Document:

EXHIBIT
      10.1

     

    LOAN
      AND SECURITY AGREEMENT

     

    This
      Loan
      and Security Agreement (“Agreement”)
      is
      dated this 20TH
      day of
      September, 2007, by and among NEW
      YORK HEALTH CARE, INC.
      a New
      York corporation (“NYH”),
      and
      such other Persons joined hereto as a Borrower from time to time (together
      with
      NYH, collectively, “Borrowers”
      and each
      individually a “Borrower”)
      and
CIT
      HEALTHCARE LLC,
      a
      Delaware limited liability company as lender (“Lender”).

     

    BACKGROUND

     

    A. Borrowers
      have requested that Lender make available to them, on a joint and several basis,
      a Credit Facility in the maximum amount of $5,000,000 which will be secured
      by a
      first priority perfected security interest in the Accounts and other Collateral
      of Borrowers. Lender is willing to make the Credit Facility available to
      Borrowers pursuant to the terms and provisions hereinafter set forth.

     

    B. The
      parties desire to set forth the terms and conditions of their relationship
      to
      writing.

     

    NOW,
      THEREFORE, the parties hereto, intending to be legally bound, hereby agree
      as
      follows:

     

    SECTION
      1. DEFINITIONS
      AND INTERPRETATION

     

    1.1 Terms
      Defined:
      As
      used
      in this Agreement, the following terms have the following respective
      meanings:

     

    “Account(s)”
means
      (a) all accounts, payment intangibles, instruments, chattel paper and all other
      rights of Borrowers to receive payments including without limitation, the third
      party reimbursable portion of accounts receivable owing to a Borrower arising
      out of the delivery by such Borrower of medical, surgical, diagnostic, treatment
      or other professional or medical or healthcare related services and/or the
      supply of goods related to any of such services (whether such services are
      supplied by a Borrower or a third party), including without limitation all
      health-care-insurance-receivables and all other rights to reimbursement under
      any agreements with an Obligor, (b) all accounts, general intangibles, rights,
      remedies, guarantees, supporting obligations, letter of credit rights, and
      security interests in respect of the foregoing and, all rights of enforcement
      and collection, all books and records evidencing or related to the foregoing,
      and all rights under this Agreement in respect of the foregoing, (c) all
      information and data compiled or derived by such Borrower in respect of such
      accounts receivable (other than any such information and data subject to legal
      restrictions of patient confidentiality), and (d) all proceeds of any of the
      foregoing.

     

    “Accounts
      Detail File”
has
      the
      meaning set forth in Section 2.2(b) hereof.

     

    “Advance(s)”
means
      any monies advanced or credit extended, including without limitation the Loans
      to or for the benefit of Borrowers, or any of them by Lender, under the Credit
      Facility.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Advance
      Rate”
means
      85% or such other percentage(s) resulting from an adjustment pursuant to Section
      2.1(d) below.

     

    “Affiliate”
means
      with respect to any Person (the “Specified
      Person”),
      (a)
      any Person which directly or indirectly controls, or is controlled by, or is
      under common control with, the Specified Person, and (b) any partner, director
      or officer (or, in the case of a Person which is not a corporation, any
      individual having analogous powers) of the Specified Person or of a Person
      who
      is an Affiliate of the Specified Person within the meaning of the preceding
      clause (a). For purposes of the preceding sentence, “control” of a Person shall
      mean the possession, directly or indirectly, of the power to direct or cause
      the
      direction of the management or policies of such Person, or direct or indirect
      ownership (beneficially or of record) of, or direct or indirect power to vote,
      10% or more of the outstanding shares of any class of capital stock of such
      Person (or in the case of a Person that is not a corporation, 10% or more of
      any
      class of partnership or other equity interest).

     

    “Authorized
      Officer”
means
      any officer, member or partner of a Borrower authorized by specific resolution
      of Borrower to request Loans as set forth in the incumbency certificate referred
      to in Section 4.1(d) of this Agreement.

     

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

     

    “BioBalance”
means
      BioBalance Corp., a Delaware corporation and a wholly owned Subsidiary of the
      Borrower.

     

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

     

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

     

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

     

    “Borrowing
      Base Report”
has
      the
      meaning set forth in Section 2.2(b) hereof.

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “CHAMPUS”
means
      the Civilian Health and Medical Program of the Uniformed Service, a part of
      TRICARE, a medical benefits program supervised by the U.S. Department of
      Defense.

     

    “Closing”
has
      the
      meaning set forth in Section 4.6 hereof.

     

    “Closing
      Date”
has
      the
      meaning set forth in Section 4.6 hereof.

     

    “Collateral”
has
      the
      meaning set forth in Section 3.1 hereof.

     

    “Collection
      Days” shall
      mean a period of three (3) Business Day(s) after the deposit of Collections
      into
      the Collection Account, for which interest may be charged on the aggregate
      amount of such deposits at the rate provided for in Section 2.3 (a) (or Section
      2.3(b) if applicable) hereof.

     

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

     

    “Collection
      Account”
has
      the
      meaning set forth in Section 2.7(a) hereof.

     

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

     

    “Commitment
      Fee”
has
      the
      meaning set forth in Section 2.8 hereof.

     

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

     

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

     

    “Credit
      Facility”
has
      the
      meaning set forth in Section 2.1(a) hereof.

     

    “Default
      Rate”
means
      300 basis points above the interest rate otherwise applicable on the
      Loans.

     

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

     

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

     

    “Distribution”
means
      (a) dividends or other distributions on capital stock or partnership or other
      equity interests of a Borrower; (b) the redemption, repurchase or acquisition
      of
      such stock or partnership or other equity interests or of warrants, rights
      or
      other options to purchase such stock or partnership or other equity interest;
      and (c) loans made to any Shareholders, officers, directors and/or Affiliates
      of
      such Borrower.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Download
      Date”
has
      the
      meaning set forth in Section 2.2(b) hereof.

     

    “EBITDA”
means
      in any period, all earnings of the Borrowers for said period before all
      interest, tax obligations and amortization and depreciation of the Borrowers
      for
      said period, determined in accordance with GAAP on a consistent basis with
      the
      latest audited financial statements of the Company, but excluding the effect
      of
      non-operating income and extraordinary or non-reoccurring gains or losses for
      such period. 

