Document:

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                          SECURITIES PURCHASE AGREEMENT

            SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
January 15, 1997, between TOWER GROUP, INC., a Delaware corporation (including
its successors and assigns, "Tower" or the "Company"), and AMERICAN RE-INSURANCE
COMPANY, a Delaware corporation (including its successors and assigns,
"Purchaser").

            WHEREAS, the Company desires to sell to Purchaser, and Purchaser
desires to purchase from the Company, for the aggregate consideration, and upon
the other terms and subject to the conditions, set forth herein: (i) 60,000
shares of the Company's Series A Cumulative Redeemable Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock" or the "Shares"), the terms
of which are set forth in the Certificate of Designations, Preferences and
Rights of Series A Cumulative Redeemable Preferred Stock, in the form of Exhibit
A annexed hereto (the "Certificate of Designations"); and (ii) a warrant (the
"Warrant") to purchase up to 583,333 shares of common stock, par value $.01 per
share (the "Common Stock"), of the Company and providing for certain
registration rights with respect to the Warrant Shares (as defined in the
Warrant) purchased or purchasable upon exercise thereof, in the form of Exhibit
B annexed hereto.

            NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, each of the parties hereto intending legally to be bound
hereby agrees as follows:

            1. DEFINITIONS; CERTAIN REFERENCES.

            The terms defined in this Section 1, whenever used in this
Agreement, shall have the following meanings for all purposes of this Agreement:

            "Acquisition" means (a) any Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such person
shall become a Subsidiary of the Company or any Subsidiary of the Company or
shall be merged with or into the Company or any Subsidiary of the Company or (b)
the acquisition by the Company or any Subsidiary of the Company of the assets of
any person which constitute all or substantially all of the assets of such
Person or any division or line of business of such Person.

            "Affiliate" means, as to any specified Person, a Person that
directly, or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified; provided
that, as to any specified Person, "Affiliate" shall not include any Persons
which are limited partners of the Person specified.

            "Applicable Insurance Regulatory Authority" means, when used with
respect to any Insurance Subsidiary, the insurance department or similar
administrative authority or agency located in (i) each state or other
jurisdiction in which such Insurance Subsidiary is domiciled or (ii) to the
extent asserting regulatory jurisdiction over such Insurance Subsidiary, the
insurance department, authority or agency in each state or other jurisdiction in
which such Insurance Subsidiary is licensed, and shall include any Federal
insurance regulatory department, authority or agency that may be created and
that asserts regulatory jurisdiction over such Insurance Subsidiary.

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            "Available Cash Flow" shall mean (a) the sum of Consolidated Net
Income plus interest, depreciation, and income taxes, for the Company calculated
for the last four consecutive completed fiscal quarters, minus (b) that portion
of Consolidated Net Income allocable to Tower Insurance that is not available to
the Company by way of dividends pursuant to applicable insurance law during such
period.

            "Board of Directors" means the Board of Directors of the Company.

            "Business Day" means any day except a Saturday, a Sunday or other
day on which commercial banks are required or authorized to close in New York
City.

            "Capital Stock" means all classes or series of capital stock issued
by a corporation including, without limitation, in the case of the Company, the
Common Stock and the Series A Preferred Stock.

            "Certificate of Designations" has the meaning set forth in the
recitals to this Agreement.

            "Certificate of Incorporation" means the certificate of
incorporation of the Company and any amendments thereto.

            "Closing" has the meaning set forth in Section 2.2 of this
Agreement.

            "Closing Date" has the meaning set forth in Section 2.2 of this
Agreement.

            "Code" means the Internal Revenue Code of 1986, as amended.

            "Common Stock" has the meaning set forth in the recitals to this
Agreement.

            "Company" has the meaning set forth in the first paragraph of this
Agreement.

            "Consolidated Interest Expense" shall mean, for any period, the sum
of (a) the consolidated interest expense of the Company and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount resulting from debt issued at discount,
noncash interest payments, the interest component of any deferred payment
obligations, and the interest component under all leases of property required to
be capitalized on the balance sheet of the Company or any of its Subsidiaries),
(b) interest expense for any debt guaranteed by the Company or any of its
Subsidiaries, and (c) the expenses of the Company and its Subsidiaries for such
period, whether paid or accrued, in respect of operating leases of the Company
and such Subsidiaries, provided, however, that Consolidated Interest Expense
shall not include (i) any expenses in respect of operating leases between the
Company and any of its Subsidiaries or between two Subsidiaries, (ii) interest
expense for debt between the Company and any Subsidiary or (iii) expenses in an
amount not exceeding $600,000 per annum arising out of any leases for real
property.

            "Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, determined in accordance with GAAP,
excluding (i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any asset
sale or (b) the disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any indebtedness of such Person or any of
its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).

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            "Consolidated Subsidiaries" means each Subsidiary of the Company
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of the Company in accordance with GAAP.

            "Employment Agreement" means that certain Employment Agreement dated
as of January 15, 1997 between the Company and Michael H. Lee.

            "Environmental Laws" has the meaning set forth in Section 4.18.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

            "Fixed Charge Coverage Ratio" for any period shall mean the ratio of
(a) Available Cash Flow during the last four consecutive completed fiscal
quarters, to (b) Consolidated Interest Expense during the last four consecutive
completed fiscal quarters.

            "GAAP" means generally accepted accounting principles as in effect
from time to time of application to the provisions hereof.

            "Governmental Authority" means any federal, state, local or county
governmental agency, department, board, commission, instrumentality or authority
(including Applicable Insurance Regulatory Authority) of the United States or
any foreign nation or any self-regulatory organization having jurisdiction over
the Company (or any Subsidiary) or any of their respective assets or businesses.

            "Hazardous Material" has the meaning set forth in Section 4.20.

            "Indebtedness" shall mean (a) all indebtedness of the Company or any
of its Subsidiaries (1) for borrowed money or for the deferred purchase price of
property or services (other than trade payables or current liabilities arising
in the ordinary course of business) or (2) evidenced by bonds, notes, debentures
or similar instruments (including a purchase money obligation), (b) obligations
of the Company or any of its Subsidiaries as lessee under leases required to be
capitalized on the balance sheet of the Company or any of its Subsidiaries under
GAAP and leases of property or assets made as part of any sale and leaseback to
which the Company or any of its Subsidiaries is a party, (c) all obligations,
contingent or otherwise, of the Company or any of its Subsidiaries in connection
with any letters of credit or acceptances issued under letter-of-credit
facilities, acceptance facilities or other similar facilities, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by the Company or any of
its Subsidiaries (even if the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), but excluding trade payables and other accrued current
liabilities arising in the ordinary course of business, (e) all obligations of
the Company or any of its Subsidiaries under interest rate contracts, (f) all
redeemable Capital Stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (g) any liability of
others described in the preceding clauses (a), (b), (c), (d), (e) or (f) that
the Company or any of its Subsidiaries has guaranteed or that is otherwise its
legal liability and (h) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred to in
clauses (a), (b), (c), (d), (e), (f) or (g) above; provided, however, that
Indebtedness shall not include (i) lease obligations in connection with leases
between the Company and any of its Subsidiaries, or between two such
Subsidiaries, and (ii) obligations in connection with any indebtedness between
the Company and its Subsidiaries, or between two Subsidiaries.

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            "Indemnified Liabilities" has the meaning set forth in Section 7.1
of this Agreement.

            "Indemnified Party" has the meaning set forth in Section 7.1 of this
Agreement.

            "Initial Public Offering" means the initial public offering of any
class of Capital Stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the SEC in
accordance with the Securities Act.

            "Insurance Subsidiaries" shall mean Tower Insurance, TRM and any
other Subsidiary of the Company acquired or created after the date hereof
subject to the terms hereof that is licensed to conduct the business of selling,
issuing or underwriting insurance or reinsurance (other than an insurance
agency).

            "Lien" shall mean, with respect to any asset, any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law, including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in any filing of or agreement to
give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction and including any lien or charge arising by
statute or other law, which secures the payment of a debt (including, without
limitation, any tax) or the performance of an obligation.

            "Liquidation Preference Amount", with respect to the Series A
Preferred Stock, has the meaning set forth in the Certificate of Designations.

            "Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise, determined in accordance with GAAP or SAP),
business, operations, properties, investments or prospects of the Company and
its Subsidiaries, taken as a whole, or on the ability of the Company to perform
its obligations under this Agreement, the Certificate of Designations, the
Stockholders' Agreement or the Warrant.

                  "NAIC" means the National Association of Insurance
Commissioners and any successor thereto.

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            "Officer's Certificate" shall mean a certificate signed on behalf of
the Company by the Company's President and Chief Executive Officer, stating
inter alia that the officer signing such certificate has made or has caused to
be made such investigations as are necessary to permit him to verify the
accuracy of the information set forth in such certificate.

            "Permitted Investment" means negotiable instruments or securities
represented by instruments which evidence investments in (i) money market funds
and cash equivalents having a rating of A-I or P-I or better by Standard &
Poor's Ratings Services and Moody's Investors Service Inc., as applicable, (ii)
fixed income securities rated Category 1 by the Securities Valuation Office of
the NAIC, (iii) any issuance by the Company of bonds, notes, debentures or other
debt securities to, or any contributions to the capital of, any of the Company's
Subsidiaries or (iv) any acquisition by Tower Insurance of any capital stock of
any other Person; provided, that any investment made pursuant to clause (iv)
shall not exceed the aggregate amount of $200,000.

            "Person" (or "Persons as the context may require) means an
individual, a corporation, a partnership, limited liability company, a firm, a
joint venture, an association, a trust, an unincorporated organization, a
government, foreign or domestic, or any agency or political subdivision thereof
or any other entity engaging in commercial activities.

            "Principal Insurance Subsidiary" means each Subsidiary of the
Company that (i) bears risk in connection with the business of selling, issuing
or underwriting insurance or reinsurance and (ii) has assets or annual revenues
in excess of $1,000,000. On the date hereof, the Principal Insurance Subsidiary
is Tower Insurance.

            "Purchase Price" means $3,000,000.

            "Purchaser" has the meaning set forth in the first paragraph of this
Agreement.

            "Qualified Investment Banking Firm" means any one of the following
nationally recognized investment banking firms: Brown (Alex) & Sons
Incorporated; Dillon, Read & Co.; Donaldson, Lufkin & Jenrette Securities
Corporation; Goldman, Sachs & Co.; Lehman Brothers Inc.; Merrill Lynch, Pierce,
Fenner & Smith Incorporated; Montgomery Securities; Morgan Stanley & Co.
Incorporated; and Smith Barney, Inc.

            "Reinsurance Agreement" means any agreement, contract, treaty or
other arrangement whereby other insurers cede or assume insurance to or from any
other insurers.

            "Responsible Officer" shall mean, with respect to any Person, its
chief executive officer, president, chairman, chief financial officer, any
senior vice president or any other officer having substantially the same
authority and responsibility as any one or more of the foregoing.

            "SAP" means, with respect to any Insurance Subsidiary, the
accounting procedures and practices prescribed or permitted by the Applicable
Insurance Regulatory Authority or the NAIC.

            "SEC" means the Securities and Exchange Commission and any successor
thereto.

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            "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

            "Security" or "Securities" means the Series A Preferred Stock, the
Warrant and the Warrant Shares, or any of them.

            "Securityholder" or "Securityholders" means any holder or holders of
the Securities.

            "Senior Officer" means any of the following persons: the Chief
Executive Officer, the Chief Operating Officer and the Chief Financial Officer
of the Company or any other person performing substantially similar duties.

            "Series A Preferred Stock" has the meaning set forth in the recitals
to this Agreement.

            "Shares" has the meaning set forth in the recitals to this
Agreement.

            "Statutory Statement" means, as to any Insurance Subsidiary, a
statement of the condition and affairs of such Insurance Subsidiary, prepared in
accordance with SAP, and filed with the Applicable Insurance Regulatory
Authority.

            "Stockholders' Agreement" means that certain Stockholders' Agreement
dated as of January 15, 1997, among the Company, the Purchaser, and the
stockholders of the Company and Warrantholders named therein, in the form of
Exhibit D attached hereto.

            "Subsidiary" means, with respect to any Person, a corporation or
other business entity of which shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other managers of such corporation or business entity are at the time owned,
directly or indirectly through one or more intermediaries, by such Person.

            "Tower Insurance" means Tower Insurance Company of New York, a New
York corporation and a wholly-owned subsidiary of the Company.

            "Transaction Documents" means (i) the Stockholders' Agreement, (ii)
the Voting Agreement and (iii) the Warrant.

            "TRM" means Tower Risk Management Corp., a New York corporation and
a wholly-owned subsidiary of the Company.

            "Voting Agreement" means that certain Voting Agreement dated as of
January 15, 1997 between the Company and Purchaser.

            "Warrant" has the meaning set forth in the recitals to this
Agreement.

            "Warrantholder" (or Warrantholders as the context may require) means
the holder or beneficial owner of a Warrant.

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2.    PURCHASE AND SALE OF THE SERIES A PREFERRED STOCK AND WARRANT.

      2.1   Issuance and Sale of the Series A Preferred Stock and Warrant.

            2.1.1 Certificate of Designations. Prior to the Closing, the Company
shall adopt and file with the Secretary of State of the State of Delaware the
Certificate of Designations.

            2.1.2 Issuance and Sale of the Series A Preferred Stock and Warrant.
Subject to the terms and conditions of this Agreement, Purchaser agrees to
purchase from the Company at the Closing, and the Company agrees to issue and
sell to Purchaser at the Closing for the Purchase Price (i) the Series A
Preferred Stock and (ii) the Warrant.

            2.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place on or about January 15, 1997.
The "Closing Date" shall mean the date on which the Closing occurs (which date
shall not be later than January 31, 1997).

            2.3 Transactions at the Closing. At the Closing, the Company shall
deliver to Purchaser (i) certificates representing the Series A Preferred Stock
and (ii) the Warrant, each registered in the name of Purchaser or its nominee
against payment of the Purchase Price by wire transfer of immediately available
funds to an account or accounts previously designated by the Company.
Immediately following the Closing, the Series A Preferred Stock and the Warrant
will be detachable from each other and may be separately transferred, subject to
compliance with applicable federal and state securities laws.

3.    CONDITIONS TO THE CLOSING.

      3.1   Conditions Precedent to the Obligations of Purchaser. The
obligations of Purchaser to purchase the Series A Preferred Stock and Warrant
under the terms of this Agreement are subject to the satisfaction (or waiver by
Purchaser at or prior to the Closing) of the following conditions precedent:

            3.1.1 Compliance by the Company. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by the Company on
or prior to the Closing Date shall have been complied with and performed by it
and the representations and warranties made by the Company in this Agreement
shall be true and correct on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date, except to the extent such representations and warranties
expressly relate to a particular date.

            3.1.2 Compliance Certificate. The Company shall have delivered to
Purchaser a certificate signed by a Responsible Officer of the Company
certifying to the effect specified in Section 3.1.1.

            3.1.3 Proceedings and Documents. All corporate and other proceedings
taken in connection with the (i) issuance of the Series A Preferred Stock and
Warrant and the consummation of the transactions contemplated hereby and all
documents relating thereto and (ii) the November 1996 reorganization of the
Company and its Subsidiaries and the consummation of the transactions
contemplated thereby and all documents relating thereto shall be satisfactory in
form and substance to Purchaser and its counsel and Purchaser and its counsel
shall have received copies of such documents and papers as it or they may
request in connection therewith.

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            3.1.4 Legal Opinion. The Company shall have furnished to Purchaser
on the Closing Date the opinion of counsel to the Company, dated the Closing
Date, substantially in the form of Exhibit D hereto and such other opinions as
Purchaser may reasonably request.

            3.1.5 Certificate of Designations. The Certificate of Designations
shall have been filed in the office of the Secretary of State of Delaware.

            3.1.6 Stockholders' Agreement and Employment Agreement. The Company,
the Purchaser and the stockholders of the Company shall have entered into a
Stockholders' Agreement dated as of the date hereof (as from time to time
assigned, supplemented or amended or as the terms thereof may be waived), and
the Company and Michael H. Lee shall have entered into the Employment Agreement.

            3.1.7 No Material Limitations. There shall not have occurred any
enactment, promulgation or entry of any order, rule, regulation or statute
effected by any domestic or foreign government, governmental authority or court
that could, in the reasonable judgment of the Purchaser, impose material
limitations upon the ability of the Purchaser to hold or to exercise effectively
all rights of ownership of the Series A Preferred Stock.

            3.1.8 No Material Adverse Change. Since December 31, 1995, except as
set forth in Schedule 3.1.8, there shall not have occurred any material adverse
change in the condition, capitalization (financial or otherwise, determined in
accordance with GAAP or SAP), business, operations, properties, investments or
prospects of the Company and its Subsidiaries taken as a whole, or on the
ability of the Company to perform its obligations under this Agreement, the
Certificate of Designations, the Stockholders' Agreement, the Voting Agreement,
the Employment Agreement or the Warrant.

            3.1.9 Due Diligence. The Purchaser shall have completed its legal,
financial and operational due diligence review of the Company and its
Subsidiaries and shall be satisfied with the results thereof.

            3.1.10 Regulatory Approvals. The Company and its Subsidiaries shall
have obtained all necessary consents, approvals, authorizations, registrations,
filings and declarations from all appropriate Federal, state or local
governmental bodies (including, without limitations, any Applicable Insurance
Regulatory Authority) in connection with the transactions contemplated hereby
(including, without limitation, the Warrant) and Purchaser and its counsel shall
have received a copy of any approval from the New York Department of Insurance
and such other evidence to such effect as it or they may reasonably request.

            3.1.11 Quota Share Treaty. Tower Insurance shall have entered into a
quota share treaty on such terms as shall be acceptable to Purchaser.

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            3.1.12 Corporate Structure. The corporate and tax structure of the
Company and its Subsidiaries shall be reasonably acceptable to Purchaser and its
counsel. The Company shall own 100% of the Capital Stock of Tower Insurance and
TRM.

            3.1.13 Commitment Fee. Am-Re Services, Inc. shall have received a
commitment fee in the amount of $90,000.

            3.1.14 Actuarial Review. Purchaser shall have received an actuarial
review of the insurance operations of the Company and its Subsidiaries, in form
and substance satisfactory to the Purchaser.

            3.1.15 Financial Statements; Projections. Purchaser shall have
received the following:

                  (i) the audited consolidated balance sheet of the Company and
            its Subsidiaries for the fiscal year ended December 31, 1995, and
            the related audited consolidated statements of operations,
            stockholders' equity and cash flows, in each case prepared in
            accordance with GAAP;

                  (ii) the unaudited consolidated and consolidating balance
            sheet of the Company and its Subsidiaries for each of the three
            fiscal quarters during the period ended September 30, 1996, and the
            related consolidated statements of operations, stockholders' equity
            and cash flows, in each case prepared in accordance with GAAP
            (subject to normal year-end audit adjustments);

                  (iii) the audited annual Statutory Statement of the Principal
            Insurance Subsidiary for the fiscal year ended December 31, 1995,
            and the unaudited quarterly Statutory Statement of the Principal
            Insurance Subsidiary for each of the three fiscal quarters during
            the period ended September 30, 1996, in each case prepared in
            accordance with SAP and as filed with such Principal Insurance
            Subsidiary's Applicable Insurance Regulatory Authority; and

                  (iv) projected financial statements for the Company and its
            Subsidiaries for each year during the period from fiscal year 1997
            to and including fiscal year 2002 (the "Projections"), which
            Projections have been prepared in good faith on the basis of sound
            financial planning practice, and have been based on assumptions
            believed by the Company to be reasonable at the time made and upon
            all relevant information then available to the Company and shall
            reflect the forecasted financial condition and income and expenses
            of the Company and its Subsidiaries, and a pro forma Closing Date
            balance sheet giving effect to the transactions contemplated hereby.

            3.1.16 Stop Loss Covers. Tower Insurance shall purchase accident
year stop loss covers in an amount and form satisfactory to Purchaser.

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4.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

            The Company hereby represents and warrants to Purchaser as follows:

            4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to enter into this
Agreement, the Transaction Documents to which it is a party, and the other
agreements to which it is a party provided for herein or therein and to perform
its obligations hereunder and thereunder. The Company is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
character and location of its properties (owned or leased) or the nature or
conduct of its business activities makes such qualification necessary, except
for such jurisdictions where the failure to be so qualified would not have a
Material Adverse Effect. The Company has all requisite corporate power and
authority to own its properties and conduct its business as presently conducted.

      4.2   Subsidiaries.

            4.2.1 Each Subsidiary of the Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Subsidiary of the Company has all requisite
corporate power and authority to own its properties and conduct its business as
presently conducted.

            4.2.2 Each Subsidiary of the Company is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which the character
and location of its properties (owned or leased) or the nature or conduct of its
business activities makes such qualification necessary, except for such
jurisdictions where the failure to be so qualified would not have a Material
Adverse Effect.

            4.2.3 Tower Insurance and TRM are all of the Subsidiaries of the
Company. Each Subsidiary is a wholly owned Subsidiary of the Company.

            4.2.4 All of the issued and outstanding shares of Capital Stock of,
or other ownership interests in, each Subsidiary of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, were not issued
in violation of or subject to any preemptive or similar rights and, are directly
owned by the Company, free and clear of any Lien or other restriction on
transferability or voting or other defects of title whatsoever, and there are no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for or agreements or understandings with respect to the
sale or issuance of, any shares of Capital Stock or other equity interests in
such Subsidiary.

            4.3 Certificate of Incorporation and By-Laws. The copies of the
Certificate of Incorporation and By-Laws of the Company which have heretofore
been delivered to Purchaser are true, accurate and complete. After the
transactions contemplated by the Agreement, the certificate of incorporation of
the Company shall be amended to include as part thereof a certificate of
designations, preferences and rights of cumulative redeemable preferred stock in
the form of the Certificate of Designations annexed hereto as Exhibit A.

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      4.4   Capitalization, Options, Warrants and Agreements.

            4.4.1 Prior to the consummation of the transactions contemplated by
this Agreement, the authorized Capital Stock of the Company consisted of (i)
2,000,000 shares of preferred stock, par value $.01 per share, none of which
have been issued and (ii) 8,000,000 shares of Common Stock, 2,500,001 shares of
which have been issued to Michael H. Lee, Chung Han Lee, Carl P. Lee, Chong Ho
Lee, Leah Petro and Edwin Levine. The Capital Stock of the Company after the
transactions contemplated by this Agreement will consist of (i) 2,000,000 shares
of preferred stock, par value $.01 per share, of which 60,000 shares of Series A
Preferred Stock will have been issued and (ii) 8,000,000 shares of Common Stock,
par value $.01 per share, of which 2,500,001 will have been issued and 583,333
will have been reserved for issuance pursuant to the Warrant. The Company is not
bound by, nor has it granted, issued or made or agreed to grant, issue or make
any convertible or exchangeable securities, warrants, options, calls,
subscription rights or other commitments of any character relating to the issued
or unissued shares of Capital Stock of the Company, nor is there any plan,
agreement or arrangement providing for the granting of any such security,
warrant, option, right or commitment, except for the issuance of Series A
Preferred Stock and the Warrant pursuant to this Agreement. All issued and
outstanding shares of Capital Stock of the Company will be, as of the Closing
and immediately thereafter, duly authorized, validly issued, fully paid and
nonassessable and such shares will not have been issued in violation of or
subject to any preemptive or similar rights.

            4.4.2 There are no statutory or contractual stockholders' preemptive
rights or rights of first refusal with respect to the issuance of the Series A
Preferred Stock and the Warrant hereunder and the issuance of the Warrant
Shares, and upon issuance thereof and against payment of the Exercise Price, the
Warrant Shares will be duly authorized, validly issued, fully paid and
nonassessable.

            4.5 Authority. The execution, delivery and performance of this
Agreement, the Transaction Documents to which it is or will be a party, and the
other agreements and instruments to which it is or will be a party provided for
herein or therein and the consummation of the transactions contemplated hereby
and thereby (including without limitation the issuance by the Company of the
Series A Preferred Stock, the Warrant and Warrant Shares as contemplated herein
and therein) have been duly and validly authorized by all necessary corporate
action on the part of the Company, and no other corporate proceedings on the
part of any such party are necessary to authorize this Agreement, the
Transaction Documents to which it is or will be a party, and the other
agreements and instruments to which it is or will be a party provided for herein
or therein and the consummation of the transactions contemplated hereby and
thereby (including without limitation the issuance by the Company of the Series
A Preferred Stock, the Warrant and Warrant Shares as contemplated herein and
therein). Each of this Agreement, the Transaction Documents to which it is a
party, and the other agreements and instruments to which it is or will be a
party provided for herein or therein has been or will be duly executed by the
Company, and constitutes or will constitute the legal, valid and binding
obligation of such party enforceable against the Company in accordance with its
terms except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general principles of equity. On the Closing Date, the Company shall duly and
validly issue, execute and deliver the Series A Preferred Stock and the
Warrants, and each of the Series A Preferred Stock, the Warrant and the Warrant
Shares when issued in accordance with the terms of the Warrant will constitute
the legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms. Neither the execution nor the delivery
of this Agreement by the Company, the Transaction Documents to which it is or
will be a party, and the other agreements and instruments to which it is or will
be a party provided for herein or therein, nor the consummation of the
transactions and performance of the obligations contemplated hereby or thereby,
will: (i) conflict with or result in a breach or violation of (A) any of the
terms, conditions or provisions of the Certificate of Incorporation or By-Laws
of the Company or (B) any law, rule, regulation or order of any Governmental
Authority (including without limitation the Securities Act and the Exchange
Act), or any order, judgment, writ, injunction, decree, aware or other action of
any court or Governmental Authority or arbitrator(s); (ii) conflict with or
result in a breach or violation of, or default (or event which, with the giving
of notice or passage of time or both, would constitute a breach, violation or
default) or loss of a material benefit under, result in the termination or
modification of or, creation of any Lien under, or permit the acceleration or
modification of any material obligation under any provision of any indenture,
mortgage, Lien, lease or other material agreement or instrument or restriction
of any kind to which the Company or any of its Subsidiaries is a party or by
which any of its assets or properties are otherwise bound; or (iii) require the
Company or any of its Subsidiaries to obtain any consent, approval,
authorization or action of, or make any report to or filing with or give any
notice to, any third party, or any governmental entity, or conflict with or
violate any permit, license, judgment, order, writ, injunction, decree, statute,
law, ordinance, rule or regulation applicable to the Company or, any of its
Subsidiaries or their respective assets or properties.

                                       11
<PAGE>

            4.6 Indebtedness. The capitalization table on Schedule 4.6 sets
forth all outstanding Indebtedness of the Company and each of its Subsidiaries,
and identifies specifically any such Indebtedness in excess of $100,000. The
Company and each of its Subsidiaries have no outstanding Indebtedness and are
not guarantors or otherwise contingently liable for any Indebtedness except as
disclosed on Schedule 4.6. There exists no default under the provisions of any
instrument evidencing such Indebtedness or of any agreement relating thereto.

            4.7 Brokers and Finders. No agent, broker, investment banker, person
or firm acting on behalf of the Company or under authority of the Company is or
will be entitled to any broker's, finder's or investment banker's fee or any
other commission or similar fee from the Purchaser in connection with the
negotiation of any of the transactions contemplated hereby.

            4.8 Private Offering. Neither the Company nor anyone acting on its
behalf has offered the Series A Preferred Stock or the Warrant or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any Person other
than Purchaser and not more than six (6) other institutional investors. Neither
the Company nor anyone acting on its behalf has taken, or will take, any action
which would require that the Securities be registered under Section 5 of the
Securities Act, or any "blue-sky laws" of any applicable jurisdiction.

            4.9 Investment Company Act and Holding Company Status. Neither the
Company nor any of its Subsidiaries is an investment company or a person
directly or indirectly controlled by or acting on behalf of an investment
company within the meaning of the Investment Company Act of 1940, as amended.
Neither the Company nor any of its Subsidiaries is a "holding company" or
"subsidiary company" of a "holding company." or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", or a "public
utility", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

                                       12
<PAGE>

            4.10 Absence of Undisclosed Liabilities. The Company and its
Subsidiaries have no obligations or liabilities (whether accrued, absolute,
contingent, liquidated or otherwise, including without limitation any tax
liabilities due or to become due) which are not fully disclosed and adequately
provided for in the consolidated financial statements of the Company for the
fiscal year ended December 31, 1995 and the nine months ended September 30, 1996
delivered by the Company to and Purchaser, except as set forth in Schedule 4.10
and except current liabilities incurred since the date of such financial
statements and obligations under agreements entered into in the usual and
ordinary course of business, none of which (individually or in the aggregate) is
material to the business, properties, financial condition or results of
operations of the Company and its Subsidiaries considered as a whole, and
contingent liabilities that are not (individually or in the aggregate) material
to the business, properties, financial condition or results of operations of the
Company and its Subsidiaries considered as a whole.

