditation standards and requirements of all applicable state
laws or regulatory bodies; (g) any Applicable Law relating to the
Borrowers’ ownership, management, or operation of a healthcare facility or
business, or assets used in connection therewith; (h) any Applicable Law
relating to the billing or submission of claims, collection of accounts
receivable, underwriting the cost of, or provision of management or
administrative services in connection with, any and all of the foregoing, by
any Borrower; and (i) any and all other applicable healthcare laws,
regulations, manual provisions, policies and administrative guidance, each of (a) through
(h) as may be amended from time to time.

 

“Indebtedness” means, as to any Person
at a particular time, without duplication, all of the following, whether or not
included as indebtedness or liabilities in accordance with GAAP:

 

(a)           all
Funded Indebtedness; and

 

(b)           all
guarantees with respect to outstanding Indebtedness of the types specified in
clauses (a) and (b) above of any other Person.

 

“Indemnified Party” has the meaning set forth
in Section 9.03(b) hereof.

 

A-7

 

“Individual Payor Account” means an Account
owing by an Obligor who is the individual patient or Person who received the
goods or services rendered.

 

“Initial Term” has the meaning set forth in Section 2.01(d) hereof.

 

“Interest Rate” and “Interest Rates”
has the meaning set forth in Section 2.03(a) hereof.

 

“Investment” means, as to any Person, any
direct or indirect acquisition or investment by such Person, whether by means
of (a) the purchase or other acquisition of Capital Stock of another
Person, or (b) a loan, advance or capital contribution to, guarantee or
assumption of debt of, or purchase or other acquisition of any other debt or
equity participation or interest in, another Person, including any partnership
or joint venture interest in such other Person. For purposes of determining
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment.

 

“JHA Loan Documents”
means (i) that certain Loan Agreement between BMC and JHA West 16 LLC and
any and all documents, instruments or agreements required or delivered in
connection with the transaction contemplated therein and (ii) that certain
Loan Agreement between BMC and JHA East 7 LLC and any and all documents,
instruments or agreements required or delivered in connection with the
transaction contemplated therein.

 

“JHA Loans” means
any and all credit facilities, loans or advances in connection with (i) that
certain Loan Agreement between BMC and JHA West 16 LLC or (ii) that
certain Loan Agreement between BMC and JHA East 7 LLC.

 

“JHA Maturity
Date” means the earlier of (i) the date of termination or payoff of the
credit facility described in that certain Loan Agreement between BMC and JHA
West 16 LLC as contemplated by the Plan of Reorganization (other than upon
exercise by JHA West 16 LLC of its option to acquire property in satisfaction
of debt or any refinancing thereof permitted by Section 7.07(i) hereof),
and (ii) the termination or payoff of the credit facility described in
that certain Loan Agreement between BMC and JHA East 7 LLC as contemplated by
the Plan of Reorganization of BMC (other than any refinancing thereof permitted
by Section 7.07(i) hereof).

 

“Letter of Credit Account” means that certain
deposit account at Wells Fargo Bank securing BMC’s workers’ compensation
insurance arrangements.

 

“LIBOR Rate” means an
annual rate equal to the greater of (i) four percent (4.0%) per annum or (ii) as
a reference rate, the annual rate reported as the London Interbank Offer Rate
applicable to thirty (30) day deposits of United States dollars as reported in
the Money Rates Section of The Wall Street Journal on the date of
determination. If The Wall Street Journal is not published on such
Business Day or does not report such reference rate, such reference rate shall
be as reported by such other publication or source as Lender may select.

 

“Loan(s)” means collectively the Revolving
Loans, and each may also be referred to as a “Loan”.

 

“Loan Documents” means this Agreement, the
Revolving Note, the Business Associate Agreement, the Depository Agreements,
and all agreements relating to the Government Lockbox and the Commercial
Lockbox, all financing statements, the Subordination Agreement(s), the Perfection Certificate, the Negative
Pledge Agreement and any other agreements, instruments, documents and
certificates delivered in connection with this Agreement.

 

“Loan Request” has the meaning set forth in Section 2.02(c) hereof.

 

“Lockbox Bank” means Citizens Bank of
Pennsylvania or such other bank that is acceptable to Lender.