     

    “Eligible
      Account”
means
      an Account of a Borrower:

     

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

     

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

     

    (c) the
      Obligor of which has received a letter substantially in the form of Exhibit
      4.2A,
      (in the case of all Accounts other than Government Accounts), or a letter
      substantially in the form of Exhibit
      4.2B
      (in the case of all Government Accounts), 

     

    (d) in
      an aggregate amount, as relating to an individual Obligor, not more than
      $300,000, denominated and payable in dollars in the United States; provided,
      however,
      that with
      respect to an
      Obligor which is (i) a commercial insurance company rated by S&P as AAA or
      AA, or (ii) CHAMPUS, Medicare or Medicaid, the limitation set forth in this
      subsection (d) shall not apply; 

     

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

     

    (f) the
      Account has been billed;

     

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

     

    (h) which
      is
      not outstanding more than 150 days past the Billing Date in the case of Accounts
      that have been billed; provided
      that in
      no event may the Account be outstanding more than 195 days past the date the
      corresponding services and/or goods were provided,

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

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

     

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

     

    (l) the
      Obligor of which is not HRA.

     

    “Estimated
      Net Value”
or
      “ENV”
means
      on any date of calculation with respect to any Account an amount equal to the
      anticipated cash collections as calculated by Lender using the Value Track
      SystemTM (which system periodically adjusts such amount to reflect Lender’s
      evaluation of the performance of similar Accounts and to reflect payments
      received with respect thereto), except that if Lender determines that all
      Obligor payments with respect to an Account have been made or if an Account
      has
      become a Defaulted Account, the ENV of such Account shall be zero. 

     

    “Event
      of Default”
has
      the
      meaning set forth in Section 8.1 hereof.

     

    “Expenses”
has
      the
      meaning set forth in Section 9.5 hereof.

     

    “Fixed
      Charge Coverage Ratio”
means
      for any period, the ratio of (a) EBITDA for such period to (b) Fixed Charges
      paid during such period. 

     

    “Fixed
      Charges”
means,
      without duplication, for any period, (a) the aggregate of all cash interest
      expense paid during such period, plus
      (b)
      scheduled payments of principal with respect to Indebtedness (including capital
      lease obligations) payable during the next twelve (12) months, and plus
      (c)
      Distributions paid or payable during such period (other than Distributions
      paid
      to BioBalance as permitted in Section 7.10), and plus
      (d)
      income taxes paid or payable in cash with respect to such period.

     

    “Funding
      Date”
has
      the
      meaning set forth in Section 2.2(a) hereof.

     

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

     

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

     

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

     

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

     

    “HRA”
means
      the New York City Human Resources Administration.

     

    “Indebtedness”
of
      a
      Person at a particular date shall mean all liabilities and obligations of such
      Person, including without limitation, those which in accordance with GAAP would
      be classified upon a balance sheet as liabilities and all other indebtedness,
      debt and other similar monetary obligations of such Person whether direct or
      guaranteed, contingent or liquidated, matured or unmatured and all premiums,
      if
      any, due at the required prepayment dates of such any indebtedness, and all
      indebtedness secured by a lien on assets owned by such Person, whether or not
      such indebtedness actually shall have been created, assumed or incurred by
      such
      Person. Any indebtedness of such Person resulting from the acquisition by such
      Person of any assets subject to any lien shall be deemed, for the purposes
      hereof, to be the equivalent of the creation, assumption and incurring of the
      indebtedness secured thereby, whether or not actually so created, assumed or
      incurred.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

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

     

    “Initial
      Term”
has
      the
      meaning set forth in Section 2.1(c).

     

    “JCAHO”
means,
      as the context requires, the Joint Commission for Accreditation of Healthcare
      Organizations, the Community Health Accreditation Program, Inc., Accreditation
      for Health Care, Inc., and/or any other organization (or any successor entity
      or
      entities charged with performing its/their functions) recognized by the Centers
      for Medicare and Medicaid Services as having authority to provide accreditations
      to providers of home health services and other healthcare services in which
      the
      Borrower may engage.

     

    “Lender”
has
      the
      meaning ascribed thereto in the preamble to the Agreement.

     

    “LIBOR”
means
      the rate per annum equal to the rate (rounded up to the nearest one-sixteenth
      of
      one percent (1/16%)) determined by the Lender to be a rate at which Dollar
      deposits are offered to major banks in the London interbank eurodollar market
      for funds. “Loan(s)”
has
      the
      meaning set forth in Section 2.1(a) hereof.

     

    “Loan
      Documents”
means
      this Agreement, the Revolving Credit Note, Depository Agreements and all
      agreements relating to the Government Lockbox and the Commercial Lockbox, all
      financing statements, the Subordination Agreement and any other agreements,
      instruments, documents and certificates delivered in connection with this
      Agreement.

     

    “Loan
      Request”
has
      the
      meaning set forth in Section 2.2(c) hereof.

     

    “Lockbox
      Bank”
means
      North Fork Bank, a Division of Capital One, N.A. or such other bank that is
      acceptable to Lender.

     

    “Maturity
      Date”
has
      the
      meaning set forth in Section 2.1(c).

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

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

     

    “Permitted
      Liens”
means
      the following: (a) security interests and liens granted to Lender; (b) liens
      incurred in the ordinary course of business in connection with worker’s
      compensation, unemployment insurance or other forms of governmental insurance
      or
      benefits, relating to employees, securing sums (i) not overdue or (ii) being
      diligently contested in good faith provided that adequate reserves with respect
      thereto are maintained on the books of the Borrower in conformity with GAAP;
      (c)
      liens for taxes (i) not yet due or (ii) being diligently contested in good
      faith
      by appropriate proceedings, provided that adequate reserves with respect thereto
      are maintained on the books of the Borrower in conformity with GAAP; and which
      have no effect on the priority of liens in favor of Lender.

     

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

     

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

     

    “Revolving
      Credit Note”
has
      the
      meaning set forth in Section 2.1(b). 

     

    “Revolving
      Loan Commitment”
means
      an amount equal to Five
      Million Dollars
      ($5,000,000).