            4.11 Material Agreements. Except as disclosed on Schedule 4.11
hereto, the Company represents and warrants to the Purchaser that neither the
Company nor any of its Subsidiaries is a party to any written or oral:

            (a) agreement with any labor union;

            (b) agreement for the purchase of material fixed assets or for the
purchase of materials, supplies or equipment in excess of normal operating
requirements;

            (c) agreement for the employment of any officer, individual employee
or other Person on a full time basis or any agreement with any Person for
consulting services under which payments to such Person exceed $100,000 per
annum;

            (d) bonus, pension, profit sharing, retirement, stock purchase,
stock option, deferred compensation, medical, hospitalization or life insurance
or similar plan, contract or understanding with respect to any or all of the
employees of the Company or any other Person;

            (e) material indenture, loan or credit agreement, note agreement,
deed of trust, mortgage, security agreement, promissory note or other agreement
or instrument relating to or evidencing Indebtedness or subjecting any material
asset or property of the Company or any of its Subsidiaries to any Lien or
evidencing any material Indebtedness;

            (f) guaranty of any Indebtedness;

            (g) lease or agreement under which the Company or any of its
Subsidiaries is lessee of or holds or operates any property, real or personal,
owned by any other Person under which payments to such Person exceed $100,000
per annum;

                                       13
<PAGE>

            (h) lease or agreement under which the Company or any of its
Subsidiaries is lessor or which permits any Person to hold or operate any
material property, real or personal, owned or controlled by the Company or any
of its Subsidiaries (other than leases between the Company and any of its
Subsidiaries, or between two such Subsidiaries);

            (i) agreement obligating the Company or any of its Subsidiaries to
pay any royalty or similar charge for the use or exploitation of any tangible or
intangible property;

            (j) covenant not to compete or other restriction on the ability of
the Company or any of its Subsidiaries to conduct its business or engage in any
other activity; or

            (k) other agreement not made in the ordinary course of business that
is material to the Company and its Subsidiaries considered as a whole.

            4.12 Employees. Except as set forth in Schedule 4.12, to the
knowledge of the President and Chief Executive Officer of the Company after due
inquiry, no officer or key employee of the Company or any of its Subsidiaries
has any plans to terminate his or her employment with his or her employer and no
such employee is in violation of any term of any employment contract, or
nondisclosure agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant relating to the right of any such employee
to be employed by the Company or such Subsidiary, and the employment of the
employees of the Company or such Subsidiary does not subject the Company or such
Subsidiary or Purchaser to any liability arising by reason of any such contract,
agreement or competition laws. The Company and its Subsidiaries have complied in
all material respects with all laws relating to employment or labor, including
provisions relating to wages, hours, equal opportunity, collective bargaining
and payment of Social Security and other taxes. None of the Company or any of
its Subsidiaries is involved in any material labor dispute, nor, to the
knowledge of the Company, is any such dispute threatened.

            4.13 Insurance Coverage. There is in full force and effect one or
more policies of insurance issued by insurers of recognized responsibility,
insuring the Company and its Subsidiaries, their properties and business against
such losses and risks, and in such amounts, as are customary in the case of
corporations of established reputation engaged in the same or similar businesses
of similar size and similarly situated. The Company and its Subsidiaries have
not been refused any insurance coverage sought or applied for, and the Company
and its Subsidiaries have no reason to believe that they will be unable to renew
their existing insurance coverage upon terms at least as favorable as those
presently in effect, other than possible increases in premiums that do not
result from any act or omission of the Company and its Subsidiaries.

            4.14 Litigation. Except as disclosed on Schedule 4.14, there is no
legal action, suit, arbitration or other legal, administrative or other
governmental investigation, inquiry or proceeding (whether federal, state, local
or foreign) pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries or any of their properties, assets or
businesses which, if adversely determined, could reasonably be expected to have
a Material Adverse Effect. The Company and its Subsidiaries are not in default
with respect to any order, writ, judgment, injunction, decree, determination or
award of any court or of any governmental agency or instrumentality (whether
federal, state, local or foreign). The Company has no knowledge of any
unasserted claim, the assertion of which is likely and that, if asserted, will
be for legal or equitable relief that, if granted, would have a Material Adverse
Effect. No injunction, stay or restraining order is in effect prohibiting the
consummation of any of the transactions contemplated by this Agreement.

                                       14
<PAGE>

            4.15 Disclosure. The representations and warranties contained in
this Agreement or incorporated herein by reference and the information appearing
in the writings furnished by the Company to Purchaser pursuant hereto taken as a
whole, do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein or therein not misleading.
To the knowledge of the Company, there is no fact which the Company has not
disclosed to Purchaser in writing which materially and adversely affects the
business, properties, financial condition, or results of operations of the
Company and its Subsidiaries considered as a whole or the ability of the Company
to perform this Agreement, the Transaction Documents or any of the transactions
contemplated hereby or thereby.

            4.16 Absence of Defaults. None of the Company or any of its
Subsidiaries is in violation of its charter or bylaws or is in default in any
respect in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of Indebtedness to which the
Company or any of its Subsidiaries is a party or to which any of them or their
respective properties or assets are subject or under any license, permit,
approvals, registration, certification, consent or franchise referred to in
Section 4.16 which default is reasonably likely to have a Material Adverse
Effect. There exists no condition that, with notice, the passage of time or
both, would constitute a default under any such document or instrument and that
is reasonably likely to have such a Material Adverse Effect. Each of the Company
and its Subsidiaries is in compliance with all local, state and federal laws,
ordinances and regulations (including environmental laws) applicable to its
properties (whether owned, leased or licensed) and its business, except where
the failure to comply would not have a Material Adverse Effect.

            4.17 Necessary Licenses. Each of the Company and its Subsidiaries
possesses such certificates, authorities, licenses or permits (including,
without limitation, authorizations under all relevant insurance laws and
regulations) issued by the appropriate local, state, federal or foreign
regulatory agencies or bodies (including any Applicable Insurance Regulatory
Authority) as are material to, or legally required for, the operation of its
business. Neither the Company nor any of its Subsidiaries has received any
notice of proceedings relating to, or has reason to believe that any
governmental body or agency is considering limiting, suspending, modifying or
revoking any such certificate, authority, license or permit.

      4.18  Compliance with Environmental Laws.

            4.18.1 Each of the Company and its Subsidiaries is in compliance
with, and has and will have all necessary permits or authorizations to conduct
its business as required under, all applicable or pertaining Environmental Laws,
except for such instances of noncompliance which, either singly or in the
aggregate, are not reasonably likely to have a Material Adverse Effect.

                                       15
<PAGE>

            4.18.2 There is no alleged liability, or to the knowledge of the
Company, potential liability (including, without limitation, alleged or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) of the Company of any of its Subsidiaries arising directly or
indirectly out of, based upon or resulting from (i) the presence, release or
threatened release into the environment of any Hazardous Material at any
location, whether or not owned by the Company or any of its Subsidiaries, or
(ii) any violation or alleged violation of any Environmental Law which alleged
or potential liability singly or in the aggregate is reasonably likely to have a
Material Adverse Effect.

            The term "Hazardous Material" means all pollutants, contaminants,
chemicals, wastes and other carcinogenic, ignitable, corrosive, reactive, toxic,
radioactive or otherwise hazardous substance or materials (whether solids,
liquids or gases), including but not limited to any substances, materials or
wastes subject to regulation, control or remediation under Environmental Laws.

            The term "Environmental Laws" means all federal, state, district,
local, and foreign laws, all rules or regulations promulgated thereunder, and
all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated, or entered pursuant thereto, relating to pollution or
protection of the environment (including without limitation ambient air, surface
water, ground water, land surface, or subsurface strata), including without
limitation (i) laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, chemicals, industrial materials, wastes,
or other substances into the environment and (ii) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport, or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes, or other
substances. Environmental Laws shall include without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Toxic Substances Control Act, as amended, the Hazardous Materials
Transportation Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Clean Water Act, as amended, the Safe Drinking Water Act, as
amended, the Clean Air Act, as amended, the Atomic Energy Act of 1954, as
amended, the Occupational Safety and Health Act, as amended, and all analogous
laws promulgated or issued by any state or other governmental authority.

      4.19  ERISA. Except as set forth on Schedule 4.19 hereto:

            4.19.1 Multiemployer Plans. Neither the Company nor any of its
Subsidiaries has any obligation to contribute to (or any other liability,
including current or potential withdrawal liability, with respect to) any
"multiemployer plan" (as defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").

            4.19.2 Retiree Welfare Plans. Neither the Company nor any of its
Subsidiaries maintains or has any obligation to contribute to (or any other
liability with respect to) any plan or arrangement whether or not terminated,
which provides medical, health, life insurance or other welfare-type benefits
for current or future retired or terminated employees, their spouses or
dependents (except for limited continued medical benefit coverage required to be
provided under Section 4980B of the Code or as required under applicable state
law).

                                       16
<PAGE>

            4.19.3 Defined Benefit Plans. Nether the Company nor any of its
Subsidiaries maintains, contributes to or has any liability under (or with
respect to) any employee plan which is a "defined benefit plan" (as defined in
Section 3(35) of ERISA), whether or not terminated.

            4.19.4 Defined Contribution Plans. Neither the Company nor any of
its Subsidiaries maintains, contributes to or has any liability under (or with
respect to) any employee plan which is a "defined contribution plan" (as defined
in Section 3(34) of ERISA), whether or not terminated.

            4.19.5 Other Plans. Neither the Company nor any of its Subsidiaries
maintains, contributes to or has any liability under (or with respect to) any
plan or arrangement providing benefits to current or former employees, including
any bonus plan, plan for deferred compensation, employee health or other welfare
benefit plan or other arrangement, whether or not terminated and whether or not
subject to ERISA.

            4.19.6 Unfunded Liability. No plan maintained by the Company or any
of its Subsidiaries, or to which the Company or any of its Subsidiaries has an
obligation to contribute to, or with respect to which the Company or any of its
Subsidiaries has any other liability, has any material unfounded liability.

            4.19.7 Plan Qualification and Compliance. Each employee benefit plan
set forth on Schedule 4.19.7 hereto that is intended to be qualified under
Section 401 (a) of the Code has received a favorable determination letter from
the Internal Revenue Service as to the qualification of such plan and nothing
has occurred since the date of such determination letter that could adversely
affect the qualification of such plan. Each employee benefit plan set forth on
Schedule 4.19.7 hereto and all related trusts, insurance contracts and funds
have been maintained, funded and administered in compliance in all material
respects with their respective terms and with all applicable laws and
regulations.

            4.20 Taxes. Each of the Company and its Subsidiaries has timely
filed or caused to be timely filed, on the due dates thereof or within
applicable grace periods, with the appropriate taxing authority, all U.S.
federal, state, city and other material returns, statements, forms and reports
for taxes (the "Returns") required to be filed by or with respect to the income,
properties or operations of the Company and its Subsidiaries. The Returns
accurately reflect in all material respects all liability for taxes of the
company and its Subsidiaries and for the periods covered thereby. Each of the
Company and its Subsidiaries has paid all material taxes payable by it other
than taxes which are not delinquent, and other than those contested in good
faith and for which adequate reserves have been established in accordance with
generally accepted accounting principles. There is no material action, suit,
proceeding, investigation, audit, or claim now pending or, to the best knowledge
of the Company, threatened by any taxing authority regarding any taxes relating
to the Company and its Subsidiaries. As of the date of this Agreement, neither
the Company nor any of its Subsidiaries has entered into an agreement or waiver
or been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Company or
such Subsidiary. Neither the Company nor any of its Subsidiaries has provided,
with respect to itself or property held by it, any consent under Section 341 of
the Code.

                                       17
<PAGE>

5.    REPRESENTATIONS AND WARRANTIES OF PURCHASER.

            Purchaser hereby represents and warrants to the Company as follows:

            5.1 Acquisition for Own Account. The Securities to be acquired by
Purchaser pursuant to this Agreement are being acquired by it for its own
account and not with a view to the distribution thereof, without prejudice,
however, to the rights of Purchaser at all times to sell or otherwise dispose of
all or any part of the Securities under an effective registration statement
under the Securities Act or under an exemption from such registration available
under the Securities Act and subject, nevertheless, to the disposition of
Purchaser's property being at all times within its control. The Purchaser is an
"accredited investor" as such term is defined in Regulation D promulgated under
the Securities Act.

            5.2 Restrictive Legend. Except as otherwise permitted by this
Section 5.2, each certificate representing the Shares, the Warrant Shares or the
Warrant (or any replacement therefor) shall bear a legend substantially in the
following form:

            THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
            REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
            OR BLUE SKY LAWS OF ANY STATE, AND MAY NOT BE SOLD OR
            TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION
            STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
            LAWS COVERING SUCH SECURITIES OR SUCH SALE OR TRANSFER IS
            EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
            REQUIREMENTS OF SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
            THE SECURITIES ARE SUBJECT TO AND ENTITLED TO THE BENEFITS OF
            A SECURITIES PURCHASE AGREEMENT AND MAY NOT BE TRANSFERRED,
            SOLD OR OTHERWISE DISPOSED OF, EXCEPT AS THEREIN PROVIDED.

            The requirement of a restrictive legend pursuant to this Section 5.2
shall terminate with respect to specified Securities when (i) such Securities
shall have been effectively registered under the Securities Act and sold by the
holder thereof in accordance with such registration, or (ii) in the opinion of
counsel satisfactory to the Company, such restrictions are no longer required in
order to assure compliance with the Securities Act. Whenever such restrictions
shall terminate as to any Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new certificates representing such
Securities of like tenor not bearing the foregoing legend. The Company shall, if
requested by a holder of Securities to remove a legend from the certificate(s)
representing such Securities, pay the reasonable fees and disbursements of
counsel for such holder in connection with all opinions rendered by such counsel
pursuant to this Section 5.2. Purchaser agrees that it will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any Securities (or solicit any offer to buy, purchase, or otherwise acquire or
take a pledge of any Securities), except in compliance with the Securities Act,
the rules and regulations promulgated thereunder, applicable slate securities
laws and the provisions of this Agreement. Any legend endorsed on a certificate
evidencing Series A Preferred Stock, Warrant or Warrant Share and any stop
transfer instructions or notations on the Company's records with respect to such
Series A Preferred Stock, Warrant or Warrant Share shall be removed or lifted
and the Company shall issue a certificate without such legend to the holder of
such Series A Preferred Stock, Warrant or Warrant Share if such Series A
Preferred Stock, Warrant or Warrant Share may be sold under Rule 144(k) of the
Commission under the Securities Act.

                                       18
<PAGE>

      6.    COVENANTS OF THE COMPANY.

            6.1   Financial Statements and Other Reports. The Company shall
deliver to Purchaser so long as it shall hold any of the Shares or any portion
of the Warrant or any Warrant Shares:

            6.1.1 Quarterly Financial Statements. As soon as available and in
any event within forty-five (45) days after the end of each quarterly fiscal
period (other than the last quarterly fiscal period) in each fiscal year of the
Company, unaudited consolidated and consolidating balance sheets of the Company
and its Consolidated Subsidiaries as of the end of such period and the related
consolidated and consolidating statements of operations, changes in
stockholders' equity and cash flows of the Company and its Consolidated
Subsidiaries for such period and for the period from the beginning of the
respective fiscal year to the end of such period, setting forth, in case of the
consolidated statements, in comparative form the corresponding consolidated
figures for the corresponding period in the preceding fiscal year, accompanied
by a certificate of a senior financial officer of the Company, which certificate
shall state that said financial statements fairly present, in all material
respects, the financial position of the Company and its Consolidated
Subsidiaries and the results of operations and cash flows of the Company and its
Consolidated Subsidiaries in accordance with GAAP, consistently applied, as of
the end of and for such period (subject to normal year-end audit adjustments).

            6.1.2 Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of the Company, audited
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of the end of such year and the related audited consolidated statements of
operations, changes in stockholders' equity and cash flows of the Company and
its Consolidated Subsidiaries for such year, setting forth, in the case of the
consolidated statements, in comparative form the figures for the corresponding
fiscal period of the preceding fiscal year, and accompanied in the case of said
consolidated statements and balance sheet, by a report thereon of Schnitzer and
Kondub, or other independent certified public accountants of recognized national
standing, which report shall state that said consolidated financial statements
fairly present, in all material respects, the consolidated financial position
and results of operations and cash flows of the Company and its Consolidated
Subsidiaries as of the end of and for such fiscal year in accordance with GAAP.

            6.1.3 Quarterly Statutory Statements. As soon as available and in
any event within 45 days after the end of each of the first three quarterly
fiscal periods of each fiscal year of each Insurance Subsidiary, the quarterly
Statutory Statement of such Insurance Subsidiary, and (if required to be filed
with the Applicable Insurance Regulatory Authority, combined Statutory
Statements) prepared in accordance with SAP for such fiscal quarter as filed
with the Applicable Insurance Regulatory Authority, together with a certificate
of a senior financial officer of such Insurance Subsidiary stating that such
Statutory Statement presents the financial position of such Insurance Subsidiary
for such fiscal quarter in accordance with SAP.

                                       19
<PAGE>

            6.1.4 Annual Statutory Statements. As soon as available and in any
event within 60 days after the end of each fiscal year of each Insurance
Subsidiary, unaudited annual Statutory Statements of such Insurance Subsidiary
(and, if required to be filed with the Applicable Insurance Regulatory
Authority, combined Statutory Statements) prepared in accordance with SAP for
such fiscal year as filed with the Applicable Insurance Regulatory Authority,
together with respect to each Insurance Subsidiary, a certificate of a senior
financial officer of such Insurance Subsidiary stating that such statutory
statements present the financial position of such Insurance Subsidiary for such
fiscal year in accordance with SAP.

            6.1.5 Auditors' Report. Promptly after filing the annual Statutory
Statement with the Applicable Insurance Regulatory Authority and in any event
not later than five (5) days after such filing, a report of Schnitzer and
Kondub, or other independent certified public accountants of recognized national
standing, on the Statutory Statement delivered pursuant to Section 6.1.4.

            6.1.6 Loss Reserve Report. To the extent required to be filed with
an Applicable Insurance Regulatory Authority or otherwise available, promptly
after becoming available a copy of each quarterly, internally prepared report
reviewing the adequacy of loss reserves of any Insurance Subsidiary (as shown in
the most recent Statutory Statement of such Insurance Subsidiary); and once
every three years a report prepared by an independent actuarial consulting firm
of nationally recognized professional standing reviewing the adequacy of loss
reserves of each Insurance Subsidiary (which firm shall be provided access to or
copies of all reserve analyses and valuations relating to the insurance business
of each such Insurance Subsidiary) together with its opinion affirming the
adequacy of such loss reserves.

            6.1.7 SEC Reports. Promptly upon their becoming available, copies of
all registration statements and regular periodic reports, if any, that the
Company shall have filed with the SEC or any national securities exchange.

            6.1.8 Notices of Default. Promptly (but in any event within five
business days) after the discovery or receipt of notice of any default by the
Company or any of its Subsidiaries under any other material agreement to which
it or such Subsidiary is a party (including the Agreement) or any other material
adverse event or circumstance affecting the Company or any Subsidiary
(including, without limitation, threatened or actual governmental investigations
or proceedings and the filing of any material litigation against the Company or
any Subsidiary or the existence of any dispute with any Person which involves
threatened or probable material litigation being commenced), the Company shall
deliver to Purchaser an Officer's Certificate specifying the nature and period
of existence thereof and what actions the Company has taken and proposes to take
with respect thereto.

            6.2 Restrictions on Corporate Action. The Company will not modify or
amend any provision of the Certificate of Incorporation or By-Laws of the
Company or modify or amend any provision of the Warrant if such action would
adversely alter or change the specific designations and the powers, rights and
preferences of, and the qualifications, limitations and restrictions in respect
of, the Series A Preferred Stock or adversely affect the rights of the holders
of the Warrant and of any other warrants that may be issued in its place.

                                       20
<PAGE>

            6.3 No Inconsistent Agreements. The Company shall not, and shall not
permit any of its Subsidiaries to, create or cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of the
Company or any such Subsidiary to pay dividends or make distributions on or
mandatorily or at the option of a holder redeem in accordance with the terms
thereof the Series A Preferred Stock except for such encumbrances or
restrictions existing under or by reason of applicable law.

            6.4 Amendments to Certificate; By-Laws. For so long as any of the
Shares are outstanding, the Company shall not, without the affirmative vote or
the written consent of the holders of all of the issued and outstanding Shares,
amend the Certificate of Incorporation or the By-Laws of the Company in any
manner inconsistent with the provisions of Section 6.2.

            6.5 Inspection of Property. The Company will permit the Purchaser
upon reasonable prior notice, during normal business hours and at such party's
expense to (a) visit and inspect any of the properties of the Company and its
Subsidiaries, (b) examine the corporate and financial records of the Company and
its Subsidiaries and make copies thereof or extracts therefrom and (c) discuss
the affairs, finances and accounts of any such corporations with the directors,
officers, key employees and independent accountants of the Company and its
Subsidiaries; provided that the Company may require the Purchaser to sign a
confidentiality agreement reasonably acceptable to the Company pursuant to which
the Purchaser shall agree to keep confidential all confidential information
acquired pursuant to this Section 6.5.

            6.6 Investments. The Company shall not make any investments except
for Permitted Investments.

            6.7 Business Maintenance. The Company will, and will cause each of
its Subsidiaries to:

            (a) at all times cause to be done all things necessary to maintain,
preserve and renew its existence and will use its best efforts to maintain,
preserve and renew all licenses, authorizations and permits necessary to the
conduct of its business, including, without limitation, all authorizations of
state departments of insurance or other insurance regulatory agencies (including
Applicable Insurance Regulatory Authority), except where the failure to
maintain, preserve or renew such licenses, authorizations and permits would not
be material to the business, properties, financial condition or results of
operation

            (b) maintain and keep its properties that are used in and necessary
to its business in good repair, working order and condition in all material
respects, and from time to time make all necessary or desirable repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times, except where the failure to so maintain,
keep, repair, renew or replace such properties would not be material to the
business, properties, financial condition or results of operations of the
Company and its Subsidiaries considered as a whole;

                                       21
<PAGE>

            (c) apply for and continue in force with good and responsible
insurance companies insurance policies covering risks of such types and in such
amounts as are customary for corporations of similar size engaged in similar
lines of business, provided, that the Company and its Subsidiaries may
self-insure in accordance with good business practice;

            (d) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or supplies that if unpaid
might by law become a Lien upon any of its property, unless and to the extent
that (i) the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with GAAP) have
been established on its books with respect thereto or (ii) such failure to pay
or discharge does not have, and cannot reasonably be expected to have, a
material adverse effect upon the business, properties, financial condition or
results of operations of the Company and its Subsidiaries considered as a whole;

            (e) comply with all other obligations that it incurs pursuant to any
contract or agreement, whether oral or written, express or implied, as such
obligations become due, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with GAAP) have been established on its books with
respect thereto, or unless and to the extent that any breach of such contract or
agreement would not have a material adverse effect on the business, properties,
financial condition or results of operations of the Company and its Subsidiaries
considered as a whole;

            (f) comply with all applicable laws, rules and regulations of all
governmental authorities including, without limitation, the rules and
regulations of any insurance regulatory agencies having jurisdiction over the
Company or any of its Subsidiaries, the violation of which might reasonably be
expected to have a material adverse effect on the business, properties,
financial condition or results of operations of the Company and its Subsidiaries
considered as a whole; and

            (g) maintain proper books of record and account that fairly present
its financial condition and results of operations and make provisions on its
financial statements for all such proper reserves as in each case are required
in accordance with GAAP or, as applicable, in accordance with SAP.

            6.8 New York Insurance Department Approval. The Company will not
depart in any material respect from the terms of the formal decision of the New
York Department of Insurance with respect to the transactions contemplated
hereby, without the prior written consent of the holders of at least a majority
of the shares of Series A Preferred Stock outstanding at the time.

            6.9 Reservation of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrant and any other warrants that may be issued in its place, the
aggregate number of shares of Common Stock (or other securities) from time to
time issuable upon exercise thereof. All such shares of Common Stock (or other
securities) shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and nonassessable.

                                       22
<PAGE>

            6.10 Cash Reserves. During the periods that Series A Preferred Stock
is outstanding, the Company shall maintain cash or cash equivalents equal to at
least two (2) quarters of dividend payments as set forth in the Certificate of
Designations.

            6.11 Information Required Under Rule 144A. Upon the request of the
holder of any of the Securities, the Company will provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of the Securities, except at
such times as the Company is subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act. For the purpose of this Section 6.10, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.

            6.12 Sale of Substantial Portion of Assets, Subsidiaries. Neither
the Company nor any of its Subsidiaries will sell, transfer, lease, exchange,
convey or otherwise dispose of all or substantially all of the consolidated
assets of the Company in a single transaction or a series of related
transactions to any Person or Persons (other than to the Company) without the
prior written consent of the holders of a majority of the outstanding shares of
Series A Preferred Stock. Neither the Company nor any of its Subsidiaries will
sell, transfer or otherwise dispose of any Capital Stock of any Subsidiary,
except to the Company without the prior written consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock.

            6.13 Merger, Acquisition, Consolidation, Recapitalization and Sale.
Neither the Company nor any of its Subsidiaries will permit or agree to (i) the
sale, lease, transfer, exchange, conveyance or other disposition (whether
through voluntary liquidation, dissolution, winding-up or otherwise) of all or
substantially all of the consolidated assets of the Company or any of its
Subsidiaries in a single transaction or a series of related transactions to any
Person or Persons, (ii) the consolidation or merger of the Company or any of its
Subsidiaries with or into any other Person or Persons, (iii) an Acquisition,
(iv) the recapitalization of the Company or any of its Subsidiaries or (v) the
sale, transfer or other disposition of any capital stock of any Subsidiary
without the prior written consent of the holders of a majority of the
outstanding shares of Series A Preferred Stock.

            6.14 No Material Asset Acquisitions or Dispositions. Neither the
Company nor any of its Subsidiaries will permit or agree to (i) a material
disposition (whether by sale, lease, transfer, exchange, conveyance, voluntary
liquidation, winding up or otherwise) of the consolidated assets of the Company
or any of its Subsidiaries or (ii) a material acquisition of the assets of any
Person in a single transaction or a series of related transactions with any
Person outside the ordinary course of business.

            6.15 Business Activities. The Company will not, nor will the Company
permit any of its Subsidiaries to, engage in any business other than (i) the
property and casualty insurance business and such business activities incidental
or related thereto, and (ii) such other businesses as the Company or its
Subsidiaries are engaged in on the date hereof.

                                       23
<PAGE>

            6.16 Indebtedness. Except for Indebtedness existing as of the
Closing Date neither the Company nor any of its Subsidiaries shall incur,
create, assume, guarantee or suffer to exist any Indebtedness during the first
year following the Closing without the prior written consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock; provided that
the Company and its Subsidiaries may incur intercompany Indebtedness. Following
the first anniversary of the Closing Date, the Company may incur, create or
assume indebtedness, provided that the Company maintains a Fixed Charge Coverage
Ratio of at least 10:1 as of the date of such incurrence, creation or assumption
of Indebtedness and at all times during which such Indebtedness remains
outstanding.

            6.17 Restrictions on Affiliate Payments. The Company will not, nor
will it permit any of its Subsidiaries to, make any payment to any Affiliate
(excluding any dividends paid by any Insurance Subsidiary to the Company) or to
any officer or director of an Affiliate at any time that dividends on the Series
A Preferred Stock are in arrears or at any time that the Company has failed to
redeem the Series A Preferred Stock as required under the Certificate of
Designations or to make any other payment required under this Agreement, except
for payments with respect to the salaries, bonuses and employee benefits of
officers and employees of the Company, Tower Insurance and TRM in the ordinary
course of business in compensation for their services in such capacities. Such
payments may be accrued and paid to the Affiliate or to the officer or director
of the Affiliate, as the case may be, after the payment in full of all dividends
on the Series A Preferred Stock in arrears to the holders of the Series A
Preferred Stock, the payment of the Redemption Price (as defined in the
Certificate of Designations) to the holders of the Series A Preferred Stock as
provided under the Certificate of Designations or the payment of any other
payment required under this Agreement, as the case may be.