 

“Material Adverse Effect” shall mean a
material adverse affect upon, or a material adverse change in, any of (a) the
financial condition, operations, business, Property or prospects of Borrowers,
taken as a whole; (b) the ability of Borrowers to perform their
Obligations; (c) the legality, validity or enforceability of any Loan 

 

A-8

 

Document; (d) the perfection or priority
of the liens of Lender granted under the Loan Documents or the rights and
remedies of Lender under the Loan Documents; or (e) the condition or value
of any portion of the Collateral as defined herein (other than market
fluctuations in the values of such Collateral); (f) the use or scope of
any Permit or (g) the continued participation or the ability to accept or
bill for goods or services in the Medicaid, Medicare or other government
reimbursement programs by any Borrower.

 

“Maturity Date” has the meaning set forth in Section 2.01(d) hereof.

 

“Maximum Credit Limit” means an amount, from
time to time, equal to the Revolving Loan Commitment, not to exceed at any time
Six Million and No/Dollars ($6,000,000.00) in the aggregate.

 

“Maximum Loan Turn Days” means a number of
days calculated as follows: (i) the result of (a) the average
outstanding balance of the Revolving Loans for the trailing three (3) month
period ending on the calculation date divided by (b) the average
monthly cash collections for the trailing three (3) month period ending on
the calculation date, multiplied by (ii) thirty (30).

 

“Medicaid” means, collectively, the
healthcare assistance program established by Title XIX of the Social Security
Act (42 U.S.C. §§ 1396 et. seq.) and any statutes succeeding thereto, and all
laws, rules, regulations, manuals, orders, guidelines or requirements (whether
or not having the force of law) pertaining to such program, in each case as the
same may be amended, supplemented or otherwise modified from time to time.

 

“Medicare” means, collectively, the health
insurance program for the aged and disabled established by Title XVIII of the
Social Security Act (42 U.S.C. §§ 1395 et. seq.) and any statutes succeeding
thereto, and all laws, rules, regulations, manuals, orders or guidelines
(whether or not having the force of law) pertaining to such program, in each
case as the same may be amended, supplemented or otherwise modified from time
to time.

 

“Multiemployer Plan” means a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.

 

“Negative Pledge Agreement” means the
Negative Pledge Agreement, dated as of the date hereof, between Prospect
Hospital Advisory Services, Inc. and Lender.

 

“Obligations” means all now existing or
hereafter arising debts, obligations, covenants, and duties of payment or
performance of every kind, matured or unmatured, direct or contingent, owing,
arising, due, or payable to Lender, by or from Borrowers, or any of them,
whether arising out of this Agreement or any other Loan Document or otherwise,
including, without limitation, all obligations to repay principal of and
interest on all the Loans, and to pay interest, fees, costs, charges, Expenses,
professional fees, and all sums chargeable to Borrowers, or any of them, under
the Loan Documents, whether or not evidenced by any note or other instrument.

 

“Obligor” means the party primarily obligated
to pay an Account.

 

“Organizational Documents” means, (a) with
respect to any corporation, the, charter, certificate or articles of
incorporation and the bylaws (or equivalent or comparable constituent documents
with respect to any non-U.S. jurisdiction); (b) with respect to any
limited liability company, the certificate or articles of formation or
organization and operating agreement; and (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

“Participation Agreements” has the
meaning set forth in Section 5.03(d)(ii) hereof.

 

“PBGC” means the Pension Benefit
Guaranty Corporation or any Person succeeding to any or all of its functions
under ERISA.

 

A-9

 

“Perfection
Certificate” means that certain Perfection Certificate, in form and
substance satisfactory to Lender, entered into by Borrowers as of the date
hereof.

 

“Permit” shall mean any permit,
approval, authorization, license, accreditation, certification, provider or
supplier number, registration, certificate of authority, certificate of need,
certificate of reimbursement, variance, qualification, filing or consent
required under any Applicable Law.

 

“Permitted Liens” has the meaning set forth
in Section 5.06 hereof.

 

“Person” means any individual, corporation,
partnership, limited liability partnership, limited liability company,
association, trust, unincorporated organization, joint venture, court or
government or political subdivision or agency thereof, or other entity.

 

“Plan” means any employee pension
benefit plan (other than a Multiemployer Plan) subject to the provisions of
Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which Borrowers or any ERISA Affiliate is (or, if such plan
were terminated, would under Section 4069 of ERISA be deemed to be) an “employer”
as defined in Section 3(5) of ERISA.

 

“Plan of Reorganization”
means that certain “Second Amended Joint Chapter 11 Plan of Reorganization
Proposed by Brotman Medical Center, Inc. and the Official Committee of
Unsecured Creditors (dated November 6, 2008)” confirmed pursuant to 11
U.S.C. § 1129 by the Bankruptcy Court that is in full force and effect.