     

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

     

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

     

    “Subsidiary”
means
      as to any Person, any corporation, partnership, joint venture, limited liability
      company or other entity of which more than fifty percent (50%) of the
      outstanding capital stock or other ownership interests having ordinary voting
      power to elect a majority of the directors or other managers of such
      corporation, partnership, joint venture, limited liability company or other
      entity is at the time, directly or indirectly, owned by or the management is
      otherwise controlled by such Person (irrespective of whether, at the time,
      capital stock or other ownership interests of any other class or classes of
      such
      corporation, partnership, limited liability company or other entity shall have
      or might have voting power by reason of the happening of any contingency).
      Unless the context otherwise requires, each reference to a Subsidiary shall
      be a
      reference to a Subsidiary of the Borrowers. 

     

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

     

    “Subordination
      Agreement”
means,
      collectively and individually as context may require, those certain
      Subordination Agreements executed by the holders of the Subordinated Debt in
      favor of Lender.

     

    “Termination
      Fee”
has
      the
      meaning set forth in Section 2.3(c).

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    “Total
      Liquidity”
means
      the aggregate amount of all cash reported on Borrower’s balance sheet plus any
      Borrowing Base Excess, measured as of the most recent calendar month
      end.

     

    “TRICARE”
means
      the medical program for active duty members, qualified family members, CHAMPUS
      eligible retirees and their family members and survivors, of all uniformed
      services.

     

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

     

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

     

    “Unused
      Line Fee”
has
      the
      meaning set forth in Section 2.3(d).

     

    “Value
      Track SystemTM”
means
      the proprietary business system used by Lender to value and record the status
      of
      Accounts.

     

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

     

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

     

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

     

    SECTION
      2. THE
      LOANS

     

    2.1 Credit
      Facility - Description:

     

    (a) Subject
      to the terms and conditions of this Agreement, Lender hereby establishes for
      the
      joint and several benefit of Borrowers, a credit facility (“Credit
      Facility”)
      which
      shall include Advances which may be extended by Lender to or for the benefit
      of
      Borrowers from time to time hereunder in the form of revolving credit loans
      (“Loans”).
      The
      aggregate outstanding amount of all Advances, shall not at any time exceed
      the
      Borrowing Base. In no event shall the initial principal amount of any Loan
      be
      less than $25,000. Subject to such limitation, the outstanding balance of all
      Advances may fluctuate from time to time, to be reduced by repayments made
      by
      Borrowers, to be increased by future Advances which may be made by Lender.
      If
      the aggregate outstanding amount of all Advances exceeds the Borrowing Base,
      Borrowers shall immediately repay such excess in full.
      Lender has the right at any time, and from time to time, in its reasonable
      discretion (but without any obligation) to set aside reasonable reserves against
      the Borrowing Base in such amounts as it may deem appropriate.
      The
      Obligations of Borrowers under the Credit Facility and this Agreement are joint
      and several and shall at all times be absolute and unconditional. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (b) At
      Closing, Borrowers shall execute and deliver a promissory note to Lender in
      the
      principal amount of FIVE MILLION DOLLARS ($5,000,000) (as may be amended,
      modified or replaced from time to time, the “Revolving
      Credit Note”).
      The
      Revolving Credit Note shall evidence Borrowers joint and several, absolute
      and
      unconditional obligation to repay Lender for all Loans made by Lender under
      the
      Credit Facility, with interest as herein and therein provided. Each and every
      Loan under the Credit Facility shall be deemed evidenced by the Revolving Credit
      Note, which is deemed incorporated herein by reference and made a part hereof.
      The Revolving Credit Note shall be substantially in the form set forth in
Exhibit
      2.1(b)
      attached
      hereto and made a part hereof.

     

    (c) The
      term
      (“Initial
      Term”)
      of the
      Credit Facility shall expire on September 19, 2010. All Loans shall be repaid
      on
      or before the earlier of the last day of the Initial Term or upon termination
      of
      the Credit Facility or termination of this Agreement (“Maturity
      Date”).
      After
      the Maturity Date no further Loans shall be available from Lender. 

     

    (d) From
      time
      to time, upon not less than three (3) Business Days notice to Borrowers, Lender
      may adjust the Advance Rate in order to reflect, in Lender’s reasonable
      judgment, the experience with Borrowers (including by way of illustration,
      to
      adjust for any known or potential offsets by governmental healthcare programs
      or
      the agencies that administer them) or the aggregate amount or percentage of
      the
      Collections with respect to the Accounts.

     

    2.2 Funding
      Procedures:

     

    (a) Subject
      to the terms and conditions of this Agreement and so long as no Event of Default
      or Unmatured Event of Default has occurred hereunder, Lender will make Loans
      to
      Borrowers as requested by Borrower, which may be on a daily basis if so
      requested by Borrower, but not more than once each Business Day, each such
      day
      referred to herein as a “Funding
      Date”.

     

    (b) Not
      later
      than 11:00
      A.M. (Eastern Time) on a mutually agreeable Business Day each calendar
      week
      (“Download
      Date”),
      Borrowers will deliver to Lender the computer file data associated with the
      Accounts, which shall include without limitation, the information (including
      changes in the Obligor reimbursement rates and changes in federal or state
      laws
      or regulations affecting payment for medical services) required by Lender to
      enable Lender to process and value the outstanding Accounts of Borrowers on
      Lender’s Value Track SystemTM, as well as bill and collect such Accounts
      following an Event of Default (“Accounts
      Detail File”).
      Upon
      completion of the processing of the data with respect to such Accounts, Lender
      will prepare and deliver to Borrowers by no later than 5:00 p.m. (Eastern Time)
      on the first Business Day following the Download Date (or if such Accounts
      Detail File is not delivered until after 11:00 A.M. (Eastern Time) on the
      Download Date, the second Business Day following the Download Date), a report
      regarding the Borrowing Base then in effect, which shall be substantially in
      the
      form of Exhibit
      2.2(b)
      (a
“Borrowing
      Base Report”).
      

     

    
      
        
        

      

      
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    (c) On
      the
      Funding Date, Borrowers will sign and return the Borrowing Base Report to
      Lender. If Borrowers are requesting that a Loan be made on such Funding Date,
      Borrowers shall also deliver to Lender, concurrently with the Borrowing Base
      Report, a written request for such Loan substantially in the form of
Exhibit
      2.2(c) (a
      “Loan
      Request”).
      The
      Borrowing Base Report and Loan Request may be delivered via telecopy and
      Borrowers acknowledge that Lenders may rely on Borrowers signatures by
      facsimile, which shall be legally binding upon Borrowers.