            6.18 Use of Proceeds. The Company shall use the proceeds from the
sale of the Series A Preferred Stock and Warrant for the working capital
requirements of Tower Insurance in the ordinary course of its business, and for
no other purpose.

            6.19 Payment of Dividends. The Company shall pay to the holders of
the Series A Preferred Stock cash dividends out of funds legally available for
such purpose in an amount and on such dates as are set forth in the Certificate
of Designations.

            6.20 Restrictions on Common Stock Dividends. Neither the Company nor
any of its Subsidiaries shall declare or pay dividends on the Company's Common
Stock in an amount that exceeds (i) during the Company's 1997 fiscal year,
$200,000 and (ii) during the Company's 1998 fiscal year and the Company's fiscal
years thereafter, ten percent (10%) of the prior fiscal year's Consolidated Net
Income; provided, however, that neither the Company nor any of its Subsidiaries
shall declare or pay any dividends on the Company's Common Stock during any
period in which there are outstanding accrued and unpaid dividends on the Series
A Preferred Stock.

            6.21 Capital Stock. For as long as the Series A Preferred Stock are
outstanding, the Company shall not create, authorize, issue or sell any Capital
Stock (other than Capital Stock issued pursuant to any stock option plan of the
Company that has been approved by the holders of the Series A Preferred Stock)
without the prior written consent of the holders of at least a majority of the
Series A Preferred Stock, which consent shall not be unreasonably withheld.

                                       24
<PAGE>

            6.22 Employment Agreement. The Company shall enforce the provisions
of the Employment Agreement to the full extent permitted under applicable law.

            6.23 Tower Insurance and TRM. The Company shall not transfer, sell,
pledge, encumber or otherwise dispose of any of the outstanding Capital Stock of
Tower Insurance or TRM (other than directors' qualifying shares) nor shall the
Company permit Tower Insurance or TRM to issue shares of Capital Stock to any
Person other than the Company.

            6.24 Register of Company Securities. The Company or its duly
appointed agent shall maintain a separate register for the Series A Preferred
Stock and Warrants in which it shall register the issue and sale of all such
Series A Preferred Stock and Warrants and the exercise of any Warrants for
Warrant Shares. All transfers of Series A Preferred Stock and Warrants and the
exercise of any Warrants for Warrant Shares shall be recorded on the register.
The Company shall be entitled to regard the registered holder of Series A
Preferred Stock or Warrants as the holder of the Series A Preferred Stock or
Warrants so registered for all purposes until the Company or its agent is
required to record a transfer of such Series A Preferred Stock or Warrants on
its register. Subject to Section 5.2, the Company or its agent shall be required
to record a transfer when it receives the Note or Warrant to be transferred duly
and properly endorsed by the registered holder thereof or by its attorney duly
authorized in writing.

            6.25 Loss, Theft and Destruction of Securities. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Series A Preferred Stock, Warrant or Warrant Share and, in
the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender and cancellation of any Series A Preferred Stock, Warrant or
Warrant Share, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Series A Preferred Stock, Warrant or Warrant Share (i) in
the case of a Series A Preferred Stock, a new Series A Preferred Stock of like
class, tenor and unpaid principal amount and dated as of the date to which
interest has been paid on the unpaid principal amount of the Series A Preferred
Stock so lost, stolen, destroyed or mutilated, or, if no interest shall have
been paid thereon, then dated as of the date of the Note so lost, stolen,
destroyed or mutilated, or (ii) in the case of a Warrant or Warrant Shares, a
new Warrant or Warrant Share, as the case may be.

            6.26 Insurance Company Regulations. The Company shall not, and shall
not permit any of its Subsidiaries to, conduct any business in any jurisdiction
where the conduct of such business would cause the holder of any Series A
Preferred Stock, Warrants, or Warrant Shares, solely by their acquisition or
ownership of the Series A Preferred Stock, Warrants, or Warrant Shares, to
become subject to the jurisdiction of any insurance regulatory agency, or to
become members of any insurance holding company system, as that term is defined
under the holding-company provisions of the insurance laws of such jurisdiction.

                                       25
<PAGE>

7.    INDEMNIFICATION.

            7.1 Indemnification by the Company. In addition to all other sums
due hereunder or provided for in this Agreement, the Company agrees to
indemnify, exonerate and hold harmless Purchaser, its Affiliates and their
respective officers, directors, agents, employees, subsidiaries, partners and
controlling persons (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all actions, causes of action, losses,
claims, damages, expenses (including reasonable fees, disbursements and other
charges of counsel) or other liabilities (collectively, the "Indemnified
Liabilities") resulting from any breach of any covenant agreement,
representation or warranty of the Company in this Agreement or any legal,
administrative or other actions brought by any person or entity, proceedings or
investigations (whether formal or informal), or written threats thereof based
upon, relating to or arising out of this Agreement or the transactions
contemplated hereby; provided, that (a) the Company shall not be liable under
this Section 7.1 to an Indemnified Party (i) for any amount paid in settlement
of claims without the Company's consent, which consent shall not be unreasonably
withheld, (ii) to the extent that it is finally judicially determined that such
Indemnified Liabilities resulted primarily from the willful misconduct or gross
negligence of such Indemnified Party or (iii) to the extent that it is finally
judicially determined that such Indemnified Liabilities resulted primarily from
the material breach by such Indemnified Party of any representation, warranty,
covenant or other agreement of such Indemnified Party contained in this
Agreement, and (b) if and to the extent the foregoing undertaking may be
unenforceable for any reason the Company agrees to make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The obligations of the Company under this
Section 7 shall survive the termination of this Agreement

            7.2 Notification. Each Indemnified Party under this Section 7 shall,
promptly after the receipt of notice of the commencement of any action or other
proceeding against such Indemnified Party in respect of which indemnity may be
sought from the Company under this Section 7, notify the Company in writing of
the commencement thereof The omission of any Indemnified Party so to notify the
Company of any such action shall not relieve the Company from any liability that
it may have to such Indemnified Party under this Section 7 unless, and only to
the extent that, such omission results in the Company's forfeiture of
substantive rights or defenses. In case any such action or other proceeding
shall be brought against any Indemnified Party and it shall notify the Company
of the commencement thereof the Company shall be entitled to participate therein
and, to the extent that it may wish, to assume the defense thereof, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense.

Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an Indemnified Party is, or is reasonably likely to become, a party,
such Indemnified Party shall have the fight to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the opinion of counsel to such Indemnified Party, (i) there are or may be
legal defenses available to such Indemnified Party or to other indemnified
parties that are different from or additional to those available to the Company
which counsel selected by the Company is not pursuing to the reasonable
satisfaction of Purchaser, or (ii) any conflict or potential conflict exists
between the Company and such Indemnified Party that would make such separate
representation advisable; provided, however, that (A) any such separate counsel
employed by the Indemnified Party at the Company's expense shall be reasonably
satisfactory to the Company, (B) the Indemnified Party shall not, without the
prior written consent of the Company, settle, compromise or consent to the entry
of any judgment in such action or proceeding unless such settlement, compromise
or consent includes an unconditional release of the Company from all liability
arising or that may arise out of such action or proceeding relating to any
matter subject to indemnification hereunder and (C) in no event shall the
Company be required to pay fees and expenses under this Section 7 for more than
one firm of attorneys representing the indemnified parties in any jurisdiction
in any one legal action or group of related legal actions. The Company shall not
without the prior written consent of Purchaser, settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding relating to any matter subject to indemnification hereunder unless
such settlement, compromise or consent includes an unconditional release of
Purchaser and each other Indemnified Party from all liability arising or that
may arise out of such claim, action or proceeding. The Company shall not be
liable for any settlement of any claim, action or proceeding effected against an
Indemnified Party without the Company's written consent, which consent shall not
be unreasonably withheld. The rights accorded to indemnified parties hereunder
shall be in addition to any rights that any Indemnified Party may have at common
law, by separate agreement or otherwise.

                                       26
<PAGE>

8.    REGISTRATION RIGHTS

            The holders of the Warrant and/or Warrant Shares shall have such
rights, and the Company shall have such obligations, with respect to the
registration for sale under the Securities Act of the Warrant Shares, as are set
forth in Article V of the Warrant.

9.    TERMINATION

            9.1 Termination. This Agreement may be terminated at any time prior
to the Closing (i) by mutual written consent of the Company and Purchaser or
(ii) by the Company or Purchaser, if the Closing shall not have occurred on or
before January 31,1997.

            9.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 9.1, this Agreement shall be void and of no further effect with no
liability on the part of any party hereto, except as set forth in Sections 7 and
13.2 hereof all representations, warranties, covenants and agreements of the
Company herein and in any certificates or other instruments delivered pursuant
to this Agreement shall (i) be deemed to have been relied upon by Purchaser
notwithstanding any investigation heretofore or hereafter made by Purchaser and
(ii) survive the execution and delivery of this Agreement and the delivery of
the Preferred Stock and Warrant to Purchaser; provided, however, that the
covenants and agreements set forth in Sections 6.3, 6.4, 6.6, 6.10, 6.12, 6.13,
6.14, 6.15, 6.16, 6.17, 6.20 and 6.21 of this Agreement shall terminate with
respect to any period after the redemption of the Series A Preferred Stock.

10.   PERFORMANCE; WAIVER.

            The provisions of this Agreement may be modified or amended, and
waivers and consents to the performance and observance of the terms hereof may
be given by written instrument executed and delivered by the Company and the
holders of at least a majority of the shares of Series A Preferred Stock
outstanding at the time. The failure at any time to require performance of any
provision hereof shall in no way affect the full right to require such
performance at any time thereafter. The waiver by any party to this Agreement of
a breach of any provision hereof shall not be taken or held to be a waiver of
any succeeding breach of such provision or of any other provision or as a waiver
of the provision itself.

                                       27
<PAGE>

11. SUCCESSORS AND ASSIGNS.

            All covenants and agreements contained in this Agreement by or on
behalf of the parties hereto shall bind, and inure the benefit of, the
respective successors and assigns of the parties hereto.

12.   MISCELLANEOUS.

            12.1 Notices. All notices or other communications given or made
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).

                  If to the Company, to:

                           Tower Group, Inc.
                           c/o Tower Insurance Company of New York
                           110 William Street, 4th Floor
                           New York, New York 10038
                           Telephone No.: (212) 233-1399
                           Telecopy No.: (212) 233-1983

                           Attention:  Michael H. Lee

                           If to Purchaser, to:

                           American Re-Insurance Company
                           555 College Road East
                           Princeton, New Jersey 08543-5241
                           Telephone No.: (609) 243-4968
                           Telecopy No.: (609) 243-4992

                           Attention:   George P. Judd, Esq.
                           Assistant General Counsel

                           with copies to:

                           Latham & Watkins
                           Sears Tower, Suite 5800
                           Chicago, Illinois 60606
                           Telephone No.: (312) 876-7680
                           Telecopy No.: (312) 993-9767

                           Attention: Christopher D. Lueking, Esq.

                                       28
<PAGE>

or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.

            12.2 Expenses. Whether or not the Shares and Warrant are sold to
Purchaser or this Agreement is terminated, the Company shall pay all of the
reasonable fees and expenses of Purchaser, its advisors, attorneys, accountants,
and investment bankers incurred in connection with the transactions contemplated
hereby, provided that such expenses shall not exceed $100,000. The Company shall
also pay any applicable stamp taxes required to be paid in connection with the
Closing.

            12.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND PERFORMED BY SUCH STATE. EACH OF THE PARTIES HERETO AGREES
TO SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS IN THE STATE OF
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.

            12.4 Severability. If any term, provision, covenant or restriction
of this Agreement or any application thereof is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, each of the
Company and Purchaser direct that such court interpret and apply the remainder
of this Agreement in the manner that it determines most closely effectuates
their intent in entering into this Agreement, and in doing so particularly take
into account the relative importance of the term, provision, covenant or
restriction being held invalid, illegal or unenforceable.

            12.5 Headings; Interpretation. The index and section headings herein
are for convenience of reference only and shall not limit or otherwise affect
any of the terms hereof. References to sections mean sections of this Agreement
unless the context otherwise requires. References to herein or hereof mean this
Agreement.

            12.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.

                                       29
<PAGE>
                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.

                                  TOWER GROUP, INC.

                                  By:   /s/ Michael H. Lee
                                       ---------------------------------
                                       Name:  Michael H. Lee
                                       Title: President

                                  AMERICAN RE-INSURANCE COMPANY

                                   By:
                                       ---------------------------------
                                       Name:
                                       Title:

                                      S-1
<PAGE>

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

                                    TOWER GROUP, INC.

                                    By:
                                       ---------------------------------
                                         Name:
                                         Title:

                                    AMERICAN RE-INSURANCE COMPANY

                                    By:  /s/ Paul R. McDermott
                                       ---------------------------------
                                         Name:  Paul R. McDermott
                                         Title: Vice President

                                      S-1Exhibit 10.35

 

 

	
EXECUTION COPY

 

 

FOURTH

AMENDED AND RESTATED

CREDIT AGREEMENT

 

dated as of October 15, 2004

 

by and among

 

NOVAMED, INC.

 

as the Borrower,

 

CERTAIN COMMERCIAL LENDING INSTITUTIONS,

 

as the Lenders,

 

and

 

NATIONAL CITY BANK OF THE MIDWEST,

as the Agent for the Lenders

 

with

 

LASALLE BANK NATIONAL ASSOCIATION, as Documentation Agent

	 
	 	 	 
	

	 

  TABLE OF CONTENTS

  Page

  

	

  ARTICLE I

	

  1

	

  SECTION 1.1 Defined Terms

	

  1

	

  SECTION 1.2 Use of Defined Terms

	

  22

	

  SECTION 1.3 Cross-References

	

  23

	

  SECTION 1.4 Accounting Principles

	

  23

	
 
	
 

	

  ARTICLE II REVOLVING COMMITMENTS, 

	
 

	

  BORROWING PROCEDURES AND NOTES

	

  23

	

  SECTION 2.1 Revolving Commitments

	

  23

	

  SECTION 2.1.1 Revolving Commitment of Each Lender

	

  23

	

  SECTION 2.1.2 Lenders Not Permitted or Required To Make Loans

	

  23

	

  SECTION 2.2 Reduction of Revolving Commitment Amount

	

  23

	

  SECTION 2.2.1 Optional

	

  24

	

  SECTION 2.2.2 Mandatory Reductions and Prepayments

	

  24

	

  SECTION 2.3 Borrowing Procedure

	

  25

	

  SECTION 2.4 Continuation and Conversion Elections

	

  25

	

  SECTION 2.5 Funding

	

  25

	

  SECTION 2.6 Notes

	

  26

	

  SECTION 2.7 Letters of Credit.

	

  26

	

  SECTION 2.7.1 Issuance of Letters of Credit

	

  26

	

  SECTION 2.7.2 Participating Interests

	

  27

	

  SECTION 2.7.3 Reimbursement Upon Drawing

	

  27

	

  SECTION 2.7.4 Request for Letter of Credit

	

  28

	
 
	
 

	

  ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

	

  28

	

  SECTION 3.1 Repayments and Prepayments.

	

  28

	

  SECTION 3.1.1 Prior to the Revolving Commitment Termination Date

	

  28

	

  SECTION 3.1.2 On the MaturityDate

	

  29

	

  SECTION 3.1.3 Extension of Maturity Date

	

  29

	

  SECTION 3.2 Interest Provisions

	

  29

	

  SECTION 3.2.1 Rates

	

  29

	

  SECTION 3.2.2 Post-Maturity Rates

	

  31

	

  SECTION 3.2.3 Payment Dates

	

  31

	

  SECTION 3.3 Fees

	

  32

	

  SECTION 3.3.1 Revolving Commitment Fee

	

  32

	

  SECTION 3.3.2 Letter of Credit Fees.

	

  32

	

  SECTION 3.3.3 Agency Fees

	

  33

	
 
	
 

	

  ARTICLE IV LIBO RATE AND OTHER PROVISIONS

	

  33

	

  SECTION 4.1 LIBO Rate Lending Unlawful

	

  33

	

  SECTION 4.2 Deposits Unavailable

	

  33

	

  SECTION 4.3 Increased LIBO Rate Loan Costs, etc

	

  34

	

  SECTION 4.4 Funding Losses

	

  34

	

  SECTION 4.5 Increased Capital Costs

	

  34

	

  SECTION 4.6 Taxes

	

  35

	

  SECTION 4.7 Payments, Computations, etc

	

  36

	

  SECTION 4.8 Sharing of Payments

	

  36

	

  SECTION 4.9 Setoff

	

  37

	

  SECTION 4.10 Use of Proceeds

	

  37

	

  SECTION 4.11 Changes to Other Branches; Equal Treatment of Borrower

	

  38

	

  SECTION 4.12 Replacement of Lenders

	

  38

  

  

	
 

	
 
	
 
	
 

	

	
 

   

	

  ARTICLE V CONDITIONS TO BORROWING

	

  39

	

  SECTION 5.1 Initial Borrowing

	

  39

	

  SECTION 5.1.1 Resolutions, etc

	

  39

	

  SECTION 5.1.2 Delivery of Notes

	

  39

	

  SECTION 5.1.3 Applicable Margin

	

  39

	

  SECTION 5.1.4 Guaranty

	

  39

	

  SECTION 5.1.5 Pledge Agreements

	

  39

	

  SECTION 5.1.6 Security Agreements

	

  39

	

  SECTION 5.1.7 Intellectual Property Assignment

	

  40

	

  SECTION 5.1.8 Opinions of Counsel

	

  40

	

  SECTION 5.1.9 Agreements

	

  40

	

  SECTION 5.1.10 Closing Fees, Expenses, etc

	

  41

	

  SECTION 5.2 All Borrowings and Letters of Credit

	

  41

	

  SECTION 5.2.1 Compliance with Warranties, No Default, etc

	

  41

	

  SECTION 5.2.2 Borrowing Request; LC Notice

	

  41

	

  SECTION 5.2.3 Satisfactory Legal Form

	

  41

	

  SECTION 5.3 . Conditions to Third Amended and Restated Effective Date

	

  42

	

  SECTION 5.3.1 Executed Signature Pages to Agreement

	

  42

	

  SECTION 5.3.2 Executed Reaffirmation of Collateral Documents

	

  42

	

  SECTION 5.3.3 Payment of Fees and Expenses

	

  42

	

  SECTION 5.3.4 Resolutions, etc

	

  42

	

  SECTION 5.3.5 Certificate.

	

  42

	

  SECTION 5.3.6 Updated Disclosure Schedules

	

  43

	

  SECTION 5.3.10 Other Documents

	

  43

	
 
	
 

	

  ARTICLE VI REPRESENTATIONS AND WARRANTIES

	

  44

	

  SECTION 6.1 Organization, etc

	

  44

	

  SECTION 6.2 Due Authorization, Non-Contravention, etc

	

  44

	

  SECTION 6.3 Government Approval, Regulation, etc

	

  44

	

  SECTION 6.4 Validity, etc

	

  45

	

  SECTION 6.5 Financial Information

	

  45

	

  SECTION 6.6 No Material Adverse Change.

	

  45

	

  SECTION 6.7 Litigation, Labor Controversies, etc

	

  45

	

  SECTION 6.8 Subsidiaries

	

  45

	

  SECTION 6.9 Ownership of Properties

	

  45

	

  SECTION 6.10 Taxes

	

  46

	

  SECTION 6.11 Pension and Welfare Plans

	

  46

	

  SECTION 6.12 Environmental Warranties

	

  46

	

  SECTION 6.13 Regulations T, U and X

	

  47

	

  SECTION 6.14 Accuracy of Information

	

  47

	

  SECTION 6.15 Solvency

	

  47

	

  SECTION 6.16 Collateral Documents

	

  48

	

  SECTION 6.17 Indebtedness

	

  48

	

  SECTION 6.18 Other Agreements/Program Eligibility

	

  48

	

  SECTION 6.19 Reimbursement from Third Party Payors

	

  49

	

  SECTION 6.20 Legal Compliance

	

  49

	

  SECTION 6.21 Licensing and Accreditation

	

  49

	

  SECTION 6.22 Subordination Provisions

	

  50

	

  SECTION 6.23 RICO

	

  50

   

  

	
 

	
 
	
 
	
 

	

	
 

   

	

  ARTICLE VII COVENANTS

	

  50

	

  SECTION 7.1 Affirmative Covenants

	

  50

	

  SECTION 7.1.1 Financial Information, Reports, Notices, etc

	

  50

	

  SECTION 7.1.2 Compliance with Laws, etc

	

  52

	

  SECTION 7.1.3 Maintenance of Properties

	

  53

	

  SECTION 7.1.4 Insurance

	

  53

	

  SECTION 7.1.5 Books and Records

	

  53

	

  SECTION 7.1.6 Environmental Covenant

	

  54

	

  SECTION 7.1.7 Changes to Certain Agreements

	

  54

	

  SECTION 7.1.8 Governmental Licenses

	

  54

	

  SECTION 7.1.9 Covenants Extending to Other Persons

	

  55

	

  SECTION 7.1.10 Solvency

	

  55

	

  SECTION 7.1.11 Further Assurances

	

  55

	

  SECTION 7.1.12 New Subsidiaries

	

  55

	

  SECTION 7.2 Negative Covenants

	

  57

	

  SECTION 7.2.1 Business Activities

	

  57

	

  SECTION 7.2.2 Indebtedness

	

  57

	

  SECTION 7.2.3 Liens

	

  60

	

  SECTION 7.2.4 Financial Condition

	

  61

	

  SECTION 7.2.5 Investments

	

  62

	

  SECTION 7.2.6 Restricted Payments, etc

	

  64

	

  SECTION 7.2.7 Intentionally Omitted.

	

  66

	

  SECTION 7.2.8 Consolidation, Merger, etc

	

  66

	

  SECTION 7.2.9 Asset and Capital Stock Dispositions, etc.

	

  66

	

  SECTION 7.2.10 Modification of Certain Agreements.

	

  68

	

  SECTION 7.2.11 Transactions with Affiliates

	

  68

	

  SECTION 7.2.12 Negative Pledges, Restrictive Agreements, etc

	

  69

	
 
	
 

	

  ARTICLE VIII EVENTS OF DEFAULT

	

  69

	

  SECTION 8.1 Listing of Events of Default

	

  69

	

  SECTION 8.1.1 Non-Payment of Obligations

	

  70

	

  SECTION 8.1.2 Breach of Warranty

	

  70

	

  SECTION 8.1.3 Non-Performance of Certain Covenants and Obligations.

	

  70

	

  SECTION 8.1.4 Non-Performance of Other Covenants and Obligations

	

  70

	

  SECTION 8.1.5 Default on Other Indebtedness

	

  70

	

  SECTION 8.1.6 Judgments

	

  70

	

  SECTION 8.1.7 Pension Plans

	

  71

	

  SECTION 8.1.8 Change of Control

	

  71

	

  SECTION 8.1.9 Bankruptcy, Insolvency, etc

	

  71

	

  SECTION 8.1.10 Impairment of Security, etc

	

  72

	

  SECTION 8.1.11 Fraud and Abuse Laws

	

  72

	

  SECTION 8.1.12 Certifications

	

  72

	

  SECTION 8.2 Action if Bankruptcy

	

  72

	

  SECTION 8.3 Action if Other Event of Default

	

  73

	

  SECTION 8.4 Letters of Credit

	

  73

   

  

	
 

	
 
	
 
	
 

	

	
 

   

	

  ARTICLE IX

	

  73

	

  SECTION 9.1 Actions

	

  73

	

  SECTION 9.2 Funding Reliance, etc

	

  74

	

  SECTION 9.3 Exculpation

	

  74

	

  SECTION 9.4 Successor

	

  74

	

  SECTION 9.5 Loans by National City

	

  75

	

  SECTION 9.6 Credit Decisions

	

  75

	

  SECTION 9.7 Copies, etc

	

  76

	
 
	
 

	

  ARTICLE X

	

  76

	

  SECTION 10.1 Waivers, Amendments, etc

	

  76

	

  SECTION 10.2 Notices

	

  77

	

  SECTION 10.3 Payment of Costs and Expenses

	

  77

	

  SECTION 10.4 Indemnification

	

  78

	

  SECTION 10.5 Survival

	

  79

	

  SECTION 10.6 Severability

	

  79

	

  SECTION 10.7 Headings

	

  79

	

  SECTION 10.8 Execution in Counterparts, Effectiveness, etc

	

  79

	

  SECTION 10.9 Governing Law; Entire Agreement

	

  79

	

  SECTION 10.10 Successors and Assigns

	

  79

	

  SECTION 10.11 Sale and Transfer of Loans and Note; Participations in Loans and Note

	

  80

	

  SECTION 10.11.1 Assignments

	

  80

	

  SECTION 10.11.2 Participations

	

  81

	

  SECTION 10.12 Confidentiality

	

  82

	

  SECTION 10.13 Other Transactions

	

  83

	

  SECTION 10.14 Forum Selection and Consent to Jurisdiction

	

  83

	

  SECTION 10.15 Waiver of Jury Trial

	

  83

  

	

  SCHEDULE 1

	

  —

	

  Original Closing Date Stockholders

	

  SCHEDULE 2

	

  —

	

  Agreed EBITDA Formula

	

  SCHEDULE 6.3

	

  —

	

  Approvals

	

  SCHEDULE 6.8

	

  —

	

  Subsidiaries

	

  SCHEDULE 6.10

	

  —

	

  Tax Matters

	

  SCHEDULE 6.17

	

  —

	

  Existing Indebtedness

	

  SCHEDULE 6.18

	

  —

	

  Service Agreements; Employment Agreements

	

  SCHEDULE 6.21

	

  —

	

  Required Certificates

	

  SCHEDULE 7.1.4

	

  —

	

  Insurance

	

  SCHEDULE 7.2.3

	

  —

	

  Existing Liens

	

  SCHEDULE 7.2.5

	

  —

	

  Existing Investments

	

  SCHEDULE 7.2.8

	

  —

	

  Subsidiaries to be Dissolved

	

  SCHEDULE 10.1

	
— 
	

  Commitment Percentages

	

  SCHEDULE 10.2

	

  —

	

  Notice Information

  

	

  EXHIBIT A

	

  Form of Note

	

  EXHIBIT B

	

  Form of Borrowing Request

	

  EXHIBIT C

	

  Form of Continuation/Conversion Notice

	

  EXHIBIT D

	

  Form of Lender Assignment Agreement

	

  EXHIBIT E

	

  Form of Guaranty

	

  EXHIBIT F-1

	

  Form of Borrower Pledge Agreement

	

  EXHIBIT F-2

	

  Form of Guarantor Pledge Agreement

	

  EXHIBIT G-1

	

  Form of Borrower Security Agreement

	

  EXHIBIT G-2

	

  Form of Guarantor Security Agreement

	

  EXHIBIT H

	

  Form of Opinion of Counsel to the Borrower

	

  EXHIBIT I

	

  Form of Reaffirmation of Collateral Documents

	

  EXHIBIT J

	

  Form of Adjusted Equity ownership EBITDA Certificate

	

  EXHIBIT K

	

  Permitted Asset Dispositions

  

  * NovaMed, Inc. agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request. 
  

	 
	 	 	 
	

  

  

EXECUTION COPY

 

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 15, 2004, by and among NOVAMED, INC., a Delaware corporation (the “Borrower”), the various financial institutions from time to time party hereto (collectively, the “Lenders”), NATIONAL CITY BANK OF THE MIDWEST, as agent (the
“Agent”) for the Lenders and LASALLE BANK NATIONAL ASSOCIATION, as Documentation Agent;

 

W I T N E S S E T H:

 

WHEREAS, the Borrower, the Lenders and the Agent entered into that certain Credit Agreement dated as of June 28, 2000 (the “Original Credit Agreement”) which Original Credit Agreement was amended and restated as of August 29, 2001 pursuant to an Amended and Restated Credit Agreement and was again amended and restated as of October 23, 2001 pursuant to that certain Second Amended and Restated Credit Agreement, and was again amended and restated as of June 26, 2003 (the "
Third Amended and Restated Credit Agreement");and

 

WHEREAS, the Borrower has requested that the Lenders and the Agent amend and restate the Third Amended and Restated Credit Agreement; and 

 

WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including Article V), to amend and restate the Third Amended and Restated Credit Agreement; and

 

WHEREAS, the proceeds of the Loans hereunder will be used for general corporate purposes and working capital purposes of the Borrower and its Subsidiaries and to finance Permitted Acquisitions by the Borrower. 