 

“Prime” means Prime Healthcare Services Los
Angeles, LLC, its Affiliates, and any successor or assign thereof.

 

“Property” means an interest of
Borrowers, or any of them, in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.

 

“Prospect Consulting Fee” means the
consulting fee payable pursuant to that certain Consulting Services Agreement,
dated as of August 1, 2005 (as amended by that certain Amendment to
Consulting Services Agreement, dated as of October 25, 2007), by and
between BMC and Prospect Hospital Advisory Services, Inc. (f/k/a Prospect
Medical Management, Inc.).

 

“Required Insurance” has the meaning set
forth in Section 6.02(a) hereof

 

“Reserves” has the meaning set forth in Section 2.01(a) hereof.

 

“Reserve Accounts” means any account
established, or to be established, by Borrower pursuant to the JHA Loan
Documents at a financial institution approved by JHA West 16, LLC or JHA East
7, LLC to pay for capital improvements, repairs and replacements as described
in the JHA Loan Documents.

 

“Revolving Loan(s)” has the meaning set forth
in Section 2.01(a) hereof.

 

“Revolving Loan Commitment” means an
amount equal to Six Million and No/Dollars ($6,000,000.00).

 

“Revolving Note” has the meaning set forth in
Section 2.01(b) hereof.

 

“Revolving Termination Fee” has the meaning
set forth in Section 2.03(c) hereof.

 

“Risk Pool Account” means that certain
deposit account at Wells Fargo Bank that receives certain capitation payments
from Health Net of California, Inc. for Health Net Medicare Advantage
enrollees and which is subject to the joint control of BMC and Prospect Medical
Group, Inc.

 

A-10

 

“Securities” has the meaning set forth
in Section 6.14 hereof.

 

“Settlement Date” has the meaning set forth
in Section 2.02(a) hereof.

 

“Shareholder” means, as applicable, a
shareholder, member or partner of a Borrower.

 

“Subordinated Debt”
means debt or other obligations of a Borrower that is subordinated to the
Obligations of Borrowers to Lender on terms and conditions that are
satisfactory to the Lender in its sole discretion.

 

“Subordination Agreement” means collectively
and individually those certain Subordination Agreements, in form and substance
satisfactory to Lender, from the holders of the Subordinated Debt in favor of
Lender.

 

“Subsidiary” of a Person means a
corporation, partnership, limited liability company or other business entity of
which fifty-one percent (51%) of the Capital Stock having ordinary voting power
for the election of directors or other governing body (other than Capital Stock
having such power only by reason of the happening of a contingency) are at the
time beneficially owned, or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise specified, all references herein to a “Subsidiary” or
to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrowers.

 

“Tax and Insurance Deposit Accounts”
means any account established, or to be established, by Borrower pursuant to
the JHA Loan Documents at a financial institution approved by JHA West 16, LLC
or JHA East 7, LLC for the purpose of depositing payments of real estate taxes
and assessments and insurance premiums in the amounts and in the manner set
forth in the JHA Loan Documents.

 

“Taxes” shall mean all federal, state,
local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax, or additional amounts with respect thereto,
and including liabilities under escheat, unclaimed property laws or similar
laws, and the term “Tax” means any of the foregoing taxes.

 

“Third Party Payor” means Medicare,
Medicaid, TRICARE, and other state or federal health care program, Blue Cross
and/or Blue Shield, private insurers, managed care plans and any other person
or entity which presently or in the future maintains Third Party Payor
Programs.

 

“Third Party Payor Programs” means all
payment and reimbursement programs sponsored by a Third Party Payor, in which a
Borrower participates.

 

“TRICARE” means the health care plan for the
uniformed services, retirees and their families.

 

“Uniform Commercial Code” or “UCC”
means the Uniform Commercial Code as in effect from time to time in the State
of New York or any other state, as applicable.

 

“Unmatured Event of Default” means an event
which with the passage of time, giving of notice or both, would become an Event
of Default.

 

“Unused Line Fee” has the meaning set forth
in Section 2.03(d) hereof.

 

“Wells Fargo Depository Agreements” means
that certain Collection Account Agreement, dated as of the date hereof, between
BMC, Wells Fargo Bank, National Association, and Gemino Healthcare Finance, LLC
and that certain Four Party Wholesale Lockbox Agreement (Access Restricted
Immediately), dated as of the date hereof, between BMC, Wells Fargo Bank,
National Association (as Lockbox Processor), Wells Fargo Bank, National Association
(as Depository Bank), and Gemino Healthcare Finance, LLC.

 

A-11

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