     

    (d) Subject
      to the terms and conditions of this Agreement, if the Borrowing Base Report
      (if
      applicable) and Loan Request are delivered to Lender before 11:00 A.M. on the
      Funding Date, Lender will advance on the Funding Date (or the next Business
      Day
      if the Borrowing Base Report and Loan Request are delivered after 11:00 A.M.
      (Eastern Time)) to Borrowers a Loan in the amount equal to the lesser of (i)
      the
      amount of the Loan requested by Borrowers in the Loan Request, or (ii) the
      Borrowing Base Excess as of such date. Any Advances made by Lender hereunder
      shall be treated for all purposes as, and shall accrue interest at the same
      rate
      applicable to, Loans.

     

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

     

    2.3 Interest
      and Fees:

     

    (a) Each
      Loan
      shall bear interest on the outstanding principal amount thereof from the date
      made until such Loan is paid in full, at a rate per annum equal to 30-day LIBOR
      plus three and one half percent (3.50%). The interest rate hereunder is variable
      and adjusted monthly based on the 30-day LIBOR published in the Wall Street
      Journal, Eastern Edition on the first day of each fiscal month.

     

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

     

    (c) Should
      the Credit Facility be terminated for any reason prior to the last day of the
      Initial Term, in addition to repayment of all Obligations then outstanding
      and
      termination of Lender’s commitment hereunder, Borrowers shall unconditionally be
      obligated to pay at the time of such termination, a fee (“Termination
      Fee”)
      in an amount equal to the following percentage of the Revolving Loan Commitment:
      one and one half percent (1.50%), if such early termination occurs on or prior
      to the first anniversary date of this Agreement; one percent (1.0%) if such
      early termination occurs after the first anniversary date of this Agreement
      but
      on or before the second anniversary of this Agreement; and one half of one
      percent (0.50%) if such early termination occurs after the second anniversary
      of
      the date of this Agreement but prior to the last day of the Initial
      Term.
      Borrowers acknowledge that the Termination Fee is an estimate of Lender’s
      damages in the event of early termination and is not a penalty. In the event
      of
      termination of the Credit Facility, all of the Obligations shall be immediately
      due and payable upon the termination date stated in any notice of termination.
      All undertakings, agreements, covenants, warranties and representations of
      Borrowers contained in the Loan Documents shall survive any such termination,
      and Lender shall retain its security interests in the Collateral and all of
      its
      rights and remedies under the Loan Documents notwithstanding such termination
      until Borrowers have paid the Obligations to Lender, in full, in immediately
      available funds, together with the applicable Termination Fee, if any.
      Notwithstanding the payment in full of the Obligations, Lender shall not be
      required to terminate its security interests in the Collateral unless, with
      respect to any loss or damage Lender may incur as a result of dishonored checks
      or other items of payment received by Lender from Borrowers or any Obligor
      and
      applied to the Obligations, Lender shall, at its option, (i) have received
      a
      written agreement executed by Borrowers and by any Person whose loans or other
      advances to Borrowers are used in whole or in part to satisfy the Obligations,
      indemnifying Lender from any such loss or damage; or (ii) have retained such
      monetary reserves and security interests on the Collateral for such period
      of
      time as Lender, in its reasonable discretion, may deem necessary to protect
      Lender from any such loss or damage.

     

    
      
        
        

      

      
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    (d) Borrowers
      shall unconditionally pay to Lender (i) a fee (“Unused
      Line Fee”)
      equal
      to one half of one percent (0.50%) per annum of the unused portion of the Credit
      Facility and (ii) a collateral management fee (“Collateral
      Management Fee”),
      equal
      to one half of one percent (0.50%) per annum of the average daily outstanding
      balance of the Loans during each month (or portion thereof). The unused portion
      of the Credit Facility shall be the difference between the Revolving Loan
      Commitment and the average daily outstanding balance of the Loans during each
      month (or portion thereof). The Unused Line Fee and the Collateral Management
      Fee shall be calculated and payable monthly, in arrears, and shall be due and
      payable on the first Business Day of each calendar month.

     

    2.4 Additional
      Interest Provisions:

     

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

     

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

     

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

     

    
      
        
        

      

      
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    2.5 Payments:

     

    (a) All
      accrued interest on the Loans, including interest charges for Collection Days,
      shall be due and payable monthly on the first Business Day of each month. Any
      Unused Line Fees or Collateral Management Fees shall be due and payable monthly
      on the first Business Day of each month with respect to Unused Line Fees and
      Collateral Management Fees which accrued during the prior month.

     

    (b) If
      at any
      time the aggregate principal amount of all Advances outstanding exceeds the
      Borrowing Base then in effect, Borrowers shall immediately make such principal
      prepayments of the Loans (subject to the terms of Sections 2.3(c) and 2.3(d)),
      as is necessary to eliminate such excess.

     

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

     

    (d) Subject
      to the terms of Sections 2.3(c) and 2.3(d) above, Borrowers may prepay the
      principal of the Loans on any Funding Date by giving Lender written notice
      of
      the proposed prepayment two Business Days’ prior to such Funding
      Date.

     

    (e) All
      payments and prepayments shall be applied first to any unpaid interest and
      fees
      and thereafter to the principal of the Loans and to other amounts due Lender.
      Except as otherwise provided herein, all payments of principal, interest, fees,
      or other amounts payable by Borrowers hereunder shall be remitted to Lender
      in
      immediately available funds not later than 11:00 a.m. (Eastern Time) on the
      day
      due. Whenever any payment is stated as due on a day which is not a Business
      Day,
      the maturity of such payment shall be extended to the next succeeding Business
      Day and interest shall continue to accrue during such extension.

     

    (f) The
      Borrowers hereby authorize the Lender, without notice to the Borrowers, to
      charge the Loans with all payments and expenses due under Sections 2.3, 2.5,
      6.9
      and 9.5 hereof as such amounts become due. The Borrowers confirm that any
      charges which Lender may make to the Loans as provided herein will be made
      as an
      accommodation to the Borrowers and solely at the Lender’s
      discretion.