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING TERMS

 

SECTION 1.1  Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof).

 "Affected Lender" is defined in Section 4.12.

	 
	 	 	 
	

	 

“Affiliate” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power

 

(a)     to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or

 

(b)     to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

“Agent” means National City Bank of Michigan/Illinois.

 

“Agreed EBITDA FORM” is defined in Schedule 2.

 

“Agreement” means, on any date, this Fourth Amended and Restated Credit Agreement as originally in effect on the Fourth Amended and Restated Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date.

 

“ASC Facility” means an ambulatory surgery center, surgical facility or other form of outpatient surgical treatment center (including, without limitation, vision correction or laser vision correction center), or any business primarily in the business of owning, operating and/or managing one or more thereof.

 

"ASC Startup" means any capital expenditure or other amount expended the Borrower or any other Credit Party in an ASC Facility which capital expenditure would not by definition constitute an Investment or Permitted Acquisition hereunder. 

 

“ASC Subsidiary” means a Subsidiary of the Borrower that is primarily engaged in the business of being an ASC Facility.

 

“ASC Subsidiary Capital Event” means the purchase by the Borrower or a Wholly-Owned Subsidiary of the Borrower of all or a portion of the equity interests in a Non-Wholly-Owned ASC Subsidiary or Controlled Minority ASC Entity or the redemption by a Non-Wholly-Owned ASC Subsidiary or Controlled Minority ASC Subsidiary of the Borrower of all or a portion of the equity interests in such Non-Wholly-Owned ASC Subsidiary or Controlled Minority ASC Entity, as applicable.

 

“Asset Disposition” means any sale, transfer or other disposition of any property of the Borrower or any Subsidiary in a single transaction or in a series of related transactions (other than the sale of inventory and of equipment that is obsolete, worn-out or no longer useable by the Borrower or any of its Subsidiaries, in each case in the ordinary course of business and Permitted Equity Ownership Sales).

	 
	 	-2-	 
	

	 

 

“Assignee Lender” is defined in Section 10.11.1.

 

“Authorized Officer” means, relative to any Credit Party, those of its officers whose signatures and incumbency shall have been certified to the Agent and the Lenders pursuant to Section 5.1.1.

 

"Available Revolving Commitment": means at any time, an amount equal to the excess, if any, of (a) the Revolving Commitment Amount then in effect over (b) the sum of all Revolving Extensions of Credit then outstanding.

 

“Base Rate” means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (i) the rate of interest most recently announced by the Agent as its prime rate of interest or (ii) 0.50% per annum above the Federal Funds Effective Rate. The Base Rate is not necessarily intended to be the lowest rate of interest determined by the Agent in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Base Rate. The Agent will give notice promptly to the Borrower and the Lenders of changes in the Base Rate.

 

“Base Rate Loan” means a Loan bearing interest at a fluctuating rate determined by reference to the Base Rate.

 

“Borrower” is defined in the preamble.

 

“Borrower Pledge Agreement” means the Pledge Agreement executed and delivered by the Borrower pursuant to Section 5.1.5, substantially in the form of Exhibit F-1 hereto, as amended, supplemented, restated or otherwise modified from time to time.

 

“Borrower Security Agreement” means the Security Agreement executed and delivered pursuant to Section 5.1.6, substantially in the form of Exhibit G-1 hereto, as amended, supplemented, restated or otherwise modified from time to time.

 

“Borrowing” means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1.

 

“Borrowing Request” means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B hereto.

	 
	 	-3-	 
	

	 

 

“Business Day” means     

 

(a)     any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in Chicago, Illinois; and

 

(b)     relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market.

 

“Capital Expenditures” means, for any period, the aggregate amount of all expenditures of the Borrower and its Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures.

 

“Capitalized Lease Liabilities” means all monetary obligations of any Credit Party under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.

 

“Cash Equivalent Investment” means, at any time:

 

(a) any evidence of Indebtedness, maturing not more than eighteen months after such time, issued or guaranteed by the United States Government;

 

(b) commercial paper, maturing not more than nine months from the date of issue, which is issued by:

 

(i) a corporation (other than an Affiliate of any Credit Party) organized under the laws of any state of the United States or of the District of Columbia and rated A-l by Standard & Poor’s Corporation or P-l by Moody’s Investors Service, Inc., or

 

(ii) any Lender (or its holding company);

 

(c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either:

 

(i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or

 

(ii) any Lender; or

 

(d) any repurchase agreement entered into with any Lender (or other commercial banking institution of the stature referred to in clause (c)(i)) which:

 

(i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c); and

 

(ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder.

	 
	 	-4-	 
	

	 

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

 

“CERCLIS” means the Comprehensive Environmental Response Compensation Liability Information System List.

 

“Change of Control” means (a) any Person or any two or more Persons acting in concert (in any such case, excluding the Original Closing Date Stockholders and their Affiliates) acquiring beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act), directly or indirectly, of capital stock (or other securities convertible into such capital stock) of the Borrower representing 35% or more of the combined voting power of all capital stock of the Borrower entitled to vote in the election of directors, or (b) during any period of 12 consecutive calendar months, the ceasing of those individuals (the
“Continuing Directors”) who (i) were directors of the Borrower, on the first day of each such period or (ii) subsequently became directors of the Borrower, and whose initial election or initial nomination for election subsequent to that date was approved either by (A) a majority of the Continuing Directors then on the board of directors of the Borrower or (B) the shareholders who, in accordance with the provisions of the Articles of Incorporation of the Borrower, are entitled to elect such director, to constitute a majority of the board of directors of the Borrower.

 

“CMS” shall mean the Centers for Medicare and Medicaid Services and any successor thereto. 

 

“Code” means the Internal Revenue Code of 1986, and regulations promulgated thereunder.

 

“Collateral” means all property and interests in property and proceeds thereof now owned or hereafter acquired by any Credit Party in or upon which a Lien now or hereafter exists in favor of the Agent on behalf of the Lenders, whether under this Agreement, Collateral Document or under any other documents executed by any such Credit Party and delivered to the Agent.

 

“Collateral Documents” means, collectively, (a) the Borrower Security Agreement, the Guarantor Security Agreement, the Guaranty, the Borrower Pledge Agreement, the Guarantor Pledge Agreement, the Reaffirmation of Collateral Documents, the Intellectual Property Assignments and all other security agreements, pledge agreements, assignments, guarantees and other similar agreements between a Credit Party and the Agent for the benefit of the Lenders now or hereafter delivered to the Lenders or the Agent pursuant to or in connection with the transactions contemplated hereby, and all financing statements (or comparable documents now
or hereafter filed in accordance with the Uniform Commercial Code or comparable law) against a Credit Party as debtor in favor of the Agent, for the benefit of the Lenders, as secured party and (b) any amendments, restatements, supplements, modifications, renewals, replacements, consolidations, substitutions and extensions of any of the foregoing.

	 
	 	-5-	 
	

	 

 

“Consideration” means with respect to any Permitted Acquisition, the aggregate of (i) the cash paid by the Borrower or any of its Subsidiaries, directly or indirectly, to the seller in connection therewith, (ii) the Indebtedness incurred or assumed by the Borrower or any of its Subsidiaries (including, without limitation, Indebtedness of a person becoming a Credit Party in connection with a Permitted Acquisition, which Indebtedness continues to exist following the consummation of such Permitted Acquisition), whether in favor of the seller or otherwise and whether fixed or contingent, in connection therewith, (iii) any guaranty given or incurred by the Borrower or any of its
Subsidiaries in connection therewith, (iv) the fair market value of any equity issued by the Borrower, in connection therewith, and (v) any other consideration given or obligation incurred by the Borrower or any of its Subsidiaries in connection therewith; provided, however, that the amount of any deferred earn-out payments to any seller not required by GAAP to be reflected as a liability on the consolidated balance sheet of the Borrower as of the date of consummation of such Permitted Acquisition shall be excluded from the determination under clauses (i) through (v) of this definition.

 

"Consolidated Interest Expenses" means, for any period, the total interest expense (including that attributable to capital leases) of the Borrower and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and unused line fees but excluding any of the foregoing to the extent it constitutes a non-cash item.

 

“Contingent Liability” means any agreement, undertaking or arrangement which would be reflected in a footnote to a balance sheet as a contingent liability in accordance with GAAP.

 

“Continuation/Conversion Notice” means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto.

 

“Controlled Group” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.

 

"Controlled Minority ASC Entity" means, as of any date of determination, any Minority ASC Entity in which the Borrower or any Credit Party as of such date has operational control over the day to day business decisions of such Minority ASC Entity including, without limitation, veto power over the disposition of the assets of such Minority ASC Entity and operational control over the disbursement of funds held by such Minority ASC Entity. 

	 
	 	-6-	 
	

	 

 

“Credit Party” means the Borrower and any Subsidiary of the Borrower party to a Loan Document.

 

“Default” means any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

 

“Dollar” and the sign “$” mean lawful money of the United States.

 

“Domestic Office” means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. A Lender may have separate Domestic Offices for purposes of making, maintaining or continuing, as the case may be, Base Rate Loans.

 

“EBITDA” means, for any applicable computation period, the Borrower’s Net Income on a consolidated basis from all continuing operations, plus (a) income and franchise taxes paid or accrued during such period, (b) interest expenses paid or accrued during such period, (c) amortization and depreciation deducted in determining Net Income for such period, and (d) up to $2.0 million over the four consecutive quarters
comprising the computation period for documented tax refund receipts and/or deferred taxes as set forth in Borrower’s consolidated statements of cash flows. For the purpose of determining compliance with Section 7.2.4(b), (c) and (d), “EBITDA” shall be as adjusted pursuant to the formula described in Schedule 2.

 

"Effective Maturity Date" is defined in Section 3.1.3.

 

“Environmental Laws” means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.

 

“Event of Default” is defined in Section 8.1.

 

"Extension Effective Date" is defined in Section 3.1.3.

 

"Extension Response Date" is defined in Section 3.1.3.

	 
	 	-7-	 
	

	 

 

"Extension Request" is defined in Section 3.1.3.

 

“Federal Funds Effective Rate” means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion.

 

“Fiscal Quarter” means any quarter of a Fiscal Year.

 

“Fiscal Year” means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g. the “2002 Fiscal Year”) refer to the Fiscal Year ending on the December 31 occurring during such calendar year.

 

"Fixed Charges" means, with respect to the Borrower and its Subsidiaries on a consolidated basis, as of any date of determination, (a) Consolidated Interest Expenses for the period of four fiscal quarters ending on the date of determination, and (b) scheduled principal payments on Indebtedness required to be made in such period and (c) 10% of the outstanding principal amount of the Loans and (d) rent expenses incurred by the Borrower and its Subsidiaries.

 

"Fourth Amended and Restated Effective Date" has the meaning assigned to it in Section 5.3.

 

“Fraud and Abuse Laws” means the federal Anti-kickback Statute, Section 1128B(b) of the Social Security Act, 42 U.S.C. Section 1320a-7b(b) (the “Anti-kickback Statue”), the federal Self-Referral Prohibition, Section 1877 of the Social Security Act, 42 U.S.C. Section 1395nn (“Stark II”), the federal False Claims Act, 31 U.S.C. Section 3729 et seq. (“False Claims Act”), and the federal civil monetary penalties act,
Section 1128A of the Social Security Act, 42 U.S.C. Section 1320a-7a (“CMPA”), each as from time to time amended; any successor statute(s) thereto; all rules and regulations promulgated thereunder; other similar federal and state laws and regulations; and, all other federal or state laws concerning illegal remuneration, referral of patients, kickbacks, fee splitting, reassignment of claims, and false or fraudulent billing for medical items or services.

 

“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any successor thereto.

 

“GAAP” means generally accepted accounting principles set forth from time to time 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 agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

	 
	 	-8-	 
	

	 

 

“Guarantor” means each Person party to a Guaranty.

 

“Guarantor Pledge Agreement” means the Pledge Agreement substantially in the form of Exhibit F-2 hereto, as amended, supplemented, restated or otherwise modified from time to time.

 

“Guarantor Security Agreement” means the Security Agreement substantially in the form of Exhibit G-2 hereto, as amended, supplemented, restated or otherwise modified from time to time.

 

“Guaranty” means, collectively, the Guaranty substantially in the form of Exhibit E hereto, as amended, supplemented, restated or otherwise modified from time to time.

 

“Hazardous Material” means

 

(a)     any “hazardous substance”, as defined by CERCLA;

 

(b)     any “hazardous waste”, as defined by the Resource Conservation and Recovery Act, as amended;

 

(c)     any petroleum product; or

 

(d)     any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any medical, hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended.

 

“Hedging Agreements” means any Interest Rate Agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging agreement, provided that such agreement is not entered into for speculative purposes, is entered into with the Agent or a Lender.

 

“herein”, “hereof”, “hereto”, “hereunder” and similar
terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document.

	 
	 	-9-	 
	

	 

 

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996 and its implementing administrative simplification regulations, specifically, the “Standards for Electronic Transactions,” 65 Fed. Reg. 50,312 (Aug. 17, 2000); “Standards for Privacy of Individually Identifiable Health Information,” 65 Fed. Reg.
 82,462 (Dec. 28, 2000), modified at 67 Fed. Reg. 53,182 (Aug. 14, 2002); and the “Security Standards,” 68 Fed. Reg. 8334 (Feb. 20, 2003), each as from time to time amended.

 

“Impermissible Qualification” means, relative to the opinion or certification of any independent public accountant as to any financial statement of any Credit Party, any qualification or exception to such opinion or certification:

 

(a)     which is of a “going concern” or similar nature;

 

(b)     which relates to the limited scope of examination of matters relevant to such financial statement; or

 

(c)     which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause such Credit Party to be in default of any of its obligations under Section 7.2.4.

 

“including” means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit
a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned.

 

“Indebtedness” of any Person means, without duplication:

 

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

 

(b)     all obligations, contingent or otherwise, relative to the face amount of all letters of credit (including Letters of Credit), whether or not drawn, and banker’s acceptances issued for the account of such Person;

 

(c)     all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities;

 

(d)     all other liabilities for borrowed money in accordance with GAAP included on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined;

 

(e)     net liabilities of such Person under all Hedging Agreements;

	 
	 	-10-	 
	

	 

 

(f)     whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and 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; and

 

(g)     all Contingent Liabilities of such Person in respect of any of the foregoing.

 

For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent payments have been made or are required to be made with respect to such Indebtedness solely by a general partner or a joint venture partner other than a Subsidiary.

 

“Indemnified Liabilities” is defined in Section 10.4.

 

“Indemnified Parties” is defined in Section 10.4.

 

“Intercompany Loans” is defined in Section 7.2.2.

 

“Intercompany Notes” is defined in Section 7.2.2.

 

“Intellectual Property Assignment” means that certain Intellectual Property Assignment in form and substance satisfactory to the Agent, duly executed and delivered by a Credit Party in favor of the Agent, for the benefit of itself and the Lenders, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Interest Period” means, relative to any LIBO Rate Loans, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and shall end on (but exclude) either (i) the day one week subsequent to such day,
or (ii) the day which numerically corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however
, that

 

(a)     the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than ten different dates;

 

(b)     Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration;

 

(c)     if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of the immediately succeeding calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day);

	 
	 	-11-	 
	

	 

 

(d)     no Interest Period with respect to Loans made prior to the Revolving Commitment Termination Date may end later than the date set forth in clause (a) of the definition of “Revolving Commitment Termination Date”;

 

(e)     no Interest Period for any Loan outstanding on and after the Revolving Commitment Termination Date shall extend beyond the Maturity Date; and

 

(f)     no Interest Period applicable to a Loan outstanding on and after the Revolving Commitment Termination Date, or portion thereof, shall extend beyond any date upon which is due any scheduled principal payment in respect of the Loans unless the aggregate principal amount of Loans represented by LIBO Rate Loans having Interest Periods that will expire on or before such date, equals or exceeds the amount of such principal payment.

 

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect the Borrower or any of its Subsidiaries against fluctuations in interest rates.

 

“Investment” means, relative to any Person,

 

(a)     any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees of the Borrower and any other Credit Party made in the ordinary course of business);

 

(b)     any Contingent Liability of such Person; and

 

(c)     any ownership or similar interest held by such Person in any other Person.

 

The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property.

 

“LC Notice” has the meaning specified in Section 2.7.

 

“Lender Assignment Agreement” means a Lender Assignment Agreement substantially in the form of Exhibit D hereto.

 

“Lenders” is defined in the preamble.

	 
	 	-12-	 
	

	 

 

“Letter of Credit” shall mean a Letter of Credit that is issued pursuant to Section 2.7.

 

“Letter of Credit Cash Collateral Account” has the meaning specified in Section 8.4.

 

“Letter of Credit Expiry Date” shall mean the date which is five Business Days prior to the Revolving Commitment Termination Date.

 

“Letter of Credit Issuer” shall mean National City.

 

“Letter of Credit Obligations” shall mean, as at the time of determination thereof, the sum of (a) the aggregate amount of all unpaid and outstanding reimbursement obligations and (b) without duplication, the aggregate stated amount at such time of Letters of Credit then outstanding and undrawn (as such aggregate stated amount shall be adjusted, from time to time, as a result of drawings, the issuance of Letters of Credit, or otherwise).

 

“Letter of Credit Sublimit” shall mean an aggregate amount of $5,000,000.

 

“LIBO Rate” is defined in Section 3.2.1.

 

“LIBO Rate Loan” means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted).

 

“LIBO Rate (Reserve Adjusted)” is defined in Section 3.2.1.

 

“LIBOR Office” means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder.

 

“LIBOR Reserve Percentage” is defined in Section 3.2.1.

 

“Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever.

 

“Loan” is defined in Section 2.1.1.

 

“Loan Document” means this Agreement, the Notes, each Collateral Document, each Hedging Agreement and each other document delivered pursuant to Section 7.1.11.

	 
	 	-13-	 
	

	 

 

“Material Adverse Effect” means a material adverse effect on the financial condition, operations, assets, business, properties or prospects of the Borrower, its Subsidiaries and Minority ASC Entities taken as a whole.

 

“Maturity Date” means the earliest of:

 

(a)     June 30, 2008; or

 

(b)     the date on which any Termination Event occurs.

 

“Medicaid Certification” means a certification by a state agency or other entity responsible for certifying Medicaid providers and suppliers that a health care provider or supplier is in compliance with all the conditions of participation set forth in the Medicaid Regulations.

 

“Medicaid Provider Agreement” means an agreement entered into between CMS or a state agency or other such entity administering the Medicaid program and a health care provider or supplier under which the health care provider or supplier agrees to provide services for Medicaid patients in accordance with the terms of the agreement and Medicaid Regulations.

 

“Medicaid Regulations” means, collectively, (i) all federal statutes (whether set forth in Title XIX of the Social Security Act or elsewhere) affecting the medical assistance program established by Title XIX of the Social Security Act and any successor statute(s); (ii) all applicable provisions of all federal rules, regulations, manuals and orders of all governmental authorities promulgated pursuant to or in connection with the statutes described in clause (i) above and all federal administrative, reimbursement and other guidelines of all governmental authorities having the force of law promulgated pursuant
 to or in connection with the statutes described in clause (i) above; (iii) all state statutes and plans for medical assistance enacted in connection with the statutes and provisions described in clauses (i) and (ii) above; and (iv) all applicable provisions of all rules, regulations, manuals and orders of all governmental authorities promulgated pursuant to or in connection with the statutes described in clause (iii) above and all state administrative, reimbursement and other guidelines of all governmental authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (iii) above, in each case as may be amended, supplemented or other wise modified from time to time.

 

“Medicare Certification” means certification by CMS or a state agency or entity under contract with CMS that the health care operation is in compliance with all the conditions of participation set forth in the Medicare Regulation.

 

“Medicare Provider Agreement” means an agreement entered into between CMS or a state agency or other such entity administering the Medicare program and a health care provider or supplier under which the health care provider or supplier agrees to provide services for Medicare patients in accordance with the terms of the agreement and Medicare Regulations.

	 
	 	-14-	 
	

	 

 

“Medicare Regulations” means, collectively, all federal statues (whether set forth in Title XVIII of the Social Security Act or elsewhere) affecting the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act and any successor statute(s); together with all applicable provisions of all rules, regulations, manuals and orders and administrative, reimbursement and other guidelines of all governmental authorities (including without limitation, the United States Department of Health and Human Services (“HHS”), CMS, the Office of the Inspector General for HHS, or any person
succeeding to the functions of any of the foregoing) promulgated pursuant to or in connection with any of the foregoing having the force of law, as each may be amended, supplemented or otherwise modified from time to time.

 

"Minority ASC Entity" means any ASC Facility which is not a Subsidiary into which the Borrower or a Subsidiary of the Borrower has made an Investment, including, without limitation, by way of a Permitted Acquisition.

 

“National City” means National City Bank Of The Midwest, acting in its individual capacity.

 

“Net Available Proceeds” means (a) with respect to any Asset Disposition, the sum of cash or readily marketable cash equivalents received (including by way of a cash generating sale or discounting of a note or account receivable) therefrom, whether at the time of such disposition or subsequent thereto, or (b) with respect to any sale or issuance of any debt or equity securities of the Borrower or any Subsidiary, cash or readily marketable cash equivalents received therefrom, whether at the time of such disposition or subsequent thereto, net, in either case, of all legal, title and recording tax expenses, commissions
 and other fees and all costs and expenses incurred and all federal, state, local and other taxes required to be accrued as a liability as a consequence of such transactions and, in the case of an Asset Disposition, net of all payments made by the Borrower or any of its Subsidiaries, including any prepayment premiums, on any Indebtedness which is secured by such assets pursuant to a Permitted Lien upon or with respect to such assets or which must, by the terms of such Lien, in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition.

 

“Net Income” means, for any computation period, with respect to the Borrower, on a consolidated basis, cumulative net income earned during such period as determined in accordance with GAAP (other than net income from any Minority ASC Entity which is restricted from declaring or paying dividends, distributions or otherwise advancing funds to its equityholders whether by contract or otherwise, except to the extent of any such net income actually received which is not in violation of the applicable restriction); 
provided, however, there shall not be included for purposes of calculating Net Income of the Borrower, net income attributable to Minority ASC Entities in excess of (i) 20% of total Net Income for the period beginning on the Fourth Amended and Restated Effective Date through June 26, 2005 and (ii) 25% of total Net Income for the period from June 26, 2005 through the Maturity Date. Net Income shall be determined without giving effect to any non-cash, non-recurring loss (excluding non-cash, non-recurring losses taken in the Fiscal Quarter ending September 30, 2001). 

	 
	 	-15-	 
	

	 

 

“Net Worth” means, for any computation period, the consolidated shareholders’ equity of the Borrower determined in accordance with GAAP, which consolidated shareholders’ equity shall be deemed to include the preferred stock of the Borrower and the value of Borrower’s treasury stock, at cost.

 

“Non-Wholly-Owned ASC Subsidiary” means an ASC Subsidiary in which the Borrower or a Subsidiary of the Borrower owns less than 100% of the equity interests but at least 50.1% of the equity interests.

 

“Note” means a promissory note of the Borrower payable to any Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.

 

“Obligations” means all obligations (monetary or otherwise) of each Credit Party arising under or in connection with this Agreement, the Notes, the Letters of Credit and each other Loan Document.

 

“Organizational Document” means, relative to any Subsidiary, its certificate of incorporation, its by-laws, its limited liability company agreement, partnership agreement and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock, partnership interests, or membership interests, as the case may be.

 

“Original Closing Date” means June 28, 2000.

 

“Original Closing Date Stockholders” means, collectively, the stockholders of record of the Borrower as of the Original Closing Date listed on Schedule 1.

 

“Original Credit Agreement” has the meaning specified in the Recitals hereto.

 

“Participant” is defined in Section 10.11.

 

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

 

“Pension Plan” means a “pension plan”, as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

	 
	 	-16-	 
	

	 

 

“Percentage” means, relative to any Lender, the percentage set forth opposite its name on Schedule 10.1 hereto or set forth in the Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.

 

“Permitted Acquisition” means the purchase (by asset purchase, stock purchase, membership interest purchase, other equity interest purchase, merger or otherwise, subject to the other requirements of this definition set forth below) by the Borrower or a Wholly-Owned Subsidiary of the Borrower (or, in the case of the purchase of an ASC Facility, by the Borrower or a Subsidiary of the Borrower) of the assets, stock, membership interests or other equity interests of a Target or Practice (it being acknowledged that medical records and certain other professional assets that are required by law to be owned by a Provider are not
 acquired in these transactions), which purchase meets the following criteria (or is otherwise approved by the Required Lenders):

 

(a) no Default or Event of Default shall have occurred or be continuing both before and after giving effect to such acquisition;

 

(b) in the event the Borrower's Total Leverage Ratio on a pro forma basis (after giving effect to the Permitted Acquisition) is less than 2.25:1.0, the Borrower must be able to comply on a pro forma basis with all of the covenants in this Agreement;

 

(c) in the event the Borrower's Total Leverage Ratio on a pro forma basis (after giving effect to the Permitted Acquisition) is greater than or equal to 2.25:1.0, (i) the Borrower must be able to comply on a pro forma basis with all of the covenants in this Agreement and (ii) the aggregate Consideration (including any Indebtedness pursuant to Section 7.2.2(h), (i), (j) and (k) relating to such Permitted Acquisitions) in connection with such Permitted Acquisition shall not exceed (unless otherwise
consented to by the Required Lenders) $12,500,000 individually and $25,000,000 for all Permitted Acquisitions consummated within the previous twelve (12) month period when aggregated with Investments made by the Borrower or any of its Subsidiaries permitted under Section 7.2.5(n) during such period; provided, further, that of such $25,000,000 permitted
above, in the case of Permitted Acquisitions involving (i) Minority ASC Entities, the aggregate Consideration (including any Indebtedness pursuant to 
Section 7.2.2(h), (i), (j) and (k) relating to such Permitted Acquisitions) shall not exceed (unless otherwise consented to by the Required Lenders) $8,000,000 individually and $14,000,000 for all Permitted Acquisitions involving Minority ASC Entities consummated within the previous twelve (12) month period; provided, further, that any Permitted Acquisition consummated prior to July 30, 2004 shall not count towards any of the limits set forth in this subparagraph (c) and (ii) Practices, the aggregate Consideration (including any Indebtedness pursuant to Section 7.2.2(h), (i) and (j)
 relating to such Permitted Acquisitions) shall not exceed (unless consented to by the Required Lenders) $1,000,000 in the aggregate for all Permitted Acquisitions involving Practices;

	 
	 	-17-	 
	

	 

 

(d) the acquisition shall have been of the assets and/or working capital of a Target or, if for stock or other equity interest in a Target, shall be for not less than 20.0% of the equity interest therein, shall (other than with respect to an ASC Facility) either, to the extent permitted by applicable law, be merged with and into the Borrower or a Wholly-Owned Subsidiary of the Borrower, or be a Wholly-Owned Subsidiary of the Borrower; provided, however
 ̧ with respect to an ASC Facility which is not merged with or into a Borrower or a Wholly-Owned Subsidiary of the Borrower, the stock or other equity interests of the ASC Facility so acquired shall be pledged to the Agent on behalf of the Lenders (and, in the case of any equity interest in a limited liability company or limited partnership, the agreement governing such Person shall not prohibit a collateral assignment of such equity interest);

 

(e) the acquired Target, on a pro forma basis shall have positive EBITDA for the period of four fiscal quarters ending on the date of any such acquisition; 

 

(f) the Borrower shall have delivered to the Agent, not later than 30 days after the closing of the acquisition (i) pro forma financial statements or certificates demonstrating continued compliance with all covenants in this Agreement following the inclusion of the target in the Borrower’s consolidated enterprise, (ii) a copy of the related acquisition agreement provided, however, in the event
the approval of the Lenders is required for any acquisition, the Borrower shall have delivered to the Agent the documents contemplated by clauses (i) and (ii) of this clause (f) not later than 15 days prior to the closing of such acquisition (with the documents contemplated in (ii) being in draft form); 

 

(g) the Borrower shall have delivered to the Agent, not later than 30 days after the closing of the acquisition a fully executed Agreed EBITDA Form; and

 

(h) after giving effect to such acquisition, the sum of the Available Revolving Commitments shall not be less than $5,000,000. 

 

 “Permitted Asset Disposition” has the meaning specified on Exhibit K hereto.

 

“Permitted Equity Ownership Sale” means the sale, transfer or other disposition of the outstanding capital stock, membership interest or other equity interests in an ASC Subsidiary (or Minority ASC Entity) or the issuance of additional equity interests in an ASC Subsidiary (or Minority ASC Entity), so long as:

 

(i)     (A) if an ASC Facility owned by any Subsidiary as of the Fourth Amended and Restated Effective Date, after giving effect to such sale, a Credit Party shall own not less than 20% of the equity interests (including securities convertible into equity interests) of such ASC Facility or (B) if an ASC Facility acquired by Borrower or any Subsidiary in connection with a Permitted Acquisition consummated after the Third Amended and Restated Effective Date, after giving effect to such sale, a Credit Party shall own not less than 20.0% of the equity interests (including securities convertible into equity interests) of such ASC Facility;

	 
	 	-18-	 
	

	 

 

(ii)     the equity interests in such ASC Subsidiary (or Minority ASC Entity) which are held by the Borrower or a Subsidiary of the Borrower after such sale continue to be pledged to the Lenders pursuant to either the Borrower Pledge Agreement or Subsidiary Guarantor Pledge Agreement, as the case may be; 

 

(iii)     the chief financial officer or chief executive officer of the Borrower shall have delivered a certificate, dated the date of such sale, to the Agent certifying (a) that no Default or Event of Default exists or would result from such sale and (b) pro forma financial statements demonstrating compliance with Section 7.2.4 for the trailing twelve-month period prior to such sale; ; and    

 

(iv)     the proceeds (other than any proceeds received by a Person who is not the Borrower or a Subsidiary of the Borrower) of any such sale are applied in the manner set forth in Section 2.2.2(c).

 

Upon the consummation of any Permitted Equity Ownership Sale and at the request of the Borrower (to comply with a requirement in the purchase and sale documents evidencing such Permitted Equity Ownership Sale), the ASC Subsidiary or Minority ASC Entity which has become a Non-Wholly Owned ASC Subsidiary or Minority ASC Entity as a result of such Permitted Equity Ownership Sale shall be released from the Guaranty, the Guarantor Pledge Agreement and Guarantor Security Agreement and the liens of the Lenders on the assets of such ASC Subsidiary shall be released (except to the extent of the pledge to the Lenders of the equity interests of such ASC Subsidiary retained by the Borrower or a Subsidiary of the Borrower) and the
Agent is hereby authorized to execute and file the necessary release documentation to reflect such release.

 

“Permitted Liens” means those liens listed in Section 7.2.3.

 

“Permitted Seller Debt” means Indebtedness owed to the Borrower which is incurred by purchasers of the Borrower’s assets in connection with a Permitted Asset Disposition. 

 

“Permitted Seller Equity” means common stock of the Borrower that is used as consideration payable to the Borrower or any of its Subsidiaries by any party to a Permitted Asset Disposition.

“Person” means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity.

 

“Plan” means any Pension Plan or Welfare Plan.

	 
	 	-19-	 
	

	 

 

“Pledged Collateral” has the meaning specified in the Borrower Pledge Agreement and the Guarantor Pledge Agreement.

 

“Practice” means any medical or ophthalmology practice, optometry practice or optical dispensory at a single location or various locations. 

 

“Provider” means any Person who performs professional medical services for a Practice that is either managed by a Subsidiary or the assets of which are owned by a Subsidiary.

 

“Quarterly Payment Date” means the last day of each March, June, September, and December or, if any such day is not a Business Day, the next succeeding Business Day.

 

“Reaffirmation of Collateral Documents” means that certain Reaffirmation of Collateral Documents substantially in the form attached hereto as Exhibit I.

 

“Release” means a “release”, as such term is defined in CERCLA.

 

"Replacement Lender" is defined in Section 4.12.

 

“Required Lenders” means Lenders holding at least 66 2/3% of the then aggregate outstanding principal amount of all of the Notes then held by the Lenders, or, if no such principal amount is then outstanding, Lenders having at least 66 2/3% of the Revolving Commitments.

 

“Resource Conservation and Recovery Act” means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time.

 

“Revolving Commitment” means, relative to any Lender, such Lender’s obligation to make Loans pursuant to Section 2.1.1.

 

“Revolving Commitment Amount” means $50,000,000. The Revolving Commitment Amount then in effect may be reduced from time to time pursuant to Section 2.2.

 

“Revolving Commitment Termination Date” means the earliest of

 

(a)     June 30, 2008;

 

(b)     the date on which the Revolving Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and

 

(c)     the date on which any Termination Event occurs.

 

Upon the occurrence of any event described in clause (b) or (c), the Revolving Commitments shall terminate automatically and without further action.

	 
	 	-20-	 
	

	 

 

"Revolving Extensions of Credit": as to any Revolving Lender at any time, an amount equal to the sum, without duplication, of (a) the aggregate principal amount of all Revolving Loans held by such Lender then outstanding and (b) an amount equal to such Lender's Percentage of the Letter of Credit Obligations then outstanding.

 

 “Senior Debt” shall mean Indebtedness of the type described in clauses (a), (c) and (d)
 of the definition “Indebtedness” (other than Subordinated Debt) of the Borrower on a consolidated basis.

 

“Solvent” means, when used with respect to a Person, that (a) the fair saleable value of the assets of such Person is in excess of the total amount of the present value of its liabilities (including for purposes of this definition all liabilities whether or not reflected on a balance sheet prepared in accordance with GAAP and whether direct or indirect, fixed or contingent, secured or unsecured, disputed or undisputed), (b) such Person is able to pay its debts or obligations in the ordinary course as they mature and (c) such Person does not have unreasonably small capital to carry out its business as conducted and as proposed to be conducted. “Solvency” shall have a correlative meaning.

 

“Subordinated Debt” means all Indebtedness the repayment of which is subordinated, upon terms satisfactory to the Required Lenders, in right of payment to the payment in full in cash of all Obligations.

 

“Subsidiary” of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof.

 

“Target” means (i) any business that sells, leases or provides medical equipment to doctors, hospitals or other health organizations, (ii) ambulatory surgery centers, surgical facilities or other form of outpatient surgical treatment centers (including, without limitation, vision correction or laser vision correction centers), regardless of the specialty or specialties involved therein, or any business that owns, operates and/or manages one or more thereof, (iii) any management service center, optical laboratory, buying group or group purchasing organization, companies that own, operate and/or manage vision
correction centers (including, without limitation, laser vision correction centers), marketing products and services organization, or reasonable extensions thereof (including any company which leases or sells equipment or provides services to any of the foregoing), at a single location or various locations, or (iv) reasonable extensions of any of the foregoing. Whenever in this Agreement “Target” is used in describing an acquisition by the Borrower or a Subsidiary of the Borrower of equity interests, such reference is to the acquisition of the assets used in the operation of the Target that can lawfully be acquired by the Borrower or a Subsidiary of the Borrower or to the acquisition of the equity interests of a Person that owns, as of the time of purchase, only those assets that can be lawfully acquired by the Borrower or a Subsidiary of the Borrower. 

	 
	 	-21-	 
	

	 

 

“Taxes” is defined in Section 4.6.

 

“Termination Event” means    

 

(a)     the occurrence of any Default described in clauses (a) through (e) of Section 8.1.9; or

 

(b)     the occurrence and continuance of any other Event of Default and either

 

(i)     the declaration of the Loans to be due and payable pursuant to Section 8.3, or

 

(ii)     in the absence of such declaration, the giving of notice by the Agent, acting at the direction of the Required Lenders, to the Borrower that the Revolving Commitments have been terminated.

 

 "Third Amended and Restated Credit Agreement" has the meaning given to it in the Recitals.

 

“Total Funded Debt" of any Person means all Indebtedness of such Person except Indebtedness specified in clause (g) of the definition of Indebtedness.

 

"Total Leverage Ratio" has the meaning assigned to it in Section 3.2.1.

 

“Type” means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan.

 

“United States” or “U.S.” means the United States of America, its fifty States and the District of Columbia.

 

“Welfare Plan” means a “welfare plan”, as such term is defined in Section 3(1) of ERISA.

 

“Wholly-Owned Subsidiary” means any Person in which (other than directors’ qualifying shares required by law) 100% of the equity interests of each class having ordinary voting power, and 100% of the equity interests of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Borrower or by one or more of the other Wholly-Owned Subsidiaries, or both.

 

SECTION 1.2  Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Schedules and in each Note, Borrowing Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document.

	 
	 	-22-	 
	

	 

 

SECTION 1.3  Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.

SECTION 1.4  Accounting Principles. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. For purposes of clarification, it shall be understood that the financial results of Non-Wholly Owned Subsidiaries and Minority ASC Entities will be reflected in Borrower’s consolidated financial statements in accordance with GAAP.

ARTICLE II

 

REVOLVING COMMITMENTS, BORROWING PROCEDURES AND NOTES

SECTION 2.1  Revolving Commitments. On the terms and subject to the conditions of this Agreement (including Article V), each Lender severally agrees to make Loans pursuant to the Revolving Commitments described in this Section 2.1.

SECTION 2.1.1  Revolving Commitment of Each Lender. From time to time on any Business Day occurring prior to the Revolving Commitment Termination Date, each Lender will make loans (relative to such Lender, and of any type, its “Loans”) to the Borrower, which, 
when added to the Letter of Credit Obligations at such time, equal to such Lender’s Percentage of the aggregate amount of the Borrowing requested by the Borrower to be made on such day. The commitment of each Lender described in this Section 2.1.1 is herein referred to as its “Revolving Commitment”. On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Loans.

SECTION 2.1.2  Lenders Not Permitted or Required To Make Loans. No Lender shall be permitted or required to make any Loan if, after giving effect thereto, the aggregate outstanding principal amount of all Loans plus Letter of Credit Obligations then outstanding

(a)     of all Lenders would exceed the Revolving Commitment Amount, or

 

(b)     of such Lender would exceed such Lender’s Percentage of the Revolving Commitment Amount.

SECTION 2.2  Reduction of Revolving Commitment Amount. The Revolving Commitment Amount is subject to reduction from time to time pursuant to this Section 2.2.

	 
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SECTION 2.2.1  Optional. The Borrower may, from time to time on any Business Day occurring after the time of the initial Borrowing hereunder, voluntarily reduce the Revolving Commitment Amount; provided, however
, that all such reductions shall require at least three Business Days’ prior notice to the Agent and be permanent, and any partial reduction of the Revolving Commitment Amount shall be in a minimum amount of $2,000,000 and in an integral multiple of $1,000,000.

 

SECTION 2.2.2  Mandatory Reductions and Prepayments. The Revolving Commitment Amount shall, without any further action, automatically and permanently be reduced to zero on the Revolving Commitment Termination Date and:

 

(a)     The Borrower shall prepay Loans in an amount equal to 100% of the insurance proceeds received by the Borrower or any Subsidiary following a casualty involving such Person’s Property, to the extent not applied (or intended to be applied) within 90 days after the consummation or receipt thereof, as applicable, to the purchase of replacement assets or repair of damaged assets;

 

(b)     The Borrower shall prepay Loans in an amount equal to 100% of the sum of the Net Available Proceeds realized upon all Asset Dispositions to the extent not applied (or committed to be applied) within 180 days of such Asset Disposition to the purchase of other assets that are not classified as current assets under GAAP and are used or useful in the business of the Company and its Subsidiaries; 

 

(c)     The Borrower shall prepay Loans in an amount equal to (i) 50% of the sum of the Net Available Proceeds realized upon all equity issuances (other than in connection with a Permitted Acquisition) by the Borrower and its Subsidiaries and (ii) 100% of the sum of the Net Available Proceeds realized upon all Permitted Equity Ownership Sales; 

 

(d)     The Borrower shall prepay Loans in an amount equal to 100% of the sum of the Net Available Proceeds realized upon all debt issuances (other than in connection with a Permitted Acquisition) by the Borrower and its Subsidiaries; 

 

(f)     The Borrower shall notify the Agent of the amount of any required prepayment at least three (3) Business Days before it is made. The Borrower shall pay any accrued interest on the Loans which are being prepaid pursuant to this Section 2.2.2 and shall pay any break funding costs associated with such required prepayment; and

 

(g)     Notwithstanding anything contained herein to the contrary, Borrower shall prepay Loans in an amount equal to 100% of the sum of the Net Available Proceeds realized upon all Permitted Asset Dispositions.

 

Any prepayments pursuant to Sections 2.2.1 or 2.2.2 hereof shall be without penalty or premium of any kind other than break funding and other charges expressly provided by this Agreement with respect to LIBOR breakage costs; provided, however
, at the reasonable request of the Borrower and to avoid any break funding charges with respect to LIBOR breakage costs associated with any prepayment, any amounts to be prepaid pursuant to Section 2.2.2 shall be deposited by the Borrower in an escrow account under the control of the Agent to return an interest rate equal to the average deposit rate payable by the Agent for commercial deposits of like size and duration as determined by the Agent in its sole discretion, such amounts to be applied in the manner set forth in this Section 2.2.2.
 at the expiration of the Interest Period for the Loans as to which break funding charges would otherwise have applied.

	 
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SECTION 2.3  Borrowing Procedure. By delivering a Borrowing Request to the Agent on or before 10:00 a.m., Chicago time, on a Business Day, the Borrower may from time to time irrevocably request, on notice on the date of the requested Borrowing in the case of Base Rate Loans and on not less than three nor more than five Business Days’ notice in the case of LIBO Rate Loans, that a Borrowing be made in a minimum amount of (i)
$500,000 if such Loan is a LIBO Rate Loan or (ii) the lesser of the unused amount of the Revolving Commitments or $100,000, if such Loan is a Base Rate Loan and an integral multiple of $100,000, to the extent such additional amount is permitted to be borrowed hereunder. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. On or before 1:00 p.m. (Chicago time) on such Business Day, each Lender shall deposit with the Agent same day funds in an amount equal to such Lender’s Percentage of the requested Borrowing. Such deposit will be made to an account which the Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Agent shall make such funds available to the Borrower by wire transfer to the accounts
the Borrower shall have specified in its Borrowing Request. No Lender’s obligation to make any Loan shall be affected by any other Lender’s failure to make any Loan.

SECTION 2.4  Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the Agent on or before 10:00 a.m., Chicago time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than three nor more than five Business Days’ notice that all, or any portion in an aggregate minimum amount of $500,000 and an integral multiple of $100,000, of any Loans be, in the
case of Base Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of delivery of a Continuation/ Conversion Notice with respect to any LIBO Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, that (i) each such conversion or continuation shall be pro rated among the applicable
outstanding Loans of all Lenders, and (ii) no portion of the outstanding principal amount of any 
Loans may be continued as, or be converted into, LIBO Rate Loans when any Event of Default has occurred and is
continuing.

SECTION 2.5  Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, 
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Sections 4.1, 4.2,
4.3 or 
4.4, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office’s interbank eurodollar market.

	 
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SECTION 2.6  Notes. Each Lender’s Loans under its Revolving Commitment shall be evidenced by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender’s Percentage of the original Revolving Commitment Amount. The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender’s Note (or on any continuation of such grid), which notations, if made, shall evidence, inter
 alia, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby. Such notations shall be conclusive and binding on the Borrower absent manifest error; provided, however, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of the Borrower or any other Credit Party.

SECTION 2.7  Letters of Credit.

SECTION 2.7.1  Issuance of Letters of Credit. From and after the date hereof, the Letter of Credit Issuer agrees, upon the terms and conditions set forth in this Agreement, and subject to the satisfaction of such policy standards and conditions relating to the issuance of standby letters of credit generally as may be established by the Letter of Credit Issuer from time to time, to issue standby letters of credit, for the account of the Borrower, from time to time from the Original Closing
Date to the Letter of Credit Expiry Date; provided that the Borrower shall not request and the Letter of Credit Issuer shall not issue, any Letter of Credit which would cause the aggregate Letter of Credit Obligations (after giving effect to the issuance of such Letter of Credit) to exceed the amount of the lesser of (i) the Letter of Credit Sublimit and (ii) the unused aggregate Revolving Commitment.

	 
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SECTION 2.7.2  Participating Interests. Immediately upon the issuance by the Letter of Credit Issuer of a Letter of Credit, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Letter of Credit Issuer, without recourse, representation or warranty, an undivided participation interest equal to its Percentage of the face amount of such Letter of Credit and each draw paid by the Letter of Credit Issuer thereunder. Each Lender’s obligation to pay its proportionate share of all draws under the Letters of Credit,
 absent gross negligence or willful misconduct by the Letter of Credit Issuer in honoring any such draw, shall be absolute, unconditional and irrevocable and in each case shall be made without counterclaim or set-off by such Lender.

 

SECTION 2.7.3  Reimbursement Upon Drawing. (a) The Borrower agrees to reimburse the Letter of Credit Issuer for the amount of each draft drawn on a Letter of Credit within one Business Day after the date such draft is so drawn. The Borrower agrees to reimburse the Letter of Credit Issuer immediately when due, under all circumstances, including, without limitation, any of the following circumstances: (w) any lack of validity or enforceability of this Agreement or any instrument executed pursuant hereto; (x)
the existence of any claim, set-off, defense or other right which the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any Letter of Credit); (y) the validity, sufficiency or genuineness of any document which the Letter of Credit Issuer reasonably has determined in good faith complies on its face with the terms of the applicable Letter of Credit, even if such document should later prove, without the knowledge of the Letter of Credit Issuer, to have been forged, fraudulent, invalid or insufficient in any respect or any statement therein shall have been untrue
or inaccurate in any respect; or (z) the surrender or material impairment of any security for the performance or observance of any of the terms hereof.

 

(b)     If the Borrower does not pay any such reimbursement obligations when due, the Borrower
shall be deemed to have immediately requested that the Lenders make a Base Rate Loan under this Agreement in a principal amount equal to such unreimbursed reimbursement obligations. The Agent shall promptly notify the Lenders of such deemed request and, without the necessity of compliance with the requirements of Sections 2.1 and
5.2, each Lender shall make available to the Agent its Loan. The proceeds of such Loans shall be paid over by the Agent to the Letter of Credit Issuer for the account of the Borrower in satisfaction of such unreimbursed reimbursement obligations, which shall thereupon be deemed satisfied by the proceeds of, and replaced by, such Loan.

 

(c)     If the Letter of Credit Issuer makes a payment on account of any Letter of Credit and is not concurrently reimbursed therefor by the Borrower and if for any reason a Loan may not be made pursuant to Section 2.7.3(b), then as promptly as practical during normal banking hours on the date of its receipt of such notice or, if not practicable on such date, not later than 12:00 noon (Chicago time) on the Business Day immediately
succeeding such date of notification, each Lender shall deliver to the Agent for the account of the Letter of Credit Issuer, in immediately available funds, the purchase price for such Lender’s interest in such unreimbursed reimbursement obligations, which shall be an amount equal to such Lender’s pro-rata share of such payment. Each Lender shall, upon demand by the Letter of Credit Issuer, pay the Letter of Credit Issuer interest on such Lender’s pro-rata share of such draw from the date of payment by the Letter of Credit Issuer on account of such Letter of Credit until the date of delivery of such funds to the Letter of Credit Issuer by such Lender at a rate per annum, computed for actual days elapsed based on a 360-day year, equal to the Federal Funds Effective Rate for such period; provided
, that such payments shall be made by the Lenders only in the event and to the extent that the Letter of Credit Issuer is not reimbursed in full by the Borrower for interest on the amount of any draw on the Letters of Credit.

	 
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SECTION 2.7.4  Request for Letter of Credit. Each Letter of Credit shall be issued upon receipt by the Letter of Credit Issuer and the Agent from the Borrower of an irrevocable request thereof (an “LC Notice”) not later than 11:00 a.m. (Chicago time) three (3) Business Days prior the issuance date. Each LC Notice for a Letter of Credit issued shall be in form and substance satisfactory to the Letter of Credit Issuer.

 

ARTICLE III

 

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

SECTION 3.1  Repayments and Prepayments.

 

SECTION 3.1.1  Prior to the Revolving Commitment Termination Date. The Borrower

 

(a)     may, from time to time on any Business Day prior to the Revolving Commitment Termination Date, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Loans; provided, however, that:

 

(i) any such prepayment shall be made pro rata among Loans of the same type and, if applicable, having the same Interest Period of all Lenders;

 

(ii) unless the Borrower complies with Section 4.4, no such prepayment of any LIBO Rate Loan may be made on any day other than the last day of the Interest Period for such Loan; and

 

(b)     shall, immediately upon any acceleration of the Maturity Date of any Loans pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, pursuant to Section 8.3,
only a portion of all Loans is so accelerated.

 

Each prepayment of any Loans made pursuant to this Section 3.1.1 shall be without premium or penalty, except as may be required by Section 4.4. No voluntary prepayment of principal of any Loans pursuant to this Section 3.1.1 shall cause a reduction in the Revolving Commitment Amount.

	 
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SECTION 3.1.2  On the Maturity  Date. On the Maturity Date, the Borrower shall repay the principal of the Loans then outstanding.

SECTION 3.1.3  Extension of Maturity Date. The Borrower may, by written request to the Agent and the Lenders given not later than one hundred eighty (180) days prior to the Maturity Date then in effect (the “Effective Maturity Date”) request (an “Extension Request”
) that such Effective Maturity Date be extended to a date which is twenty-four (24) months after such Effective Maturity Date. No later than the date (the “Extension Response Date”) which is 30 days after such Extension Request has been delivered to each of the Lenders, each Lender will notify the Borrower in writing (with a copy to the Agent) whether or not it consents to such Extension Request (which consent may be granted or denied by each Lender in its sole discretion and may be conditioned on receipt of such financial information or other documentation as may
be specified by such Lender); provided, that any Lender that fails to so advise the Borrower on or prior to the Extension Response Date shall be deemed to have denied such Extension Request. The extension of the
Maturity Date contemplated by an Extension Request shall become effective as of the applicable Effective Maturity Date; provided, that (i) all of the Lenders shall have consented to such Extension Request; and (ii) (x) each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of each of the date of such Extension Request and such Effective Maturity Date as if made on and as of such date, except to the extent relating to an earlier date, (y) no Default or Event of Default shall have occurred and be continuing on the date of such Extension Request or on such Effective Maturity Date and (z) on each of the date of such Extension Request and such Effective Maturity Date, the Agent shall have received a certificate of the Borrower as to the
matters set forth in clauses (x) and (y) above.

SECTION 3.2  Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2.

 

SECTION 3.2.1  Rates. Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum:

 

(a)     on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Base Rate from time to time in effect plus the Applicable Margin for Base Rate Loans; or

 

(b)     on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin for LIBO Rate Loans.

	 
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The “LIBO Rate (Reserve Adjusted)” means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula:

 

 

	
 
	
LIBO Rate
	=	
LIBO Rate
	 
	 	
(Reserve Adjusted)
	 	
1.00 - LIBOR Reserve Percentage
	 

 

The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Agent from National City, two Business Days before the first day of such Interest Period.

 

“LIBO Rate” means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in immediately available funds are offered to National City’s LIBOR Office in the London interbank market as at or about 10:00 a.m. London time two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of National City’s LIBO Rate Loan and for a period approximately equal to such Interest Period.

 

“LIBOR Reserve Percentage” means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including “Eurocurrency Liabilities”, as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period.

 

All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBOR Rate Loan.

 

“Applicable Margin” means on any date the applicable percentage set forth below based upon the Level as shown in the certificate then most recently delivered to the Lenders pursuant to Section 7.1.1(d):

 

	
Level
	
Base Rate
	
LIBOR Rate
	
Commitment Fee

	
I
	
.50%
	
2.00%
	
.250%

	
II
	
.25%
	
1.75%
	
.250%

	
III
	
  0%
	
1.50%
	
.200%

	
IV
	
  0%
	
1.25%
	
.175%

	 
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; provided, however that if the Borrower shall have failed to deliver to the Lenders by the date required hereunder any certificate pursuant to Section 7.1.1(d), then from the date such certificate was required to be delivered until the date of such delivery the Applicable Margin shall be deemed to be
Level I. Each change in the Applicable Margin shall take effect with respect to all outstanding Loans on the third Business Day immediately succeeding the day on which such certificate is received by the Agent. Notwithstanding the foregoing, no reduction in the Applicable Margin shall be effected if a Default or an Event of Default shall have occurred and be continuing on the date when such change would otherwise occur, it being understood that on the third Business Day immediately succeeding the day on which such Default or Event of Default is either waived or cured (assuming no other Default or Event of Default shall be then pending), the Applicable Margin shall be reduced (on a prospective basis) in accordance with the then most recently delivered certificate.

 

“Level” means, and includes, Level I, Level II, Level III or Level IV, whichever is in effect at the relevant time.

 

“Level I” shall exist at any time the Total Leverage Ratio is equal to or greater than 2.50:1.0.

 

“Level II” shall exist at any time the Total Leverage Ratio is less than 2.50:1.0 but equal to or greater than 1.75:1.0.

 

“Level III” shall exist at any time the Total Leverage Ratio is less than 1.75:1.0 but equal to or greater than 1.00:1.0.

 

"Level IV" shall exist at any time the Total Leverage Ratio is less than 1.00:1.0.

 

“Total Leverage Ratio” means, with respect to any period, the ratio of (i) Total Funded Debt to (ii) EBITDA, as of the end of the relevant period.

 

SECTION 3.2.2  Post-Maturity Rates. After the date any principal amount of any Loan is due and payable (whether on the Revolving Commitment Termination Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the Base Rate plus a margin of 2.00%.

SECTION 3.2.3  Payment Dates. Interest accrued on each Loan shall be payable, without duplication:

 

(a)     on the Revolving Commitment Termination Date;

	 
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(b)     on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan;

(c)     with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Original Closing Date;

(d)     with respect to LIBO Rate Loans, the last day of each applicable Interest Period and, in the case of an Interest period in excess of three months, on the dates which are successively three months after the commencement of such Interest Period;

 

(e)     with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and

 

(f)     on that portion of any Loans the Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration.

 

Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Maturity Date, upon acceleration or otherwise) shall be payable upon demand.

 

SECTION 3.3  Fees. The Borrower agrees to pay the fees set forth in this Section 3.3. All such fees shall be non-refundable.

 

SECTION 3.3.1  Revolving Commitment Fee. The Borrower agrees to pay to the Agent for the account of each Lender, for the period (including any portion thereof when its Revolving Commitment is suspended by reason of the Borrower’s inability to satisfy any condition of Article V) commencing on the Fourth Amended and Restated Effective Date and continuing
through the Revolving Commitment Termination Date, a commitment fee at the rate equal to the Applicable Margin for Commitment Fees per annum on such Lender’s Percentage of the sum of the average daily unused portion of the Revolving Commitment Amount. Such commitment fees shall be payable by the Borrower in arrears on each Quarterly Payment Date, commencing with the first such day following the Fourth Amended and Restated Effective Date and on the Revolving Commitment Termination Date.

 

SECTION 3.3.2  Letter of Credit Fees.(a) The Borrower agrees to pay the Agent, for the account of each Lender pro-rata on the basis of its Revolving Commitment, a fee in respect of each Letter of Credit computed at the Applicable Margin for LIBO Rate Loans on the average daily stated amount of such Letter of Credit (computed on the basis of a 360-day year for the actual days elapsed), such fee to be due and payable quarterly in arrears on each Quarterly
Payment Date and on the Revolving Commitment Termination Date.

 

(b) The Borrower shall pay to the Letter of Credit Issuer a letter of credit fronting fee for each Letter of Credit issued by the Letter of Credit Issuer equal to 1/4 of 1% of the face amount (or increased face amount) of such Letter of Credit. Such Letter of Credit fronting fee shall be due and payable on each date of issuance (or date of increase) of a Letter of Credit.

	 
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(c) The Borrower agrees to pay directly to the Letter of Credit Issuer upon each issuance of, drawing under, and/or amendment of, a Letter of Credit issued by it in such amount as shall at the time of such issuance, drawing or amendment be the administrative charge which the Letter of Credit Issuer is customarily charging for issuances of, drawing under or amendments of, letters of credit issued by it.