     

    2.6 Use
      of
      Proceeds:
      The
      Borrowers shall use the extensions of credit under and proceeds of the Credit
      Facility to pay off in its entirety any of Borrower’s obligations giving rise to
      a lien on the Collateral described herein and to pay the costs of closing.
      Thereafter, the Borrower shall use the extensions of credit under and proceeds
      of the Credit Facility for working capital and general business purposes of
      the
      Borrowers and may not be used for the benefit of any Affiliate or Subsidiary
      that is not a Borrower hereunder, including without limitation, BioBalance.
      

     

    2.7 Lockboxes
      and Collections:

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

    (f) Subject
      to charges for Collections Days, all amounts received from a Government Lockbox
      or Commercial Lockbox and any other proceeds of the Collateral deposited into
      the Collection Account will, for the purposes of calculating the Borrowing
      Base
      and interest, be credited to the aggregate outstanding amount of the Loans
      on
      the date of deposit in the Collection Account. No checks, drafts or other
      instruments received by Lender shall constitute final payment to Lender unless
      and until such instruments have actually been collected.

     

    2.8 Application
      of Proceeds of Collateral:

     

    (a) Unless
      this Agreement expressly provides otherwise, so long as no Event of Default
      shall have occurred and remain outstanding, Lender agrees to apply (i) all
      Collections to the aggregate outstanding amount of the Loans and (ii) any other
      payment received by Lender with respect to the Obligations, in such order and
      manner as Lender shall elect in the exercise of its reasonable business
      judgment.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

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

     

    2.9 Fees:
      Lender
      has fully earned a non-refundable commitment fee (“Commitment
      Fee”)
      equal
      to Fifty Thousand Dollars ($50,000). Lender acknowledges receipt of Fifteen
      Thousand Dollars ($15,000) of the Commitment Fee and a deposit of Ten Thousand
      Dollars ($10,000) towards the amount required to be paid by the Borrowers
      pursuant to Section 9.5(a) for the fees and expenses of legal counsel for
      Lender. Borrowers agree and acknowledge that the balance of the Commitment
      Fee
      ($35,000) is due and payable on or before Closing.

     

    SECTION
      3. COLLATERAL 

     

    3.1 Description:
      To
      secure
      the payment, promptly when due, and the punctual performance, of all of the
      Obligations, each Borrower assigns to Lender, and grants to it a security
      interest in all of its right, title and interest in and to the following
      property of such Borrower: (i) all accounts, payment intangibles, instruments
      and other rights to receive payments of Borrower (including without limitation
      the Accounts), whether now existing or hereafter arising or acquired, (ii)
      all
      general intangibles (including without limitation, contract rights and
      intellectual property), chattel paper, documents, supporting obligations, letter
      of credit rights, commercial tort claims, investment property, rights, remedies,
      guarantees and collateral evidencing, securing or otherwise relating to or
      associated with the foregoing, including without limitation all rights of
      enforcement and collection, (iii) all Commercial Lockboxes, all Government
      Lockboxes, all Collection Accounts and other deposit accounts into which any
      of
      the Collections or Advances are deposited, all funds received thereby or
      deposited therein, and any checks or instruments from time to time representing
      or evidencing the same, (iv) all books and records of Borrower evidencing or
      relating to or associated with any of the foregoing, (v) all information and
      data compiled or derived by Borrower with respect to any of the foregoing (other
      than any such information and data subject to legal restrictions of patient
      confidentiality), and (vi) all collections, receipts and other proceeds (cash
      and noncash) derived from any of the foregoing (collectively, the “Collateral”).
      For
      the avoidance of doubt, Collateral does not include any assets or property
      of
      BioBalance.

     

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

     

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

     

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

     

    
      
        
        

      

      
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    3.3 Other
      Actions: 

     

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

     

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

     

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

     

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

     

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

     

    3.5 Good
      Standing Certificates:
      Borrowers
      shall, prior to or at Closing and at its expense, obtain and deliver to Lender
      good standing or equivalent certificates showing each Borrower to be in good
      standing in its state of incorporation or organization and authorized to
      transact business as a foreign corporation or entity in each other state or
      foreign country in which it is doing and presently intends to do business for
      which such Borrower's failure to be so qualified might have material adverse
      effect on such Borrower's business, financial condition, Property or Lender's
      rights hereunder.

     

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

     

    
      
        
        

      

      
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    3.7 Power
      of Attorney:
      Each
      of
      the officers of Lender is hereby irrevocably made, constituted and appointed
      the
      true and lawful attorney for each Borrower (without requiring any of them to
      act
      as such) with full power of substitution to do the following (such power to
      be
      deemed coupled with an interest): (1) endorse the name of such Borrower upon
      any
      and all checks, drafts, money orders and other instruments for the payment
      of
      monies that are payable to such Borrower and constitute collections on the
      Collateral; (2) execute in the name of such Borrower any financing statements,
      schedules, assignments, instruments, documents and statements that such Borrower
      is obligated to give Lender hereunder or is necessary to perfect Lender’s
      security interest or lien in the Collateral; (3) to verify validity, amount
      or
      any other matter relating to the Collateral by mail, telephone, telecopy or
      otherwise; and (4) do such other and further acts and deeds in the name of
      such Borrower that Lender may reasonably deem necessary or desirable to enforce
      its right with respect to any Collateral.

     

    SECTION
      4. CLOSING
      AND CONDITIONS PRECEDENT TO ADVANCES

     

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

     

    4.1 Resolutions,
      Opinions, and Other Documents:
      Prior
      to
      the Closing, Borrowers shall have delivered to Lender the following:

     

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

     

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

     

    (c) certified
      copies of (i) resolutions of each Borrower’s board of directors, or manager, as
      applicable authorizing the execution of this Agreement, the Revolving Credit
      Note, and each other document to which it is a party, required to be delivered
      by any Section hereof and (ii) each Borrower’s Articles of Incorporation and By
      laws or certificate of organization and operating agreement (as applicable);
      

     

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

     

    (e) a
      written
      opinion of Borrowers’ independent counsel addressed to Lender in the form
      attached hereto as Exhibit
      4.1,
      which
      shall include without limitation, an opinion that Lender has a perfected
      security interest in the Collateral;

     

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

     

    (g) the
      Business Associate Agreement properly executed;

     

    (h) the
      Lockbox Agreements required pursuant to Section 2.7 hereof;

     

    (i) Uniform
      Commercial Code, judgment, federal and state tax lien searches pursuant to
      Section 3.4 above; 

     

    
      
        
        

      

      
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    (j) to
      the
      extent applicable, payoff letter and Lender shall have received releases from
      all Persons having a security interest or other interest in the Collateral,
      together with all UCC-3 terminations or partial releases necessary to terminate
      such Persons’ interests in the Collateral; 

     

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

     

    (l) copies
      of
      each of the accreditations, licenses, certifications required by Section 5.3
      below, and all Contracts requested by Lender;

     

    (m) the
      fully
      executed Subordination Agreements;

     

    (n) monthly
      and year to date consolidated and consolidating financial statements for the
      most recent month end prior to Closing (within 15 days prior to closing or
      such
      shorter period as Lender may determine);

     

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

     

    (p) Landlord
      Waivers with respect to the location of Borrowers’ chief executive office and
      each other location where any books and records of Borrowers may be kept;
      and

     

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

     

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

     

    (a) After
      giving effect to each such Loan:

     

    (i) the
      aggregate principal amount of all Advances outstanding shall not exceed the
      Borrowing Base then in effect; and

     

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

     

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

     

    (c) Each
      Borrower shall have signed and delivered to Lender notices, in the form of
      Exhibit
      4.2A,
      directing the Obligors (other than Obligors with respect to Government Accounts)
      to make payment to the Commercial Lockbox; and, in the form of Exhibit
      4.2B,
      directing the Obligors with respect to Government Accounts to make payment
      to
      the Government Lockbox.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (d) Borrowers
      shall have taken all actions necessary to permit Lender to record all of the
      Eligible Accounts in Lender’s Value Track SystemTM.

     

    (e) The
      lockbox arrangements required by Section 2.7 hereof shall be in effect, and
      the
      amounts received in the lockboxes shall have been identified or reconciled
      to
      Lender’s satisfaction, as required by Section 2.7(d) hereof.

     

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

     

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

     

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

     

    4.5 Closing
      Certificate:
      Lender
      shall have received a certificate dated the Closing Date and signed by the
      chief
      executive officer of Borrowers certifying that all of the conditions specified
      in this Section have been fulfilled and that there has not occurred any material
      adverse change in the operations and conditions (financial or otherwise) of
      Borrowers since May 31, 2007. 

     

    4.6 Closing: Subject
      to the conditions of this Section 4, the Credit Facility shall be made available
      on the date (“Closing
      Date”)
      this
      Agreement is executed and all of the conditions contained in Section 4.1 hereof
      are completed (“Closing”).

     

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

     

    4.8 Additional
      Closing Date Precondition: After
      considering all closing fees and expenses and other current obligations,
      Borrower shall have a Borrowing Base Excess in an amount not less than One
      Million Five Hundred Thousand Dollars ($1,500,000). This requirement shall
      apply
      only to Lender’s obligation to make the initial Loan and shall not apply to each
      subsequent Loan after the Closing Date.

     

    SECTION
      5. REPRESENTATIONS
      AND WARRANTIES

     

    To
      induce
      Lender to complete the Closing and make the Loans under the Credit Facility
      to
      Borrowers, Borrowers warrant and represent to Lender that: 

     

    5.1 Organization
      and Validity: 

     

    (a) Each
      Borrower is duly organized as either a partnership, corporation or limited
      liability company and validly existing under the laws of its state of
      organization, incorporation or formation, is duly qualified, is validly existing
      and, to the extent applicable, in good standing and has lawful power and
      authority to engage in the business it conducts in each state and other
      jurisdiction where the nature and extent of its business requires qualification,
      except where the failure to so qualify would not have a material adverse effect
      on such Borrower’s business, financial condition, Property or prospects. A list
      of all states and other jurisdictions where each Borrower is qualified to do
      business is attached hereto as Schedule
      2
      and made
      a part hereof. 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (b) The
      making and performance of this Agreement and related agreements, and each
      document required by any Section hereof will not violate any law, government
      rule or regulation, or the charter, minutes, partnership agreement, operating
      agreement or bylaw provisions of any Borrower violate or result in a default
      (immediately or with the passage of time) under any contract, agreement or
      instrument to which Borrower is a party, or by which a Borrower is bound. No
      Borrower is in violation of nor has knowingly caused any Person to violate
      any
      term of any agreement or instrument to which it or such Person is a party or
      by
      which it may be bound or of its charter, minutes, partnership agreement,
      operating agreement or bylaws, which violation could have a material adverse
      effect on any Borrower’s business, financial condition, Property or
      prospects.

     

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

     

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

     

    5.2 Places
      of Business:
      Each
      Borrower’s jurisdiction of organization is as set forth in Schedule
      2
      and each
      Borrower’s chief executive office and the only other places of business of each
      such Borrower are located at the corresponding addresses set forth on
Schedule
      2.
      Except
      as disclosed on Schedule
      2:
      (i) no
      Borrower has been organized in any other jurisdiction nor changed any such
      location in the last five years, (ii) no Borrower has changed its name in the
      last five years, and (iii) during such period no Borrower used, nor does any
      Borrower now use, any fictitious or trade name.

     

    5.3 Operation
      of Facilities:
      Each
      Borrower provides health care services and (a) maintains Medicare and Medicaid
      provider status and is the holder of the provider identification numbers
      identified on Schedule
      2
      hereto,
      all of which are current and valid and such Borrower has not allowed, permitted,
      authorized or caused any other Person to use any such provider identification
      number, (b) has obtained all material licenses, accreditations, certificates
      of
      need and approvals of governmental authorities and all other Persons necessary
      for such Borrower to own its assets, to carry on its business, to execute,
      deliver and perform the Loan Documents, and to receive payments from the
      Obligors and, if organized as a not-for-profit entity, has and maintains its
      status, if any, as an organization exempt from federal taxation under Section
      501(c)(3) of the Internal Revenue Code, and (c) only employs and engages
      certified health care aides or nurses aides who (i) have received appropriate
      certification through a training program licensed by the Department of Health
      or
      the State Education Department, and (ii) such certification is current and
      in
      good standing with any required governmental authority, including the Department
      of Health or the State Education Department. No Borrower has been notified
      by
      any such governmental authority or other Person during the immediately preceding
      24 month period that such party has rescinded or not renewed, or intends to
      rescind or not renew, any such license or approval.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    5.4 Pending
      Litigation:
      There
      are
      no judgments or judicial or administrative orders, subpoenas, proceedings or
      investigations (civil or criminal) pending, or to the knowledge of any Borrower,
      threatened, against any Borrower in any court or before any governmental
      authority or arbitration board or tribunal, other than as set forth on
Schedule
      2
      hereto,
      none of which, if adversely determined would have a material adverse effect
      on
      such Borrower. No Borrower is in default with respect to any order of any court,
      governmental authority, regulatory agency or arbitration board or tribunal.
      No
      Shareholder or executive officer of any Borrower has been indicted or convicted
      in connection with or is engaging in any criminal conduct, or is currently
      subject to any lawsuit or proceeding or under investigation in connection with
      any anti-racketeering or other criminal conduct or activity. 