 

SECTION 3.3.3  Agency Fees. The Borrower shall pay to the Agent (x) on the Fourth Amended and Restated Effective Date for its own account and/or for distribution to the Lenders such fees as heretofore agreed by the Borrower and the Agent and (y) for its own account such other fees as may be agreed to from time to time between the Borrower and the Agent, when and as due.

 

ARTICLE IV

 

LIBO RATE AND OTHER PROVISIONS

SECTION 4.1  LIBO Rate Lending Unlawful. If any Lender shall determine (which determination shall, upon notice thereof to the Borrower and the Lenders, be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into,
a LIBO Rate Loan of a certain type, subject to the provisions of Section 4.11 hereof, the obligations of all Lenders to make, continue, maintain or convert any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans of such type shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion.

SECTION 4.2  Deposits Unavailable. If the Agent shall have determined that

(a)     Dollar certificates of deposit or Dollar deposits, as the case may be, in the relevant amount and for the relevant Interest Period are not available to a Lender in its relevant market; or

 

(b)     by reason of circumstances affecting a Lender’s relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans of such type,

 

then, upon notice from the Agent to the Borrower and the Lenders, subject to the provisions of Section 4.11 hereof, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert
any Loans into, LIBO Rate Loans of such type shall forthwith be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

	 
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SECTION 4.3  Increased LIBO Rate Loan Costs, etc. The Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans, subject to the provisions of 
Section 4.11 hereof. Such Lender shall promptly notify the Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within five days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower; provided
, however
, in no event shall Borrower be obligated to pay increased costs for a period greater than 180 days prior to the date of receipt of such notice.

SECTION 4.4  Funding Losses. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of;

(a)     any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise;

 

(b)     any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or

 

(c)     any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/ Conversion Notice therefor;

 

then, subject to the provisions of Section 4.11 hereof, upon the written notice of such Lender (which notice shall be delivered within thirty days of the incurrence thereof by such Lender) to the Borrower (with a copy to the Agent), the Borrower shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower.

 

SECTION 4.5  Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in its sole and absolute discretion) that the
rate of return on its or such controlling Person’s capital as a consequence of its Revolving Commitment or the Loans made by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, subject to the provisions of Section 4.11 hereof, the Borrower shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error,
be conclusive and binding on the Borrower. In determining such amount, such Lender may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable; provided, however, in no event shall Borrower be obligated to pay increased costs for a period greater than 180 days prior to the date of receipt of the notice required by this 
Section 4.5.

	 
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SECTION 4.6   Taxes. All payments by the Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by any Lender’s net income or receipts (such non-excluded items being called 
“Taxes”). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will:

(a)     pay directly to the relevant authority the full amount required to be so withheld or deducted;

 

(b)     promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and

 

(c)     pay to the Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required.

 

Moreover, if any Taxes are directly asserted against the Agent or any Lender with respect to any payment received by the Agent or such Lender hereunder, the Agent or such Lender may pay such Taxes and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses, other than those penalties, interest or expenses which are due to any delay by Agent or any Lender) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had not such Taxes been asserted.

	 
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If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section 4.6, a distribution hereunder by the Agent or any Lender to or for the account of any Lender shall be deemed a payment by the Borrower.

 

Upon the request of the Borrower or the Agent, each Lender that is organized under the laws of a jurisdiction other than the United States shall, prior to the due date of any payments under the Notes, execute and deliver to the Borrower and the Agent, on or about the first scheduled payment date in each Fiscal Year, one or more (as the Borrower or the Agent may reasonably request) United States Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or documents (or successor forms or documents), appropriately completed, as may be applicable to establish the extent, if any, to which a payment to such Lender is exempt from withholding or deduction of Taxes.

 

SECTION 4.7  Payments, Computations, etc. Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement, the Notes or any other Loan Document shall be made by the Borrower to the Agent for the pro rata
 account of the Lenders entitled to receive such payment. All such payments required to be made to the Agent shall be made, without setoff, deduction or counterclaim, not later than 11:00 a.m., Chicago time, on the date due, in same day or immediately available funds, to such account as the Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Agent on the next succeeding Business Day. The Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Agent for the account of such Lender. All interest and fees shall be computed on the basis
of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360
 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term “Interest Period” with respect to LIBO Rate Loans) be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment.

	 
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SECTION 4.8  Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Sections 4.3, 4.4
 and 4.5) in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them;
provided, 
however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender’s ratable share (according to the proportion of:

(a)     the amount of such selling Lender’s required repayment to the purchasing Lender

 

to

 

(b)     the total amount so recovered from the purchasing Lender);

 

of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any
Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

SECTION 4.9  Setoff. Each Lender shall, upon the occurrence of any Default described in clauses (a) through (d) of 
Section 8.1.9 or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender; provided, however, that
any such appropriation and application shall be subject to the provisions of Section 4.8. Each Lender agrees promptly to notify the Borrower and the Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such Lender may have.

 

SECTION 4.10  Use of Proceeds. The Borrower shall apply the proceeds of each Borrowing in accordance with the fourth recital; without limiting the foregoing, no proceeds of any
Loan will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any “margin stock”, as defined in F.R.S. Board Regulation U.

	 
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SECTION 4.11  Changes to Other Branches; Equal Treatment of Borrower. If a Lender claims any additional amounts payable or that its is unable to make LIBOR Loans available, as described more fully in Sections 4.1 through 4.5
 hereof, such Lender shall (i) use its reasonable efforts (consistent with legal and regulatory restrictions) to avoid the need for paying such additional amounts or such unavailability, including changing the jurisdiction of its applicable lending office or moving the applicable Loan(s) to an Affiliate or Subsidiary; provided, that the taking of any such action would not, in the reasonable judgment of such Lender, be disadvantageous to such Lender and (ii) treat the Borrower, with respect to all such issues, in a manner consistent with the treatment of other similarly situated borrowers with respect to such issues.

SECTION 4.12  Replacement of Lenders. Within fifteen (15) days after receipt by Borrower of written notice and demand from any Lender for payment pursuant to Section 4.5 or 4.6 
(any such Lender demanding such payment being referred to herein as an “Affected Lender”), Borrower may, at its option, notify Agent and such Affected Lender of its intention to do one of the following:

 

(A) Borrower may obtain, at Borrower's expense, a replacement Lender (“Replacement Lender”) for such Affected Lender, which Replacement Lender shall be reasonably satisfactory to Agent. In the event Borrower obtains a Replacement Lender that will refinance all outstanding Obligations owed to such Affected Lender and assume its Commitments hereunder within ninety (90) days following notice of Borrower's intention to do so, the Affected Lender shall sell and assign all of its rights and delegate all of its obligations under this
Agreement to such Replacement Lender in accordance with the provisions of Section 10.11.1, provided that Borrower has reimbursed such Affected Lender for any administrative fee payable pursuant to Section 10.11.1 and, in any case where such replacement
 occurs as the result of a demand for payment pursuant to Section 4.5 or 5.6, paid all amounts required to be paid to such Affected Lender pursuant to subsection 4.5 or 4.6 through the date of such sale and assignment; or

 

(B) Borrower may, upon consent of the Required Lenders (other than the Affected Lender), prepay in full all outstanding Obligations owed to such Affected Lender and terminate such Affected Lender’s Revolving Commitment, in which case the Revolving Commitment Amount will be reduced by the amount of such Affected Lender's Revolving Commitment. Borrower shall, within ninety (90) days following notice of its intention to do so, prepay in full all outstanding Obligations owed to such Affected Lender (including, in any case where such replacement occurs as the result of a demand for payment for increased costs, such Affected Lender’s increased costs for which it is
entitled to reimbursement under this Agreement through the date of such prepayment), and terminate such Affected Lender’s obligations under the Revolving Commitment Amount.

	 
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ARTICLE V

 

CONDITIONS TO BORROWING

SECTION 5.1  Initial Borrowing. The obligations of the Lenders to fund the initial Borrowing and the Letter of Credit Issuer to issue, and the Lenders to participate in, any letter of Credit, shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1.

 

SECTION 5.1.1  Resolutions, etc. The Agent shall have received from each Credit Party a certificate, dated the date of the initial Borrowing, of its Secretary or Assistant Secretary as to:

(a)     resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it; and

(b)     the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes and each other Loan Document executed by it;

upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary of such Credit Party canceling or amending such prior certificate.

SECTION 5.1.2  Delivery of Notes. The Agent shall have received, for the account of each Lender, its Notes duly executed and delivered by the Borrower.

 

SECTION 5.1.3  Applicable Margin. The Agent shall receive a certificate, executed by an Authorized Officer of the Borrower, delineating the Applicable Margin after giving pro forma effect to the Loans to be incurred on the Original Closing Date.

 

SECTION 5.1.4  Guaranty. The Agent shall have received the Guaranty, dated the date hereof, duly executed by each Subsidiary of the Borrower.

SECTION 5.1.5  Pledge Agreements. The Agent shall have received executed counterparts of the Borrower Pledge Agreement and the Guarantor Pledge Agreement, each dated as of the date hereof, duly executed by each Credit Party party thereto, together with stock certificates, accompanied by undated stock powers duly executed in blank, and promissory notes, duly endorsed in blank, required to be delivered to the Agent pursuant to the Borrower Pledge Agreement and the Guarantor Pledge Agreement.

	 
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SECTION 5.1.6  Security Agreements. The Agent shall have received executed counterparts of the Borrower Security Agreement and the Guarantor Security Agreement, each dated as of the date hereof, duly executed by each Credit Party thereto, together with:

(a)     acknowledgment copies of properly filed Uniform Commercial Code financing statements naming the relevant Credit Party as the debtor and the Agent as the secured party, or other similar instruments or documents, filed under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Agent, desirable to perfect the security interest of the Agent pursuant to such Security Agreement;

(b)     executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person:

(i) in any collateral described in such Security Agreement previously granted by any Person, and

(ii) securing any of the Indebtedness identified in Part A of Schedule 6.17, together with such other Uniform Commercial Code Form UCC-3 termination statements as the Agent may reasonably request from such Credit Party; and

(c)     copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Agent, dated a date reasonably near to the date of the initial Borrowing, listing all effective financing statements which name each Credit Party (under its present name and any previous names) as the debtor and which are filed in the jurisdictions in which filings were made pursuant to clause (a) above, together with copies of such
financing statements (none of which (other than those described in clause (a), if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements described in clause (a)) shall cover any collateral described in such Security Agreement).

SECTION 5.1.7  Intellectual Property Assignment. The Agent shall have received executed counterparts of an Intellectual Property Assignment, dated the date hereof, duly executed by each Credit Party.

 

SECTION 5.1.8  Opinions of Counsel. The Agent shall have received opinions, dated the date of the initial Borrowing and addressed to the Agent and all Lenders, from Katten Muchin Zavis Rosenman, counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit H hereto.

 

SECTION 5.1.9  Agreements. The Agent shall have received true and correct copies, certified as such by an Authorized Officer of the Borrower, of each agreement governing Indebtedness listed on Schedule 6.17.

	 
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SECTION 5.1.10  Closing Fees, Expenses, etc. The Agent shall have received for its own account, or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable on the Original Closing Date pursuant to Section 3.3 and, to the extent invoiced on such date, Section 10.3
.

 

SECTION 5.2  All Borrowings and Letters of Credit. The obligation of each Lender to fund any Loan on the occasion of any Borrowing (including the initial Borrowing) and the obligation of the Letter of Credit Issuer to issue any Letter of Credit shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2.

 

SECTION 5.2.1  Compliance with Warranties, No Default, etc. Both before and after giving effect to any Borrowing (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds thereof) the following statements shall be true and correct:

(a)     the representations and warranties set forth in Article VI shall be true and correct with the same effect as if then made (unless stated to relate solely to an early date, in which case such representations and warranties shall be true and correct as of such earlier date); 

(b)     no Default or Event of Default shall have then occurred and be continuing; and

 

(c)     the Borrower shall have been in compliance with the minimum EBITDA requirements of Section 7.2.4(d) for the Fiscal Quarter most recently ended.

SECTION 5.2.2  Borrowing Request; LC Notice. The Agent shall have received a Borrowing Request for such Borrowing or LC Notice for the issuance of a Letter of Credit. Each of the delivery of a Borrowing Request or LC Notice, as the case may be, and the acceptance by the Borrower of the proceeds of such Borrowing or the issuance of such Letter of Credit, as the case may be, shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or the issuance of such Letter of Credit, as the case
may be (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof or the issuance of such Letter of Credit, as the case may be,) the statements made in Section 5.2.1 are true and correct.

 

SECTION 5.2.3  Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of each Credit Party shall be reasonably satisfactory in form and substance to the Agent and its counsel; the Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Agent or its counsel may reasonably request.

	 
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SECTION 5.3  Conditions to Fourth Amended and Restated Effective Date. This Agreement shall become effective upon the later of October 15, 2004 and the date of the satisfaction of each of the following (the “Fourth Amended and Restated Effective Date”):

 

SECTION 5.3.1  Executed Signature Pages to Agreement. Execution of this Agreement and delivery of executed signature pages to this Agreement by the Borrower, each Lender and the Agent.

 

SECTION 5.3.2  Executed Reaffirmation of Collateral Documents. Execution of the Reaffirmation of Collateral Documents by the Borrower and each Subsidiary Guarantor and delivery of the signature pages executed by the Borrower and each Subsidiary Guarantor to the Reaffirmation of Collateral Documents to the Agent.

 

SECTION 5.3.3  Payment of Fees and Expenses. Payment by the Borrower to the Agent of all reasonable out of pocket fees and expenses (including, without limitation, the reasonable fees and expenses of Winston & Strawn) of the Agent and the Lenders in connection with this Agreement.

 

SECTION 5.3.4  Resolutions, etc. The Agent shall have received from each Credit Party a certificate, dated as of the Fourth Amended and Restated Effective Date, of its Secretary or Assistant Secretary as to:

(a)     resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document to be executed by it; and

(b)     the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document executed by it;

upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary of such Credit Party canceling or amending such prior certificate.

 

SECTION 5.3.5 Certificate.

 

A certificate signed by the chief financial officer or chief executive officer of the Borrower, dated as of the Fourth Amended and Restated Effective Date and after giving effect to this Agreement:

 

(i)     stating that the representations and warranties contained in Article VI are true and correct on and as of such date as though made on and as of such date; and

	 
	 	-42-	 
	

	 

 

(ii)     stating that no Default or Event of Default exists.

 

SECTION 5.3.6 Updated Disclosure Schedules

 

A certificate signed by the chief financial officer or chief executive officer of the Borrower dated as of the Fourth Amended and Restated Effective Date, proposing any necessary changes to the Schedules to this Agreement in form and substance reasonably satisfactory to the Agent occurring after the Original Closing Date.

 

SECTION 5.3.7 Legal Opinion.

  An opinion of Katten Muchin Zavis Rosenman, special counsel to the Credit Parties, dated as of the Fourth Amended and Restated Effective Date in form and substance satisfactory to the Agent. 

SECTION 5.3.8 Payment of Closing Fee.

Borrower shall have paid to the Agent for the account of each Lender executing this Agreement on or before the Fourth Amended and Restated Effective Date an amendment fee equal to the sum of (i) 0.05% times each such Lender's Percentage of the Revolving Commitment Amount existing immediately prior to the Fourth Amended and Restated Effective Date; and (ii) 0.125% times the amount by which each such Lender's Percentage of the Revolving Commitment Amount increased on the Fourth Amended and Restated Effective Date after giving effect to the $20,000,000 increase in the Revolving Commitment Amount on such date.

 

SECTION 5.3.9 Amended and Restated Promissory Notes. Borrower shall have delivered to Agent on behalf of each of the Lenders, executed amended and restated promissory notes reflecting such Lender's Revolving Commitment Amount as of the Fourth Amended and Restated Effective Date.

 

SECTION 5.3.10 Other Documents

 

Such other customary approvals, opinions, documents or materials as the Agent may reasonably request.

	 
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ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES

In order to induce the Lenders and the Agent to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants unto the Agent and each Lender as set forth in this Article VI.

 

SECTION 6.1  Organization, etc. The Borrower and each of its Subsidiaries is validly organized and existing and in good standing under the laws of the State of its organization, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and
each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it.

 

SECTION 6.2  Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower and each of its Subsidiaries of this Agreement, the Notes and each other Loan Document executed or to be executed by it, are within each such Credit Party’s powers, have been duly authorized by all necessary corporate action, and do not:

(a)     contravene such Credit Party’s Organizational Documents;

 

(b)     contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting such Credit Party, which contravention reasonably would be expected to have a Material Adverse Effect; or

 

(c)     result in, or require the creation or imposition of, any Lien on any of such Credit Party’s properties other than a Permitted Lien.

 

SECTION 6.3  Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by any Credit Party, including, without limitation, the Borrower, of this Agreement, the Notes or any other Loan Document to which it is a party, other than as described in 
Schedule 6.3 which have been obtained or delivered on or prior to the Fourth Amended and Restated Effective Date. Neither the Borrower nor any of its Subsidiaries, is an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, within the meaning of the Public Utility Holding Company Act of 1935, as amended.

	 
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SECTION 6.4  Validity, etc. This Agreement constitutes, and the Notes and each other Loan Document executed by each Credit Party thereto will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of such Credit Party enforceable in accordance with their respective terms, except that the validity or enforceability of any such Loan Document may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors’ rights
generally or by equitable principles, whether enforcement thereof is sought in a court of law or equity.

 

SECTION 6.5  Financial Information. The audited financial statements of the Borrower and its Subsidiaries on a consolidated basis as of December 31, 2003, and the unaudited financial statements of the Borrower and its Subsidiaries on a consolidated basis as of June 30, 2004, copies of which have been furnished to the Agent and each Lender, have been prepared in accordance with GAAP consistently applied (subject to ordinary, good faith year end audit adjustments), and present fairly the consolidated financial position of the
Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended.

 

SECTION 6.6  No Material Adverse Change. Since December 31, 2003, there has been no material adverse change in the financial condition, operations, assets, business, properties or prospects of the Borrower and its Subsidiaries taken as a whole.

 

SECTION 6.7  Litigation, Labor Controversies, etc. There is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding, or labor controversy affecting any Credit Party, or any of their respective properties, businesses, assets or revenues, or any Person who provided health care services under contract with any Credit Party, which reasonably would be expected to have a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement,
the Notes or any other Loan Document. 

SECTION 6.8  Subsidiaries. (a) The Borrower has no Subsidiaries, except those Subsidiaries:

(i)     which are identified in Schedule 6.8; or

(ii)     which are permitted to have been formed or acquired by the Borrower in accordance with Section 7.1.12, 7.2.5 or 7.2.8.

SECTION 6.9  Ownership of Properties. The Borrower and each of its Subsidiaries owns good and marketable title (or valid leasehold title, with respect to leasehold estates) to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to 
Section 7.2.3.

	 
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SECTION 6.10  Taxes. Except as described on Schedule 6.10, the Borrower and each of its Subsidiaries has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

 

SECTION 6.11  Pension and Welfare Plans. During the twelve-consecutive-month period prior to the Fourth Amended and Restated Effective Date and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which reasonably would be expected to
result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty. Neither the Borrower nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA.

 

SECTION 6.12  Environmental Warranties. (a) All facilities and property (including underlying groundwater) owned or leased by the Borrower or any of its Subsidiaries have been, and continue to be, owned or leased by the Borrower and its Subsidiaries in material compliance with all applicable Environmental Laws.

(b)     There have been no past (which have not been remedied or resolved), and there are no pending or, to the best knowledge of the Borrower, threatened:

 

(i) claims, complaints, notices or requests for information received by the Borrower or any of its Subsidiaries with respect to any alleged material violation of any Environmental Law, or

 

(ii) complaints, notices or inquiries to the Borrower or any of its Subsidiaries regarding potential material liability under any Environmental Law.

 

(c)     There have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or would reasonably be expected to have, a Material Adverse Effect.

 

(d)     The Borrower and its Subsidiaries have been issued and are in material compliance with all material permits, certificates, approvals, licenses and other material authorizations relating to environmental matters and necessary or desirable for their businesses.

 

(e)     No property now or previously owned or leased by the Borrower or any of its Subsidiaries is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up.

	 
	 	-46-	 
	

	 

 

(f)     There are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries.

 

(g)     Neither the Borrower nor any of its Subsidiaries has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which reasonably would be expected to lead to material claims against the Borrower or such Subsidiary thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA.

 

(h)     To the best of the Borrower’s knowledge after due inquiry, there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by the Borrower or any of its Subsidiaries.

 

(i)     No conditions exist at, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries which, with the passage of time, or the giving of notice or both, reasonably would be expected to give rise to any material liability under any Environmental Law.

 

SECTION 6.13  Regulations T, U and X. Neither the Borrower nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans or any Letter of Credit will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or X. Terms for which meanings are provided in F.R.S. Board Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.

 

SECTION 6.14  Accuracy of Information. All factual information heretofore or contemporaneously furnished by or on behalf of any Credit Party in writing to the Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of any Credit Party to the Agent or any Lender will be, true and accurate in every material respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this Agreement by the Agent and such Lender, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading.

 

SECTION 6.15  Solvency. As of the Fourth Amended and Restated Effective Date, after giving effect to the consummation of the transaction contemplated by the Loan Documents and the payment of all fees, costs and expenses payable by the Borrower with respect to the transactions contemplated by the Loan Documents, the Borrower and its Subsidiaries are Solvent on a consolidated basis.

	 
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SECTION 6.16  Collateral Documents. (a) Subject to the provisions of clause (b) below with respect to the requirement of the Agent to maintain possession as the Pledged Collateral, the provisions of each of the Collateral Documents are effective to create in favor of the Agent for the benefit of the Lenders and the Agent, a legal, valid and enforceable first priority security interest in all right, title and interest of each Credit Party in the Collateral described therein; and financing statements have been filed
in the offices in all of the jurisdictions listed in the schedule to the Borrower Security Agreement and the Guarantor Security Agreement, and each Intellectual Property Assignment has been filed in the U.S. Patent and Trademark Office and the U.S. Copyright Office.

(b)     The provisions of the Borrower Pledge Agreement and the Guarantor Pledge Agreement are effective to create, in favor of the Agent for the benefit of the Lenders and the Agent, a legal, valid and enforceable first priority security interest in all of the Collateral described therein; and the Pledged Collateral was delivered to the Agent or its nominee in accordance with the terms thereof. The Lien of the Borrower Pledge Agreement and the Guarantor Pledge Agreement constitutes a perfected, first priority security interest in all right, title and interest of the Credit Party thereto in the Pledged Collateral described
therein, prior and superior to all other Liens and interests, provided the Agent maintains possession of the Pledged Collateral for the term of each such Borrower Pledge Agreement or Guarantor Pledge Agreement, as applicable.

 

(c)     All representations and warranties of each Credit Party contained in the Collateral Documents are true and correct as of the date on which made, except to the extent such representations pertain to a prior date, in which case such representations and warranties are true and correct as of such prior date.

 

SECTION 6.17  Indebtedness. Attached hereto as Schedule 6.17 is a complete and correct list of all Indebtedness of the Borrower and its Subsidiaries outstanding on the Fourth Amended and Restated Effective Date, showing the aggregate principal amount which was outstanding on such date. The Borrower has delivered or caused to be delivered to the
Agent a true and complete copy of each instrument evidencing any Indebtedness listed on Schedule 6.17 and of each document pursuant to which any of such Indebtedness was issued.

SECTION 6.18  Other Agreements/Program Eligibility. Neither the Borrower nor any of its Subsidiaries (and to the knowledge of the Borrower's officers, no Minority ASC Entity) is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in or applicable with respect to any Medicaid Provider Agreement, Medicare Provider Agreement, other agreement or instrument to which the Borrower or a Subsidiary is a party with a third party payor, or participation in Medicare, Medicaid
or a third party payor program in which the Borrower or a Subsidiary participates, which default, if not remedied within any applicable grace period, reasonably would be expected to (A) in the case of any Medicaid Provider Agreement or third party payor agreement other than a national third party payor agreement (i) result in the revocation, termination, cancellation, suspension or non-renewal of Medicaid Certification, any similar certification of a material third party not involved in a national third party payor agreement, if any, a Medicaid Provider Agreement or agreement with a third party payor which is not party to a national third party payor program with the Borrower or any Subsidiary of the Borrower, or eligibility to participate, directly or indirectly, in Medicaid or material third party payor programs which are not national third party payor programs of the Borrower and its Subsidiaries, and (ii) have a
Material Adverse Effect, or (B) in the case of any Medicare Provider Agreement or material national third party payor agreement, (i) result in the revocation, termination, cancellation, suspension or non-renewal of Medicare Certification, any similar certification of a material national third party payor contract or agreement, a Medicare Provider Agreement or material national agreement with a third party payor, or eligibility to participate, directly or indirectly, in Medicare or material national third party payor programs, or (ii) have a Material Adverse Effect.

	 
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SECTION 6.19  Reimbursement from Third Party Payors. The accounts receivable of the Borrower and each of its Subsidiaries (and to the knowledge of the Borrower's officers, each Minority ASC Entity) have been and will continue to be adjusted reasonably to reflect reimbursement experiences with and policies of third party payors such as Medicare, Medicaid, Blue Cross/Blue Shield, private insurance companies, health maintenance organizations, preferred provider organizations, alternative delivery systems,
managed care systems, government contracting agencies and other third party payors. In particular, accounts receivable relating to such third party payors do not and shall not exceed amounts any obligee is entitled to receive under any capitation arrangement, fee schedule, discount formula, cost-based reimbursement or other adjustment or limitation to its usual charges.

 

SECTION 6.20  Legal Compliance. The Borrower and each of its Subsidiaries (and to the knowledge of the Borrower's officers, each Minority ASC Entity) have duly complied and are in compliance with all Fraud and Abuse Laws; all applicable state laws and regulations regarding certificate of need and state licensure; HIPAA; and all other requirements, restrictions and prohibitions of law, including, without limitation, any statute, law, treaty, rule, regulation, manual, guidelines, rules of professional conduct,
or order, decree, writ, injunction or other determination of an arbitrator, court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such person or its property is subject and having the force of law, other than those noncompliance with which would not reasonably be expected to have a Material Adverse Effect.

 

SECTION 6.21  Licensing and Accreditation. Each of the Borrower and each of its Subsidiaries (and to the knowledge of the Borrower's officers, each Minority ASC Entity) has, to the extent applicable (A), (i) obtained (or been duly assigned) all required certificates of need (other than as described on Schedule 6.21) or determinations of
 need, as required by the relevant state governmental authority, for the acquisition, construction, expansion of, investment in or operation of its businesses or facilities as currently operated; (ii) obtained and maintains in good standing all required licenses; (iii) to the extent customary in the industry and geographic market in which it is engaged, obtained and maintains accreditation from all generally recognized accrediting agencies; (iv) obtained and maintains Medicaid Certification, Medicare Certification and any similar third party payor certification, if any; and (v) entered into and maintains in good standing, if applicable, its Medicaid Provider Agreement and its agreements with third party payors
, the failure of any of which has, or could reasonably be expected to have, a Material Adverse Effect; and (B) (i) obtained and maintains
Medicare Certification and (ii) entered into and maintains in good standing its Medicare Provider Agreement.

	 
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SECTION 6.22  Subordination Provisions. The subordination provisions contained in all notes, debentures and other instruments entered into or issued in respect of Subordinated Debt are enforceable against the issuer of the respective security and the holders thereof in accordance with their respective terms, and the Loans and all other Obligations are within the definitions of “Senior Indebtedness”, or other comparable definition, included in such provisions.

 

SECTION 6.23  RICO. None of the Borrower nor any of its Subsidiaries is engaged in or has engaged in any course of conduct that reasonably would be expected to subject any of their respective properties to any Lien, seizure or other forfeiture under any criminal law, racketeer influenced and corrupt organizations law, civil or criminal, or other similar laws.

ARTICLE VII

 

COVENANTS

SECTION 7.1  Affirmative Covenants. The Borrower agrees with the Agent and each Lender that, until all Revolving Commitments have terminated and all Obligations have been paid and performed in full, each Credit Party will perform the obligations set forth in this Section 7.1 applicable to such Credit Party.