     

    5.5 Medicaid
      and Medicare Cost Reporting:
      The
      Medicaid and Medicare cost reports of each Borrower for all cost reporting
      periods have been submitted when and as required to (i) as to Medicaid, the
      state agency, or other CMS-designated agent or agent of such state agency,
      charged with such responsibility or (ii) as to Medicare, the Medicare
      intermediary or other CMS-designated agent charged with such responsibility.
      No
      audit conducted after the Closing Date has resulted in any determination that
      any Borrower was overpaid for Medicaid and Medicare by $300,000 or more in
      any
      single year covered by such audit (the “Overpayment
      Representation”);
      provided,
      however,
      that so
      long as (1) an Unmatured Event of Default or Event of Default has not occurred
      and is continuing, and (2) Total Liquidity has been greater than $1,000,000
      for
      the previous six (6) consecutive calendar months and after giving effect to
      any
      amount determined to be an overpayment by such audit, the Borrower shall not
      be
      obligated to make the Overpayment Representation. 

     

    5.6 Title
      to Collateral:
      Each
      Borrower has good and marketable title to all the Collateral it respectively
      purports to own, free from liens, claims and encumbrances, except those of
      Lender, Permitted Liens and those other liens listed on Schedule
      2
      hereto.

     

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

     

    5.8 Taxes:
      All
      tax
      returns required to be filed by Borrowers, or any of them, in any jurisdiction
      have in fact been filed, and all taxes, assessments, fees and other governmental
      charges upon Borrowers, or any of them, or upon any of their respective
      Property, income or franchises, which are shown to be due and payable on such
      returns have been paid, except for those taxes being contested in good faith
      with due diligence by appropriate proceedings and for which appropriate reserves
      have been maintained under GAAP. No Borrower is aware of any proposed additional
      tax assessment or tax to be assessed against or applicable to any Borrower
      that
      might have a material adverse effect on such Borrower’s business, financial
      condition, Property or prospects. 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    5.9 Financial
      Statements:
      Borrowers’
      annual audited consolidated and consolidating balance sheet as of December
      31,
      2006, accompanied by reports thereon from Borrowers’ independent certified
      public accountants, and the quarterly consolidated balance sheet as of June
      30,
      2007 and the related income statements and statements of cash flows as of such
      dates (complete copies of which have been delivered to Lender), have been
      prepared in accordance with GAAP and present fairly, accurately and completely
      the financial position of Borrowers as of such dates and the results of their
      operations for such periods. The fiscal year for each Borrower currently ends
      on
      the date set forth on Schedule
      2
      hereto.
      Each Borrower’s federal tax identification number and organization number are as
      set forth on Schedule
      2
      hereto.

     

    5.10 Full
      Disclosure:
      Neither
      the financial statements referred to in Section 5.9, nor this Agreement or
      related agreements and documents or any written statement furnished by any
      Borrower to Lender in connection with the negotiation of the Credit Facility
      and
      contained in any financial statements or documents relating to any Borrower
      contain any untrue statement of a material fact or omit a material fact
      necessary to make the statements contained therein or herein not
      misleading.

     

    5.11 Guarantees,
      Contracts, etc.: 

     

    (a) No
      Borrower owns nor holds partnership interests or equity or long term debt
      investments in, has any outstanding advances to, or serves as guarantor, surety
      or accommodation maker for the obligations of, or has any outstanding borrowings
      from, any Person except as described in Schedule
      2
      hereto.

     

    (b) No
      Borrower is a party to any contract or agreement, or subject to any charter
      or
      other entity restriction, which materially and adversely affects its business,
      financial condition, Property or prospects. 

     

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

     

    5.12 Compliance
      with Laws: 

     

    (a) No
      Borrower is in violation of, has received written notice that it is in violation
      of, or has knowingly caused any Person to violate, any applicable statute,
      regulation or ordinance of the United States of America, or of any state, city,
      town, municipality, county or of any other jurisdiction, or of any agency,
      or
      department thereof, (including without limitation, environmental laws and
      regulations), which may materially and adversely affect its business, financial
      condition, Property or prospects.

     

    (b) Each
      Borrower is current with all reports and documents required to be filed with
      any
      state or federal securities commission (if any) or similar agency and is in
      full
      compliance in all material respects with all applicable rules and regulations
      of
      such commissions. 

     

    5.13 Other
      Associations:
      No
      Borrower is engaged in nor has an interest in any joint venture or partnership
      with any other Person or has any subsidiaries or Affiliates, except as described
      on Schedule
      2
      hereto.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    5.14 Environmental
      Matters:
      Except
      as
      disclosed on Schedule
      2
      hereto,
      no Borrower has knowledge: 

     

    (a) of
      the
      presence of any Hazardous Substances on any of the real property where any
      Borrower maintains operations or has its personal property, or 

     

    (b) of
      any
      on-site spills, releases, discharges, disposal or storage of Hazardous
      Substances that have occurred or are presently occurring on any of such real
      property where any Collateral is located, or 

     

    (c) of
      any
      spills, releases, discharges or disposal of Hazardous Substances that have
      occurred, are presently occurring on any other real property as a result of
      the
      conduct, action or activities of any Borrower.