 

SECTION 7.1.1  Financial Information, Reports, Notices, etc. The Borrower will furnish, or will cause to be furnished, to each Lender and the Agent copies of the following financial statements, reports, notices and information:

 

(a)     as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters (commencing with the Fiscal Quarter ending June 30, 2003) of each Fiscal Year of the Borrower, to the extent prepared to comply with SEC requirements, a copy of the SEC Form 10-Qs filed by the Borrower with the SEC for each such quarterly period, or if no such Form 10-Q was so filed by the Borrower with respect to any such quarterly period, consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and consolidated statements of earnings and cash flow of the
Borrower and its Subsidiaries for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by the Authorized Officer of the Borrower;

	 
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(b)     as soon as available and in any event within 90 days after the end of each Fiscal Year of the Borrower, to the extent prepared to comply with SEC requirements, a copy of the SEC Form 10-K filed by the Borrower with the SEC for such fiscal year, or, if no such Form 10-K was so filed by the Borrower for such fiscal year, a copy of the annual audit report for such Fiscal Year for the Borrower and its Subsidiaries including therein consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Borrower and its Subsidiaries for such Fiscal Year,
certified (without any Impermissible Qualification) by PricewaterhouseCoopers LLP or other independent public accountants reasonably acceptable to the Agent;

 

(c)     within five business days of becoming available and in any event within 150 days after the end of each Fiscal Year, a copy of the management letter delivered to Borrower by Borrower’s independent public accountants in connection with the audit of Borrower’s financial statements for such previous Fiscal Year;

 

(d)     as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters during a Fiscal Year, and within 90 days after the end of each Fiscal Year, a certificate, executed by the chief financial officer and/or principal accounting officer of the Borrower, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) compliance with the financial covenants set forth in Section 7.2.4.;

 

(e)     as soon as possible and in any event within three Business Days after the occurrence of each Default, a statement of the chief financial officer and/or principal accounting officer of the Borrower setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto;

 

(f)     as soon as possible and in any event within three Business Days after (x) the occurrence of any adverse development with respect to any litigation, action, proceeding, or labor controversy described in Section 6.7 or (y) the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7, any of which reasonably
would be expected to have a Material Adverse Effect, notice thereof and copies of all documentation relating thereto;

 

(g)     promptly, but not later than five days after the date of filing with the SEC, copies of all financial statements and reports that Borrower sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10-K and 10-Q) that Borrower or any of its Subsidiaries may make to, or file with, the SEC (including, without limitation, pursuant to Section 7.2.9(b)) or any national securities exchange;

	 
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(h)     immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which reasonably would be expected to result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which reasonably would be expected to result in the incurrence by the Borrower of
any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto;

 

(i)     immediately upon becoming aware of any dispute, litigation or other proceedings being instituted against any Credit Party to suspend, revoke or terminate any Medicaid Provider Agreement, Medicaid Certification, Medicare Provider Agreement, Medicare Certification, eligibility to participate in Medicare or Medicaid, or agreement with or certification by, if any, or eligibility to participate in a program of a third party payor, or any subpoena or investigation by a governmental authority, including without limitation CMS, the Office of Inspector General of the Department of Health and Human Services, and the Department of Justice, which
suspension, revocation, termination or the results of such subpoena or investigation reasonably would be expected to have a Material Adverse Effect, promptly deliver to the Agent written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution, subpoena or investigation or other process; and

 

(j)     such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request.

 

SECTION 7.1.2  Compliance with Laws, etc. (a) The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all Fraud and Abuse Laws; all applicable laws, rules, regulations and orders (including, without limitation, Medicare Regulations, Medicaid Regulations and the rules and regulations established by any third party payor), and all applicable corporate laws including without limitation:

 

(i)     the maintenance and preservation of its corporate existence and qualification as a foreign corporation, except to the extent no longer necessary within the reasonable business judgment of the Borrower or such Subsidiary, as applicable, or if otherwise terminated pursuant to a transaction consummated in accordance with the provisions of Section 7.2.8; and

	 
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(ii)     the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

 

(iii)     compliance in all material respects with all federal and state laws and regulations applicable to health care including, all Fraud and Abuse Laws, all laws relating to licensure, certificate of need and HIPAA.

 

(b) the Borrower will further use its commercially reasonable efforts, subject to applicable laws to assure the compliance in all material respects by all Minority ASC Entities with all applicable laws, including, but not limited to all federal and state laws and regulations applicable to health care including, all Fraud and Abuse Laws, all laws relating to licensure, certificate of need and HIPAA.

 

SECTION 7.1.3  Maintenance of Properties. The Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its properties in good repair, working order and condition, and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties is no longer economically desirable.

 

SECTION 7.1.4  Insurance. (a) Schedule 7.1.4 sets forth as of the date of this Agreement a true and complete listing of all insurance maintained by the Borrower and each of its Subsidiaries and each Minority ASC Entity. The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies
insurance with respect to its properties and business (including professional liability insurance, comprehensive liability insurance and business interruption insurance) against at least such casualties and contingencies and of at least such types and in at least such amounts as are commercially reasonable which insurance shall name the Agent as loss payee and an additional insured, and will, upon request of the Agent, furnish to each Lender at reasonable intervals (provided that, so long as no Event of Default shall have occurred and be continuing, no such certification shall be required to be delivered more than once in any Fiscal Year) a certificate of an Authorized Officer of the Borrower setting forth the nature and extent of all insurance maintained by the
Borrower and its Subsidiaries in accordance with this Section.

 

(b)     The Borrower will use commercially reasonable efforts to cause each Practice to maintain medical malpractice insurance at commercially reasonable levels.

SECTION 7.1.5  Books and Records. The Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Agent and each Lender or any of their respective representatives, at reasonable times and intervals, upon, so long as no Event of Default shall exist and be continuing, reasonable prior notice delivered during regular business hours, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant (and the Borrower hereby authorizes
such independent public accountant to discuss the Borrower’s financial matters with each Lender or its representatives, provided, so long as no Event of Default shall exist or be continuing, a representative of the Borrower is present) and to examine (and, at the expense of the Borrower, photocopy extracts from) any of its books or other corporate records. The Borrower shall pay any fees of such independent public accountant incurred in connection with the Agent’s or any Lender’s exercise of its rights pursuant to this Section provided, however, that so long as no Event of Default shall exist and be continuing, the Borrower shall not be liable for the fees and expenses of such independent public accountant related to more than one visit during any Fiscal Year. All visits conducted pursuant to this Section 7.1.5
 shall be conducted in such a manner so as not to disrupt the business operations of the applicable office. All information obtained during any such visit shall be subject to the provisions of Section 10.12.

	 
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SECTION 7.1.6  Environmental Covenant. The Borrower will, and will cause each of its Subsidiaries to:

 

(a)     use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary material permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws;

 

(b)     immediately notify the Agent and provide copies upon receipt of all written material claims, complaints, notices or inquiries relating to, the condition of its facilities and properties or compliance with Environmental Laws, and shall promptly cure and have dismissed with prejudice to the reasonable satisfaction of the Agent any actions and proceedings relating to compliance with Environmental Laws; and

 

(c)     provide such information and certifications which the Agent may reasonably request from time to time to evidence compliance with this Section 7.1.6.

SECTION 7.1.7  Changes to Certain Agreements. Without the prior written consent of the Required Lenders, no Credit Party shall make any amendment, supplement or modification to any agreements evidencing Subordinated Debt; provided, however, that any such amendment which conforms with applicable law in all material respects and is not materially adverse to the interests of the Lenders as Lenders under the Loan Documents shall be permitted without any consent. Copies of such amended agreements shall be delivered promptly to the Agent by the Borrower.

 

SECTION 7.1.8  Governmental Licenses. The Borrower will, and will cause each of its Subsidiaries to, obtain and maintain all material licenses, certificates of need, other applicable permits, agreements, certifications and approvals of all applicable governmental authorities as are required for the conduct of its business as currently conducted and herein contemplated, Medicaid Certifications and provider agreements and Medicare Certifications and provider agreements and certifications of third party payors, if any.

	 
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SECTION 7.1.9  Covenants Extending to Other Persons. The Borrower will, and will cause each of its Subsidiaries to, use its commercially reasonable efforts, in accordance with applicable law (which shall include, without limitation, the exercise of contractual rights and remedies available to the Borrower and its Subsidiaries) to cause each Non-Wholly Owned ASC Subsidiary, Minority ASC Entity, Practice or Provider, as appropriate to do with respect to itself, its business and its assets, each of the things required of a
Credit Party in Sections 7.1.2 through 7.1.8 inclusive, subject, however, in the case of Section 7.1.5 to any laws, rules or regulations concerning the confidentiality of medical records.

 

SECTION 7.1.10  Solvency. The Borrower and its Subsidiaries on a consolidated basis shall at all times be Solvent.

 

SECTION 7.1.11  Further Assurances. (a) The Borrower shall ensure that all written information, exhibits and reports furnished to the Agent or the Lenders do not and will not contain any untrue statement of a material fact and do not and will not omit to state any material fact or any fact necessary to make the statements contained therein not misleading
in light of the circumstances in which made, and will promptly disclose to the Agent and the Lenders and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgment or recordation thereof.

 

(b)     Promptly upon request of the Agent or the Required Lenders, the Borrower shall (and shall cause any of its Subsidiaries to) execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all such further acts, deeds, conveyances, security agreements, mortgages, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments the Agent or such Lenders, as the case may be, may reasonably require from time to time in order (i) to carry out more effectively the purposes
of this Agreement or any other Loan Document, (ii) to subject any of the properties, rights or interests covered by any of the Collateral Documents to the Liens intended to be created by any of the Collateral Documents, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Agent and the Lenders the rights granted or now or hereafter intended to be granted to the Agent and the Lenders under any Loan Document or under any other document executed in connection therewith.

 

SECTION 7.1.12  New Subsidiaries. Within 30 Business Days after the date of the acquisition or creation of any Subsidiary by the Borrower or a Subsidiary of the Borrower or in the case of a Minority ASC Entity or Non-Wholly Owned ASC Subsidiary which becomes a Wholly-Owned Subsidiary, such Person will cause to be delivered to the Agent for the benefit of the Lenders each of the following:

 

(i) in the case of a Subsidiary other than a Non-Wholly-Owned ASC Subsidiary, a joinder to the Guaranty, the Guarantor Pledge Agreement and the Guarantor Security Agreement;

	 
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(ii) in the case of a Subsidiary other than a Non-Wholly-Owned ASC Subsidiary, if such Subsidiary is a corporation, a limited liability company or a partnership that has issued certificates evidencing ownership of interests therein, the capital stock or, if applicable, certificates of ownership of such limited liability company or partnership, as the case may be, of such Person pertaining thereto, together with duly executed stock powers or powers of assignment in blank affixed thereto;

 

(iii) in the case of a Subsidiary other than a Non-Wholly-Owned ASC Subsidiary, if such Subsidiary is a limited liability company or a partnership not described in clause (ii) immediately above, an acknowledgment of security interest of such limited liability company or partnership, as the case may be, with respect to the registration of the Lien on membership or partnership interests in such Subsidiary, as the case may be, of such Person which acknowledgment shall be in form and substance satisfactory to the Agent;

 

(iv) a supplement to the appropriate schedules attached to the Collateral Documents to reflect the acquisition by the Borrower or, a Subsidiary (other than a Non-Wholly-Owned ASC Subsidiary) of the Borrower, of such Subsidiary, certified as true, correct and complete by the Authorized Officer of the relevant Credit Party (provided that the failure to deliver such supplement shall not impair the rights conferred under the Collateral Documents in after acquired Collateral and Pledged Collateral);

 

(v) to the extent requested by Agent in its reasonable discretion, an opinion or opinions of counsel to the Borrower and such Subsidiary (other than a Non-Wholly-Owned ASC Subsidiary), dated as of the date of delivery of any of the documents provided in the foregoing clause (i) and addressed to the Agent and the Lenders, in form and substance reasonably acceptable to the Agent (which opinion may include assumptions and qualifications of similar effect to those contained in the opinions of counsel delivered pursuant to Section 5.1.8), to the effect that:

 

(A) such Subsidiary is duly organized, validly existing and in good standing in the jurisdiction of its organization, has the requisite power and authority to own its properties and conduct its business as then owned and then proposed to be conducted and is duly qualified to transact business and is in good standing in each jurisdiction listed on the schedule attached to such opinion;

 

(B) the execution, delivery and performance of the Guaranty, the Guarantor Pledge Agreement and the Guarantor Security Agreement, as applicable, described in clause (i) of this Section 7.1.11, have been duly authorized by all requisite action (including any required shareholder, member or partner approval), such agreement has been duly executed and delivered and constitutes the valid and binding obligation of such Subsidiary, enforceable against such Subsidiary in accordance with its terms, except to the extent such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors’ rights and remedies generally, or to general principles of equity, whether enforcement thereof is considered in a court of law or equity; and

	 
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(C) all financing statements, instruments and documents are in a form which is sufficient to create a security interest in favor of the Agent in the Pledged Collateral and the Collateral, as the case may be;

 

(vi) current copies of the charter documents, including, limited liability agreements and certificates of formation, partnership agreements and certificates of limited partnership, if applicable, and bylaws of such Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, members, partners, or appropriate committees thereof (and, if required by such charter documents, bylaws or by applicable laws, of the shareholders, members or partners) of such Subsidiary authorizing the actions and the execution and delivery of documents described in this Section 7.1.11 and
evidence satisfactory to the Agent (confirmation of the receipt of which will be provided by the Agent to the Lenders) that such Subsidiary is Solvent as of such date and after giving effect to the execution of any of the documents required by clause (i) above.

 

SECTION 7.2  Negative Covenants. The Borrower agrees with the Agent and each Lender that, until all Revolving Commitments have terminated and all Obligations have been paid and performed in full, each Credit Party will perform the obligations set forth in this Section 7.2.

 

SECTION 7.2.1  Business Activities. The Borrower will not, and will not permit any of its Subsidiaries, including, without limitation, any New Subsidiary, to, engage in any business activity, except in (a) the fields of enterprise that fall within the definition of “Target” herein; and (b) reasonable extensions of the businesses being engaged in by the Borrower and its Subsidiaries on the Fourth Amended and Restated Effective Date.

 

SECTION 7.2.2  Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following:

 

(a)     Indebtedness in respect of the Loans and other Obligations;

	 
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(b)     until the date of the initial Borrowing, Indebtedness identified in Part A of Schedule 6.17;

 

(c)     Indebtedness, including Subordinated Debt, existing as of the Fourth Amended and Restated Effective Date which is identified in Part B of Schedule 6.17, but without giving effect to any extensions, renewals or refinancing thereof;

 

(d)     Indebtedness in respect of Liens to the extent permitted in Section 7.2.3(c);

 

(e)     unsecured Indebtedness incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding Indebtedness incurred through the borrowing of money or Contingent Liabilities);

 

(f)     Indebtedness, in respect of Capitalized Lease Liabilities, at any one time not to exceed in the aggregate $8,000,000 less the amount of any Indebtedness which is outstanding and permitted solely under subsection 7.2.3.(c);

 

(g)     Indebtedness consisting of intercompany loans, guarantees and advances made by the Borrower to any Credit Party or by such Credit Party to the Borrower or another Credit Party (“Credit Party Intercompany Loans”), provided that (i) if requested by the Agent, the payor Credit
Party shall have executed and delivered to the payee Credit Party a demand note (the “Credit Party Intercompany Note”) to evidence any such Credit Party Intercompany Loan, which Credit Party Intercompany Note shall be in form and substance satisfactory to Agent pledged to the Agent pursuant to the relevant Collateral Documents as additional collateral security for the Obligations, (ii) the payee Credit Party shall record all Credit Party Intercompany Loans on its books and records in a manner satisfactory to Agent, and (iii) at the time any such Credit Party Intercompany Loan is made by a payee Credit Party and after giving effect thereto, each of the payee Credit Party and the payor Credit Party shall be Solvent;

 

(h)     Subordinated Debt of the Borrower issued to the seller of a Target in connection with a Permitted Acquisition, such Indebtedness to be on terms and conditions reasonably satisfactory to the Agent (the Agent hereby acknowledges and agrees that the subordination provisions contained in the Subordinated Debt existing as of the date hereof are satisfactory);

 

(i)     Subordinated Debt of the Borrower, such Subordinated Debt to mature no earlier than one year after the Maturity Date and shall otherwise be on terms and conditions reasonably satisfactory to the Agent (the Agent hereby acknowledges and agrees that the subordination provisions contained in the Subordinated Debt existing as of the date hereof are satisfactory);

	 
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(j)     Indebtedness of the Borrower constituting unpaid minority interests to a Provider in connection with a Permitted Acquisition, such Indebtedness to be on terms and conditions reasonably satisfactory to the Agent;

 

(k)     Indebtedness of a Target which exists at the time such Target is the subject of a Permitted Acquisition, which Indebtedness is assumed by the Credit Party which is a party to such Permitted Acquisition and is otherwise permitted pursuant to this Section 7.2.2; 

 

(l)     Indebtedness represented by the Investments described in Section 7.2.5(h); and 

 

(m) Indebtedness in an amount not to exceed $10,000,000 in the aggregate at any one time outstanding and $2,000,000 to any individual Minority ASC Entity or Non-Wholly Owned Subsidiary at any one time outstanding, in each case when aggregated with amounts outstanding pursuant to clause (o) below, consisting of intercompany loans and advances made by the Borrower or any Subsidiary to any Minority ASC Entity or Non-Wholly Owned Subsidiary or by a Minority ASC Entity or Non-Wholly Owned Subsidiary to the Borrower or any other Subsidiary (
“Non-Credit Party Intercompany Loans”), provided that (i) the payor shall have executed and delivered to the payee a note (the “Non-Credit Party Intercompany Note”) to evidence any such Non-Credit Party Intercompany Loan, which Non-Credit Party Intercompany Note shall be in form and substance satisfactory to Agent pledged to the Agent pursuant to the relevant Collateral Documents
as additional collateral security for the Obligations, (ii) the payee shall record all Non-Credit Party Intercompany Loans on its books and records in a manner satisfactory to Agent, and
(iii) at the time any such Non-Credit Party Intercompany Loan is made by a payee and after giving effect thereto, each of the payee and the payor shall be Solvent;

 

(n) Indebtedness consisting of Non-Credit Party Intercompany Loans in excess of the amounts permitted by clauses (m) or (o) of this Section 7.2.2, but in any event not to exceed $15,000,000 in the aggregate when aggregated with amounts outstanding and permitted by 
clauses (m) or (o) of this Section 7.2.2; provided, that any such Non-Credit Party Intercompany Note permitted pursuant to this clause (n) shall be secured by a perfected first priority lien on the assets of such Minority ASC Entity or Non-Wholly Owned Subsidiary, as
applicable, the scope of which lien shall be satisfactory to the Agent and which lien shall be assigned to the Agent;

 

(o) Indebtedness consisting of guarantees by the Borrower or any Credit Party of the obligations of any Non-Wholly Owned Subsidiary or Minority ASC Entity, in any event not to exceed $15,000,000 in the aggregate at any one time outstanding and $2,000,000 to any individual Non-Wholly Owned Subsidiary or Minority ASC Entity, in each case when aggregated with Indebtedness outstanding under clause (m) above;

	 
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provided, however, that no Indebtedness otherwise permitted by clauses (d), (e), (f)
, (g),
 (h), (i), (j), (k), 
(l), (m), (n) or (o) shall be permitted if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing.

 

SECTION 7.2.3  Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except:

 

(a)     Liens securing payment of the Obligations, granted pursuant to any Loan Document;

 

(b)     until the date of the initial Borrowing; Liens securing payment of Indebtedness of the type permitted and described in clause (b) of Section 7.2.2;

 

(c)     purchase money security interests, in addition to, and not in limitation of, the Capitalized Lease Liabilities described in clause (j) hereof, on any property acquired or held by any Subsidiary in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided that
 (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, and (iii) the principal amount of the Indebtedness which is outstanding and which is secured by any and all such purchase money security interests shall not at any time exceed $8,000,000 less the amount of Indebtedness outstanding and permitted solely under subsection 7.2.2(f);

 

(d)     Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

 

(e)     Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

 

(f)     Liens (other than any Lien imposed by ERISA) incurred in the ordinary course of business in connection with workmen’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds;

 

(g)     judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is bonded or covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies;

	 
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(h)     Liens in existence on the Fourth Amended and Restated Effective Date and listed on Schedule 7.2.3, but without giving effect to any extensions or renewals thereof; and

 

(i)     easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the property of the Person which is subject thereto;

 

(j)     Liens in connection with Capitalized Lease Liabilities in the amount and to the extent permitted by subsection 7.2.2(f);

 

(k)     Liens on property leased by the Borrower or any Subsidiary or other interest or title of the lessor under operating leases securing obligations of the Borrower or such Subsidiary to the lessor under such leases; and

 

(l)     Liens on property of a Target which exist at the time such Target becomes the subject of a Permitted Acquisition to the extent such Liens are otherwise permitted pursuant to this Section 7.2.3.

 

SECTION 7.2.4  Financial Condition. The Borrower will not permit:

 

(a)     Its Net Worth as of the last day of each Fiscal Quarter to be less than 85% of the amount of its Net Worth existing on June 30, 2003, plus 50% of Net Income (without giving effect to any losses) for each Fiscal Quarter occurring since June 30, 2003, plus 50% of the net proceeds from any equity
issuance by the Borrower or any of its Subsidiaries occurring since June 30, 2003, plus 50% of any incremental additive equity associated with any Permitted Acquisition.

 

(b)     the Total Leverage Ratio as of the end of each Fiscal Quarter for the twelve month period preceding such date to be greater than 3.00:1.00.

(c)     as of the last day of any Fiscal Quarter the ratio of (a) EBITDA plus rent expenses incurred by the Borrower and its Subsidiaries, minus Capital Expenditures incurred by the Borrower and its Subsidiaries, minus
 cash taxes paid by the Borrower and its Subsidiaries, in each case for the period of four fiscal quarters then ending, to (b) Fixed Charges for such four fiscal quarter period to be less than 1.20:1.0. 

(d)     its EBITDA to be less than the following if the Total Leverage Ratio exceeds 1.50:1.00 as of the last day of any Fiscal Quarter: (i) if the last day of such Fiscal Quarter is December 31st, $3,500,000 in the aggregate for the two consecutive Fiscal Quarters then ended; (ii) if the last day of such Fiscal Quarter is March 31st, $3,000,000 in the aggregate for the two consecutive Fiscal Quarters then ended; (iii) if the last day of such Fiscal Quarter is June 30th, $3,500,000 in the aggregate for the two consecutive Fiscal Quarters then ended; or (iv) if the last day of such Fiscal Quarter is September 30th, $4,000,000 in the aggregate for the two consecutive Fiscal Quarters then ended. 

	 
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SECTION 7.2.5  Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except:

 

(a)     Investments existing on the Fourth Amendment and Restatement Effective Date and identified in Schedule 7.2.5;

 

(b)     Cash Equivalent Investments and cash, provided, however, that the balance maintained in any deposit account other than a deposit account listed on Schedule 7.2.5(b)
 hereto not subject to a Lien of the Agent shall (i) not exceed $100,000 for a period of seven consecutive days with respect to deposit accounts of Borrower and any other Credit Party and (ii) in the case of deposit accounts of any Non-Wholly Owned Subsidiary or Minority ASC Entity, be, in an amount equal to the Borrower or any Subsidiary's rights therein, transferred to a deposit account subject to a Lien of the Agent as frequently as practicable but on a no less frequent basis than monthly; 

 

(c)     without duplication, Investments permitted as Indebtedness pursuant to Section 7.2.2;

 

(d)     without duplication, Investments permitted as Capital Expenditures in the Borrower and its Subsidiaries which are Credit Parties;

 

(e)     in the ordinary course of business, (1) Investments by the Borrower in any of its Wholly-Owned Subsidiaries, or in any new Wholly-Owned Subsidiary created or acquired after the Fourth Amended and Restated Effective Date in connection with a Permitted Acquisition, (2) Investments by the Borrower or any Wholly-Owned Subsidiary in any Non-Wholly-Owned ASC Subsidiary in the form of Indebtedness permitted by Section 7.2.2(m) and (n) and (3) other cash investments
in Non-Wholly-Owned ASC Subsidiaries in the aggregate at any time outstanding not to exceed $5,000,000 when aggregated with Investments outstanding and permitted by Section 7.2.5(p);  

 

(f)     Permitted Acquisitions by the Borrower or a Wholly-Owned Subsidiary of the Borrower (or, in the case of the purchase of an ASC Facility, by the Borrower or a Subsidiary of the Borrower);

 

(g)     the acquisition by the Borrower or a Wholly-Owned Subsidiary of the Borrower of 100% of the minority interests held by a Provider in a non-Wholly-Owned Subsidiary, provided that any such acquisition is made solely in connection with the merger of such non-Wholly-Owned Subsidiary into the Borrower or a Wholly-Owned Subsidiary of the Borrower as permitted by Section 7.2.8
;

	 
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(h)     Investments by the Borrower or any Subsidiary consisting of loans to Providers in an amount not to exceed $300,000 individually or $2,000,000 in the aggregate outstanding at any one time;

 

(i)     Investments constituting Hedging Agreements of the Borrower; 

 

(j)     Investments by a Target which exist at the time such Target is the subject of a Permitted Acquisition to the extent such Investments are otherwise permitted pursuant to this Section 7.2.5;

 

(k)     Investments by the Borrower or a Subsidiary of the Borrower pursuant to ASC Subsidiary Capital Events provided that (1) no Default or Event of Default shall have occurred or be continuing both before and after giving effect to such ASC Subsidiary Capital Event, (2) the Borrower must be able to comply on a pro forma basis after giving effect to such ASC Subsidiary Capital Event with all of the covenants of this Agreement; and (3) in the event that the Borrower’s Total Leverage Ratio on a pro forma basis (after giving effect to the ASC Subsidiary Capital Event) is greater than 2.25:1.0 the aggregate consideration in
connection with such ASC Subsidiary Capital Event shall not exceed $15,000,000 individually and $35,000,0000 for all ASC Subsidiary Capital Events consummated within the previous twelve (12) month period when aggregated with the Consideration paid for Permitted Acquisitions permitted by Section 7.2.5(f) during such period, without duplication; 

 

(l)     Permitted Seller Debt in connection with Part A of Exhibit K;

 

(m) Investments (not including Investments constituting Permitted Acquisitions) by the Borrower or a Subsidiary of the Borrower in Minority ASC Entities in an amount not to exceed $500,000 in any individual Minority ASC Entity provided that the Borrower is in compliance on a pro forma basis after giving effect to such Investment with all of the covenants contained in this Agreement provided that in the case of all such Investments pursuant to this clause (m) ("
Minority ASC Investments"), (i) the Minority ASC Entity shall have executed and delivered to the Person making the Investment a demand note (the “Minority ASC Intercompany Note”) to evidence any such Minority ASC Investment, which Minority ASC Intercompany Note shall be in form and substance satisfactory to Agent and pledged to the Agent, (ii) the payee shall record all Minority ASC Investments on its books and records in a manner satisfactory to Agent, and (iii) at the time any such Minority ASC Investment is made and after giving effect thereto, each of the Person making the Investment and the payor shall be Solvent;

	 
	 	-63-	 
	

	 

 

(n)     Investments consisting of Minority ASC Investments in excess of the amounts permitted by clause (m) above, but in any event not to exceed $2,000,000 in the aggregate when aggregated with amounts outstanding and permitted by clause (m) above provided
, that any such Minority ASC Investments permitted pursuant to this clause (n) shall be secured by a perfected first priority lien on the assets of such Minority ASC Entity, the scope of which lien shall be satisfactory to the Agent and which lien shall be assigned to the Agent;

 

(o)     Investments by the Borrower and its Subsidiaries in ASC Startups in an amount not to exceed $5,000,000 (unless consented to by the Required Lenders) at any one time outstanding; provided, once the Borrower has sold an equity interest in an ASC Startup as permitted under Section 7.2.9(c), the Investment in the ASC Startup shall no longer be
considered as "outstanding" for purposes of this clause (n);

 

 

(p)     other Investments in Minority ASC Entities of the type not listed above in an amount not to exceed $5,000,000 in the aggregate outstanding for any such Investments permitted pursuant to this clause (p) when aggregated with any Investments outstanding and permitted under Section 7.2.5(e)(3) above; 

 

provided, however, that

 

(q)     any Investment which when made complies with the requirements of the definition of the term “Cash Equivalent Investment” may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and

 

(r)     no Investment otherwise permitted by clauses (e), (f), (g), 
(h), (i), (j) (m), (n), (o) or 
(p) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall exist and be continuing.

 

SECTION 7.2.6  Restricted Payments, etc. On and at all times after the Original Closing Date:

 

(a)     The Borrower will not, and will not permit any of its Subsidiaries to, declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of the Borrower or such Subsidiary or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower or such Subsidiary (other than in the case of (I) the Borrower (x) dividends or distributions payable in its common stock or warrants to purchase its common stock or splitups or reclassifications of its stock into additional or
other shares of its common stock, (y) scheduled dividend payments on its preferred stock so long as no Default or Event of Default has occurred and is continuing both before and after giving effect to the payment of such dividend and (z) distributions to any Subsidiary which is a limited liability company of the Borrower solely to permit the members thereof to make payment of its federal and state income tax liability attributable to such limited liability company’s taxable income, whether or not a Default or an Event of Default then or (II) any Subsidiary which is a limited liability company or limited partnership, distributions to members of any such Subsidiary solely to permit such members to make payment of their federal and state income tax liability attributably to such member’s taxable income of such Subsidiary whether or not a Default or an Event of Default than exists) or apply, or permit any of its Subsidiaries to apply,
any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree or permit any of its Subsidiaries to purchase or redeem, any shares of any class of capital stock (now or hereafter outstanding) of the Borrower, or warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower, except that, (A), in addition to distributions permitted pursuant to clause (a)(II) above, any Subsidiary of the Borrower may declare and pay cash dividends and distributions to its equity holders and (B) so long as no Default or Event of Default then exists or would result therefrom and so long as the Borrower would be able to comply on a pro forma basis, assuming such
redemption or purchase occurred, with all of the covenants contained in this Agreement, the Borrower may redeem or purchase shares of its stock held by former employees of the Borrower or any of its Subsidiaries following their death, disability or the termination of their employment;

	 
	 	-64-	 
	

	 

 

(b)     Borrower will not, and will not permit any of its Subsidiaries to:

 

(i) make any payment or prepayment of principal of, or make any payment of interest on, any Subordinated Debt or on any put option granted to a holder of Subordinated Debt on any day other than the stated, scheduled date for such payment or prepayment set forth in the documents and instruments memorializing such Subordinated Debt or such put option, or which would violate the subordination provisions of such Subordinated Debt or such put option, or while any Default or Event of Default exists and is continuing both before and after giving effect to such payment; or

 

(ii) redeem, purchase or defease any Subordinated Debt other than Subordinated Debt held by a Target, so long as no Default or Event of Default exists or is continuing both before and after giving effect to such redemption, purchase or defeasance; and

 

(c)     Borrower will not, and will not permit any Subsidiary to, make any sinking fund payment or deposit for any of the foregoing purposes.

(d)     Notwithstanding anything else herein to the contrary, Borrower may redeem or receive Permitted Seller Equity in connection with a Permitted Asset Disposition.

	 
	 	-65-	 
	

	 

 

(e)     Notwithstanding anything else herein to the contrary, Borrower may repurchase and redeem its common stock provided that (i) the aggregate amount of all such repurchases shall made on and after the Fourth Amended and Restated Effective Date shall not exceed $5,000,000, (ii) any offer to repurchase and any such repurchase shall be conducted in compliance with all applicable federal and state securities laws, and (iii) upon completion of such repurchase, such common stock repurchased shall be retired into treasury by Borrower. In addition to using cash to effectuate such repurchases, such repurchases of Borrower’s
common stock may also include common stock received by Borrower or its Subsidiaries as consideration for Permitted Equity Ownership Sales. For purposes of measuring the effect of such repurchases on the aforementioned $5,000,000 cap, the value of the common stock retired in a Permitted Equity Ownership Sale will be the average closing price of Borrower’s common stock during the 30-trading day period immediately preceding such Permitted Equity Ownership Sale.

 

SECTION 7.2.7  Intentionally Omitted.

 

SECTION 7.2.8  Consolidation, Merger, etc. (a) The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except:

 

(a)     any such Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any Wholly-Owned Subsidiary of the Borrower or any Guarantor, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any Wholly-Owned Subsidiary of the Borrower or any Guarantor provided, however
, that the Subsidiaries listed on Schedule 7.2.8 hereto may dissolve to the extent that the assets and liabilities of such Subsidiaries are de-minimus; 

 

(b)     so long as no Default or Event of Default exists and is continuing or would occur after giving effect thereto, the Borrower or any Wholly-Owned Subsidiary of the Borrower (or in the case of the purchase of an ASC Facility, the Borrower or any Subsidiary of the Borrower) may consummate a Permitted Acquisition; and

 

(c)     any Subsidiary may liquidate or dissolve into or merge with or into any other Person, provided that, after giving effect thereto (i) no Default or Event of Default shall exist or be continuing; (ii) the Net Worth of the surviving Person shall be at least equal to the Net Worth of the applicable Subsidiary immediately prior to the consummation of any such liquidation, dissolution or merger and (iii) the surviving Person shall assume all Obligations of the applicable Subsidiary under the Loan Documents.

 

SECTION 7.2.9 Asset and Capital Stock Dispositions, etc.(a) The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any substantial part of its assets (including accounts receivable and capital stock of Subsidiaries) to any Person, unless:

 

(i) such sale, transfer, lease, contribution or conveyance is in the ordinary course of its business or is permitted by Section 7.2.9(b); 

	 
	 	-66-	 
	

	 

 

(ii) the net book value of such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed otherwise than in the ordinary course of business by the Borrower or any of its Subsidiaries pursuant to this clause since the Fourth Amended and Restated Effective Date, does not exceed $1,000,000 (exclusive of the value of any transaction described in the preceding clause (i)); or

 

(iii) the Borrower or any Subsidiary of the Borrower may consummate a Permitted Asset Disposition.

 

(b)     the Borrower will not, and will not permit any of its Subsidiaries to, issue, sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity securities in the Borrower or any such Subsidiary (other than pursuant to this Agreement or any other Loan Document), including warrants, rights or options to acquire shares or other equity securities of the Borrower or any of its Subsidiaries; provided that, notwithstanding
the foregoing, and so long as no Default or Event of Default will result therefrom:

 

(i) (x) the Borrower may issue capital stock (or warrants, rights or options to purchase capital stock) of the Borrower in connection with a Permitted Acquisition and (y) a Subsidiary of the Borrower may undertake a Permitted Equity Ownership Sale;

 

(ii) the Borrower may issue common stock of the Borrower to a Provider upon the conversion of Subordinated Debt held by such Provider into common stock of the Borrower pursuant to the terms and conditions contained in the documentation governing such Subordinated Debt;

 

(iii) the Borrower may issue common stock of the Borrower in connection with a registered offering, provided, however, that the Borrower shall have delivered a certified copy of each agreement, document or other instrument (including, without limitation, any registration statement and underwriting agreement) entered into by the Borrower in connection with such registered offering; 

 

(iv) the Borrower may issue capital stock, and related options, of the Borrower to any permitted participant under Borrower’s stock incentive plans or to any permitted participant under any future stock incentive plans established by the Borrower and reasonably acceptable to the Agent;

	 
	 	-67-	 
	

	 

 

(v) the Borrower may issue capital stock (or warrants, rights or options to purchase capital stock) of the Borrower so long as in connection with a private placement of its capital stock the consideration received by the Borrower in connection with such sale is (x) for fair market value (as determined by the Board of Directors of the Borrower) and (y) paid in immediately available funds;

 

(vi) the Borrower or any Subsidiary may consummate a Permitted Asset Disposition.

 

(c) The Borrower or any Subsidiary may consummate Permitted Equity Ownership Sales consisting of interests in ASC Startups. 

 

To the extent the Required Lenders waive the provisions of this Section 7.2.9 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 7.2.9, such Collateral shall be sold free and clear of the Liens created by the Collateral Documents and, if requested by the Borrower, the Guarantor owner of such Collateral shall be released from the Guaranty,
and the portion of the Collateral owned by such Guarantor shall be released from the Guarantor Security Agreement and the Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing.

 

SECTION 7.2.10  Modification of Certain Agreements. Except as otherwise permitted pursuant to a Permitted Asset Disposition or Section 7.1.7 hereof, the Borrower will not, and will not permit any of its Subsidiaries to, consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, its
Organizational Documents, any document, once entered into, relating to a Permitted Acquisition, other than any amendment, supplement or other modification that conforms with applicable laws in all material respects and is not material or does not have an adverse effect on the Lenders as Lenders under the Loan Documents, or any document or instrument evidencing or applicable to any Subordinated Debt or any put option granted to the holders of Subordinated Debt, other than any amendment, supplement or other modification which extends the date or reduces the amount of any required repayment or redemption. Notwithstanding anything else in this Section 7.2.10 to the contrary, the Borrower and its Subsidiaries may terminate or make any necessary modification to
 the Organizational Documents which is the subject of a Permitted Asset Disposition. 

 

SECTION 7.2.11  Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates (other than a Subsidiary Guarantor) unless such arrangement or contract is (i) is entered into in connection with a Permitted Asset Disposition or (ii) fair and equitable to the Borrower or such Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person
in the position of the Borrower or such Subsidiary with a Person which is not one of its Affiliates.

	 
	 	-68-	 
	

	 

SECTION 7.2.12  Negative Pledges, Restrictive Agreements, etc. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement, any other Loan Document and any agreement governing any Indebtedness permitted either by clause (b) of 
Section 7.2.2 as in effect on the Fourth Amended and Restated Effective Date or by clause (d) of Section 7.2.2 as to the assets financed with the proceeds of such Indebtedness) prohibiting:

 

(a)     the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or the ability of any Credit Party to amend or otherwise modify this Agreement or any other Loan Document; or

 

(b)     the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrower by way of dividends, distributions, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower.

ARTICLE VIII

 

EVENTS OF DEFAULT

SECTION 8.1  Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an “Event of Default”.

	 
	 	-69-	 
	

	 

 

SECTION 8.1.1  Non-Payment of Obligations. The Borrower shall default in the payment or prepayment when due of any principal of or interest on any Loan or any reimbursement obligation when due, or the Borrower shall default (and such default shall continue unremedied for a period of five days) in the payment when due of any commitment fee or other fee or of any other Obligation.

 

SECTION 8.1.2  Breach of Warranty. Any representation or warranty of any Credit Party made or deemed to be made hereunder or in any other Loan Document executed by it, any Letter of Credit or any other writing or certificate furnished by or on behalf of any Credit Party to the Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document or Letter of Credit (including any certificates delivered pursuant to Article V
) is or shall be incorrect when made in any material respect.

 

SECTION 8.1.3  Non-Performance of Certain Covenants and Obligations. Any Credit Party shall default in the due performance and observance of any of its obligations under Sections 7.1.1, 7.1.7, 
7.1.8, 7.1.11, 7.1.12 or Section 7.2 (exclusive of Section 7.2.4(d)).

 

SECTION 8.1.4  Non-Performance of Other Covenants and Obligations. Any Credit Party shall default in the due performance and observance of any other agreement (other than Section 7.2.4(d)) contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower by the Agent or any Lender.

 

SECTION 8.1.5  Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 8.1.1) of any Subsidiary having a principal amount, individually or in the aggregate, in excess of $1,000,000, or a default
shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity.

 

SECTION 8.1.6  Judgments. Any judgment or order for the payment of money in excess of $1,000,000 shall be rendered against any Subsidiary (which judgment is not covered by insurance and with respect to such judgment an insurance carrier has not accepted responsibility for coverage) and either:

 

(a)     enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or

 

(b)     there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.

	 
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SECTION 8.1.7  Pension Plans. Any of the following events shall occur with respect to any Pension Plan:

 

(a)     the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member reasonably would be expected to be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $2,000,000; or

 

(b)     a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.

 

SECTION 8.1.8  Change of Control. Any Change of Control shall occur.

 

SECTION 8.1.9  Bankruptcy, Insolvency, etc. The Borrower or any Subsidiary shall:

 

(a)     become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, its debts as they become due;

 

(b)     apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for such Person or any property of such Person, or make a general assignment for the benefit of creditors;

 

(c)     in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for such Person or for a substantial part of the property of such Person, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that the Borrower hereby expressly authorizes the Agent and each Lender to appear in any court conducting any
relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents;

 

(d)     permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of such Person, and, if any such case or proceeding is not commenced by such Person, such case or proceeding shall be consented to or acquiesced in by such Person or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided
 that the Borrower hereby expressly authorizes the Agent and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or

 

(e)     take any action authorizing, or in furtherance of, any of the foregoing.

	 
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SECTION 8.1.10  Impairment of Security, etc. Any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms or pursuant to Section 7.2.9), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Credit Party thereto; any Credit Party or any other party shall, directly or indirectly, contest in any manner the effectiveness, validity, binding nature or enforceability of any Loan Document or Lien granted thereunder; or any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document.

 

SECTION 8.1.11  Fraud and Abuse Laws. Receipt by the Borrower or any Subsidiary of a notice from a governmental authority or third party payor that it intends to disallow requested reimbursements, or intends to demand or demands adjustment or repayment of past reimbursements in excess of three percent (3%) of the gross revenues of the Borrower for the previous fiscal quarter respecting amounts submitted for reimbursement or collected by such Person from participation in the Medicare, Medicaid or third party payor programs
if the gross revenues (determined in accordance with GAAP) to such Person arising from the affected Person exceed one-half percent (1⁄2%) of the gross revenues (determined in accordance with GAAP) of the Borrower for the previous Fiscal Quarter.

 

SECTION 8.1.12  Certifications. (i) Revocation, suspension or involuntary cancellation or termination of any Medicare Certification, Medicare Provider Agreement, Medicaid Certification, Medicaid Provider Agreement or third party payor certification, if any, or agreement of or affecting the Borrower or any Subsidiary, or (ii) the loss of any other permits, licenses, authorizations, certifications or approval from any federal, state or local governmental authority or termination of any contract with any such authority by the Borrower
or any Subsidiary, in either case which cancellation, revocation, suspension or termination, (x) continues for a period greater than 60 days and (y) results in the suspension or termination of operations of the Borrower or any Subsidiary or in the failure of the Borrower or any Subsidiary to be eligible to participate in Medicare, Medicaid or third party payor programs or to accept assignments of rights to reimbursement under Medicaid Regulations, Medicare Regulations or guidelines established by a third party payor, provided that any such events described in this Section 8.1.12 shall result
either singly or in the aggregate in the termination, cancellation, revocation, suspension or material impairment of operations or rights to reimbursement which produce three percent (3%) or more of the Borrower’s gross revenues (determined in accordance with GAAP).

 

SECTION 8.2  Action if Bankruptcy. If any Event of Default described in clauses (a) through (e) of 
Section 8.1.9 shall occur, the Revolving Commitments (if not theretofore terminated) and the obligation of the Letter of Credit Issuer to issue Letters of Credit shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand.

	 
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SECTION 8.3  Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (a) through (e) of 
Section 8.1.9) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Revolving Commitments (if not theretofore terminated) and/or the obligation of the Letter of Credit Issuer to issue Letters of Credit to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Revolving Commitments shall terminate.

 

SECTION 8.4  Letters of Credit. In addition to the foregoing, following the occurrence and during the continuance of an Event of Default, so long as any Letter of Credit has not been fully drawn and has not been canceled or expired by its terms, upon demand by the Lenders, the Borrower shall deposit in an account (the “Letter of Credit Cash Collateral Account”
) maintained with National City in the name of the Agent, for the benefit of itself and the Lenders, cash in an amount equal to the aggregate undrawn face amount of all outstanding Letters of Credit and all fees and other amounts due or which may become due with respect thereto. The Borrower shall have no control over funds in the Letter of Credit Cash Collateral Account, which funds shall be invested by the Agent from time to time in its discretion in certificates of deposit of National City having a maturity not exceeding thirty days. Such funds shall be promptly applied by the Agent to reimburse the Letter of Credit Issuer for drafts drawn from time to time under the Letters of Credit. Such funds, if any, remaining in the Letter of Credit Cash Collateral Account following the payment of all Obligations in full or the earlier termination of all Events of Default shall, unless the Agent is otherwise directed by a court
of competent jurisdiction, be promptly paid over to the Borrower.

 

ARTICLE IX

 

THE AGENT

 

SECTION 9.1  Actions. Each Lender hereby appoints National City as its Agent under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes the Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required
Lenders received from time to time by the Agent (with respect to which the Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Agent, pro rata according to such Lender’s Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys’ fees, and as to which the Agent is not reimbursed by the Borrower; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding
to have resulted solely from the Agent’s gross negligence or willful misconduct. The Agent shall not be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute
or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Agent shall be or become, in the Agent’s determination, inadequate, the Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given.

	 
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SECTION 9.2  Funding Reliance, etc. Unless the Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., Chicago time, on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Agent may assume that such Lender has made such amount available to the Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such
Lender shall not have made such amount available to the Agent, such Lender and the Borrower severally, without duplication, agree to repay the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Agent made such amount available to the Borrower to the date such amount is repaid to the Agent, at the interest rate applicable at the time to Loans comprising such Borrowing.

 

SECTION 9.3  Exculpation. Neither the Agent nor any of its directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document,
nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by the Agent shall not obligate it to make any further inquiry or to take any action. The Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Agent believes to be
genuine and to have been presented by a proper Person.

	 
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SECTION 9.4  Successor. The Agent may resign as such at any time upon at least 30 days’ prior notice to the Borrower and all Lenders. If the Agent at any time shall resign, the Required Lenders, with, so long as no Default or Event of Default exists and is continuing, the consent of the Borrower, may appoint another Lender as a successor Agent which shall thereupon become the Agent hereunder. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within
30 days after the retiring Agent’s giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent’s resignation
hereunder as the Agent, the provisions of

(i)     this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement; and

 

(ii)     Section 10.3 and Section 10.4 shall continue to inure to its benefit.

 

SECTION 9.5  Loans by National City. National City shall have the same rights and powers with respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Agent. National City and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of Borrower as if National City were not the Agent hereunder.

SECTION 9.6  Credit Decisions. Each Lender acknowledges that it has, independently of the Agent and each other Lender, and based on such Lender’s review of the financial information of each Credit Party, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Revolving Commitment. Each Lender also acknowledges that it will,
independently of the Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document.

	 
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SECTION 9.7  Copies, etc. The Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Agent by any Credit Party pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by such Credit Party). The Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Agent from any Credit Party for distribution to the Lenders by the Agent in accordance with the terms of this Agreement.

ARTICLE X

 

MISCELLANEOUS PROVISIONS

 

SECTION 10.1  Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, 
however, that no such amendment, modification or waiver which would:

 (a)     modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender;

 

(b)     modify this Section 10.1, change the definition of “Required Lenders”, increase the Revolving Commitment Amount or the Percentage of any Lender, reduce any fees described in Article III
, change the schedule of repayments of Loans provided for in Section 3.1.2, release any Guarantor from its obligations pursuant to any Guaranty (except in connection with a Permitted Asset Disposition or as otherwise permitted hereby, in which such cases no consent of any Lender is required), release all or substantially all of the collateral security (except in connection with a Permitted Asset Disposition or as otherwise permitted hereby, in which such cases no consent of any Lender is required), except as otherwise specifically provided in any Loan Document or extend the Revolving Commitment Termination Date or Maturity Date shall be made without the consent of each Lender and each holder of a
Note;

 

(c)     extend the due date for, or reduce the amount of, any scheduled repayment or prepayment of principal of or interest on any Loan or any fee payable to a Lender (or reduce the principal amount of or rate of interest on any Loan) shall be made without the consent of the holder of that Note evidencing such Loan or Lender entitled to such fee;

 

(d)     affect adversely the interests, rights or obligations of the Agent qua the Agent shall be made without consent of the Agent; or

 

(e)     modify Section 2.7 or 8.4 shall be made without the consent of the Letter of Credit Issuer.

	 
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No failure or delay on the part of the Agent, any Lender or the holder of any Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on any Credit Party in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Agent, any Lender or the holder of any Note under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.

 

SECTION 10.2  Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile transmission and addressed, delivered or transmitted to such party at its address, facsimile number transmission set forth below in Schedule 10.2 hereto or set forth in the Lender Assignment Agreement or at such other address,
or facsimile transmission number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile transmission, shall be deemed given when transmitted, provided such notice is delivered or facsimile transmitted during regular business hours on a Business Day.

SECTION 10.3  Payment of Costs and Expenses. The Borrower agrees to pay on demand all reasonable expenses of the Agent (including the reasonable fees and out-of-pocket expenses of counsel to the Agent and of local counsel, if any, who may be retained by counsel to the Agent) in connection with:

(i) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated, and

 

(ii) the filing, recording, refiling or rerecording of any Security Document and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of such Security Document, and

 

(iii) the preparation and review of the form of any document or instrument required by this Agreement or any other Loan Document.

 

The Borrower further agrees to pay, and to save the Agent and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or any other Loan Documents. The Borrower also agrees to reimburse the Agent and each Lender upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys’ fees and legal expenses) incurred by the Agent or such Lender in connection with (x) the negotiation of any restructuring or “work-out”, whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. Notwithstanding anything contained herein to the contrary, the Borrower shall not be
responsible for any costs or expenses incurred by the Agent or any Lender in connection with the transactions contemplated by either of Section 10.11(a) or 10.11(b) hereof.

	 
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SECTION 10.4  Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Revolving Commitments and the making of the Loans, the Borrower hereby indemnifies, exonerates and holds the Agent and each Lender and each of their respective officers, directors, employees and agents (collectively, the “Indemnified Parties”)
free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys’ fees and disbursements (collectively, the “Indemnified Liabilities”), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to:

(i)     any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan;

 

(ii)     the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article V not to fund any Borrowing);

 

(iii)     any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Borrower of all or any portion of the stock or assets of any Person, whether or not the Agent or such Lender is party thereto;

 

(iv)     any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by Borrower or any of its Subsidiaries of any Hazardous Material; or

 

(v)     the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Borrower or such Subsidiary,

	 
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except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party’s gross negligence or willful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

 

SECTION 10.5  Survival. The obligations of the Borrower under Sections 4.3, 4.4, 4.5
, 4.6 and 10.3 and 10.4, and the obligations of the Lenders under Section 9.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Revolving Commitments.
The representations and warranties made by the Borrower in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document.

 

SECTION 10.6  Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.

 

SECTION 10.7  Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof.

 

SECTION 10.8  Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by the Borrower and the Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and each Lender (or notice thereof satisfactory to the Agent) shall have been received by the Agent and notice thereof shall have been given by the Agent to the Borrower and each Lender.

 

SECTION 10.9  Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.

	 
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SECTION 10.10  Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that:

(i)     the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Agent and all Lenders; and

 

(ii)     the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11.

 

SECTION 10.11  Sale and Transfer of Loans and Note; Participations in Loans and Note. Each Lender may assign, or sell participations in, its Loans and Revolving Commitment to one or more other Persons in accordance with this Section 10.11.

 

SECTION 10.11.1  Assignments. Any Lender:

 

(i)     with the written consent of the Agent and, provided no Event of Default then shall exist or be continuing, the Borrower (which consent shall not be unreasonably delayed or withheld) may at any time assign and delegate to one or more commercial banks or other financial institutions, and

 

(ii)     with notice to the Borrower and the Agent, but without the consent of the Borrower or the Agent, may assign and delegate to any of its Affiliates or to any other Lender,

 

(each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an “Assignee Lender”), all or any fraction of such Lender’s total Loans and Revolving Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender’s Loans and Revolving Commitment) in a minimum aggregate amount of $5,000,000 (or such lesser amount to the extent that after giving effect to such assignment such Lender’s total
Loans and Revolving Commitment is reduced to zero); provided, however, that any such Assignee Lender will comply, if applicable, with the provisions contained in the penultimate sentence of Section 4.6, and provided 
further, however, that, the Borrower and the Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until:

 

(iii)     written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower and the Agent by such Lender and such Assignee Lender,

 

(iv)     such Assignee Lender shall have executed and delivered to the Borrower and the Agent a Lender Assignment Agreement, accepted by the Agent, and

 

(v)     the processing fees described below shall have been paid.

	 
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From and after the date that the Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within five Business Days after its receipt of notice
that the Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver to the Agent (for delivery to the relevant Assignee Lender) a new Note evidencing such Assignee Lender’s assigned Loans and Revolving Commitment and, if the assignor Lender has retained Loans and a Revolving Commitment hereunder, a replacement Note in the principal amount of the Loans and Revolving Commitment retained by the assignor Lender hereunder (such Note to be in exchange for, but not in payment of, that Note then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Note. The assignor Lender shall mark the predecessor Note “exchanged” and deliver it to the Borrower. Accrued interest on that part of the predecessor Note evidenced by the new Note, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor
Note evidenced by the replacement Note shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Note and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee to the Agent upon delivery of any Lender Assignment Agreement in the amount of $3,500. Any attempted assignment and delegation not made in accordance with this Section 10.11.1 shall be null and void.

 

SECTION 10.11.2  Participations. Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a “Participant”) participating interests in any of the Loans, its Revolving Commitment, or other interests of such Lender hereunder; 
provided, however, that:

 

(i)     no participation contemplated in this Section 10.11 shall relieve such Lender from its Revolving Commitment or its other obligations hereunder or under any other Loan Document,

 

(ii)     such Lender shall remain solely responsible for the performance of its Revolving Commitment and such other obligations,

 

(iii)     the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and each of the other Loan Documents,

 

(iv)     no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant’s consent, take any actions of the type described in clause (b) or 
(c) of Section 10.1, and

	 
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(v)     the Borrower shall not be required to pay any amount under Section 4.6 that is greater than the amount which it would have been required to pay had no participating interest been sold.

 

The Borrower acknowledges and agrees that each Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6
, 4.8, 4.9, 10.3 and 10.4, shall be considered a Lender.

 

SECTION 10.12  Confidentiality. The Lenders shall hold all non-public information (which has been identified as such by Borrower) obtained pursuant to the requirements of this Agreement in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure to any of their examiners, Affiliates, outside auditors, counsel and other professional advisors in connection with this Agreement or as reasonably required by any 
bona fide transferee, participant or assignee or as required or requested by any governmental agency or representative thereof or pursuant to legal process; provided, however, that:

(i)     unless specifically prohibited by applicable law or court order, each Lender shall notify the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information;

 

(ii)     prior to any such disclosure pursuant to this Section 10.12, each Lender shall require any such bona fide transferee, participant and assignee receiving a disclosure of non-public information to agree in writing:

 

(1)     to be bound by this Section 10.12; and

 

(2)     to require such Person to require any other Person to whom such Person discloses such non-public information to be similarly bound by this Section 10.12; and

 

(iii)     except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, no Lender shall be obligated or required to return any materials furnished by any Credit Party.

 

(iv)     to the extent necessary to comply with HIPAA, the Lenders and Borrower shall execute a Business Associate Agreement pursuant to HIPAA attached hereto as Exhibit L, to protect the Borrower’s disclosure of individually identifiable health information to the Lenders. 

	 
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SECTION 10.13  Other Transactions. Nothing contained herein shall preclude the Agent or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which Borrower or such Affiliate is not restricted hereby from engaging with any other Person.

SECTION 10.14  Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR ANY CREDIT PARTY SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH SUCH CREDIT PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

	 
	 	-83-	 
	

	 

 

SECTION 10.15  Waiver of Jury Trial. THE AGENT, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.

* * *

	 
	 	-84-	 
	

	 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

 

	 	 	 
	 	NOVAMED, INC.
	 
 	 
 	 
 
		By:  	/s/ Stephen J. Winjum
	 	

	 	Title: President

 

	 	 	 
	 	NATIONAL CITY BANK OF
THE MIDWEST,
	 	
Individually as a Lender, as Letter of Credit

Issuer and as Agent

	 
 	 
 	 
 
		By:  	 /s/ James M. Kershner
	 	

	 	Title: Vice President

 

	 	 	 
	 	LASALLE BANK NATIONAL ASSOCIATION 
	 	Individually as a Lender
	 
 	 
 	 
 
		By:  	/s/ Sam L. Dendrinos
	 	

	 	Title: First Vice President

 

	 	 	 
	 	THE NORTHERN TRUST COMPANY 
	 	Individually as a Lender
	 
 	 
 	 
 
		By:  	/s/ Yvette D. Taylor
	 	

	 	Title: Vice President

	 
	 	-85-

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