     

    5.15 Capital
      Stock and Equity Interests:
      The
      authorized and outstanding shares of capital stock and other equity interests
      of
      (a) the officers and directors of each Borrower and (b) to the best of
      Borrower’s knowledge based upon any and all Schedule 13-D documents filed under
      the Securities Exchange Act of 1934, any Person owning an amount equal to or
      more than 5% of the authorized and outstanding shares of capital stock and
      other
      equity interests any Borrower is as set forth on Schedule
      2
      hereto.
      All of the capital stock and equity interests of each Borrower have been duly
      and validly authorized and issued and is fully paid and non-assessable and
      have
      been sold and delivered to the holders thereof in compliance with, or under
      valid exemption from, all Federal and state laws and the rules and regulations
      of all regulatory bodies thereof governing the sale and delivery of securities.
      Except for the rights and obligations set forth in Schedule
      2,
      there
      are no subscriptions, warrants, options, calls, commitments, rights or
      agreements by which any Borrower or any of the Shareholders of any Borrower
      is
      bound relating to the issuance, transfer, voting or redemption of shares of
      its
      capital stock, membership units or any pre-emptive rights held by any Person
      with respect to the shares of capital stock or membership units of any such
      Borrower. Except as set forth in Schedule
      2,
      no
      Borrower has issued any securities convertible into or exchangeable for shares
      of its capital stock or membership units or any options, warrants or other
      rights to acquire such shares or membership units or securities convertible
      into
      or exchangeable for such shares.

     

    5.16 Lockboxes:
      The
      Government Lockbox and the Commercial Lockbox are the only lockbox accounts
      maintained by Borrowers, and each Obligor of an Eligible Account has been
      directed by the notice attached as Exhibit
      4.2A
      to this
      Agreement, and is required to, remit all payments with respect to such Account
      for deposit in the Commercial Lockbox (other than the Obligors of Government
      Accounts which have been directed by the notice attached as Exhibit
      4.2B
      to this
      Agreement to remit all payments with respect to such Accounts for deposit in
      the
      Government Lockbox).

     

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

     

    5.18 Security
      Interest:
      Each
      Borrower has granted to Lender a valid, perfected first priority and only
      security interest in the Accounts and the other Collateral subject to no other
      liens, claims or encumbrances, other than Permitted Liens.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    5.19 Accounts:

     

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

     

    (b) Each
      Borrower has made and will continue to make all payments to Obligors necessary
      to prevent any Obligor from offsetting any earlier overpayment to such Borrower
      against any amounts such Obligor owes on an Account, except for bona fide
      disputes being diligently contested in good faith by Borrower provided that
      (i)
      Borrower has provided written notice to Lender, (ii) Lender
      has had the opportunity to set aside reasonable reserves against the Borrowing
      Base in such amounts as it may deem appropriate with respect to such disputes,
      and (iii) such bona fide disputes are
      in an
      aggregate amount less than $300,000 in any single year or $900,000 over any
      three year period.

     

    5.20 Pension
      Plans:
      Each
      pension or profit sharing plan, if any, to which any Borrower is a party has
      been and will be funded in accordance with the obligations of such Borrower(s)
      set forth in such plan.

     

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

     

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

     

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

     

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

     

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

     

    (e) No
      such
      Account (i) requires the approval of any third person for such Account to be
      assigned to Lender hereunder, (ii) is subject to any legal action, proceeding
      or
      investigation (pending or threatened), dispute, set-off, counterclaim, defense,
      abatement, suspension, deferment, deductible, reduction or termination by the
      Obligor, or (iii) is past, or within 180 days of, the statutory limit for
      collection applicable to the Obligor.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    (p) Neither
      such Account nor the related Contract contravenes any laws, rules or regulations
      applicable thereto (including, without limitation, laws, rules and regulations
      relating to usury, consumer protection, truth-in-lending, fair credit billing,
      fair credit reporting, equal credit opportunity, fair debt collection practices
      and privacy) and no party to such related Contract is in violation of any such
      law, rule or regulation in connection with such Contract.

     

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

     

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

     

    5.23 Commercial
      Tort Claims:
      Borrowers
      have no commercial tort claims against any third parties, except as shown on
      Schedule
      2
      hereto.

     

    5.24 Letter
      of Credit Rights:
      Borrowers
      have no letter of credit rights except as shown on Schedule 2
      hereto.

     

    5.25 Intellectual
      Property:
      Except
      as
      shown on Schedule
      2
      attached
      hereto and made part hereof, (i) Borrowers do not require any copyrights,
      patents, trademarks or other intellectual property, or any license(s) to use
      any
      patents, trademarks or other intellectual property in order to provide services
      to their customers or to bill Obligors and collect therefrom, in the ordinary
      course of business, and (ii) Lender will not require any copyrights, patents,
      trademarks or other intellectual property or any licenses to use the same in
      order to provide such services or bill and collect the Accounts, after the
      occurrence of an Event of Default.

     

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

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    SECTION
      6. BORROWER’S
      AFFIRMATIVE COVENANTS

     

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

     

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

     

    6.2 Maintenance
      of Insurance, Financial Records and Existence:

     

    (a) Property
      Insurance
      -
      Borrowers shall maintain or cause to be maintained insurance on its Property
      against fire, flood, casualty and such other hazards in such amounts, with
      such
      deductibles and with such insurers as are customarily used by companies
      operating in the same industry as Borrowers The policies of all such casualty
      insurance shall contain standard Lender Loss Payable and additional insured
      clauses issued in favor of Lender pursuant to which all losses thereunder shall
      be paid to Lender as Lender’s interests may appear. Such policies shall
      expressly provide that the requisite insurance cannot be altered or canceled
      without thirty (30) days prior written notice to Lender and shall insure Lender
      notwithstanding the act or neglect of the insured. At or prior to Closing,
      Borrowers shall furnish Lender with insurance certificates certified as true
      and
      correct and being in full force and effect as of the Closing Date or such other
      evidence of insurance as Lender may require. In the event Borrowers fail to
      procure or cause to be procured any such insurance or to timely pay or cause
      to
      be paid the premium(s) on any such insurance, Lender may do so for Borrowers,
      but Borrowers shall continue to be liable for the same. Borrowers further
      covenant that all insurance premiums owing under its current casualty policy
      have been paid. Borrowers also agree to notify Lender, promptly, upon Borrowers’
receipt of a notice of termination, cancellation or non-renewal from its
      insurance company of any such policy. Each Borrower hereby appoints Lender
      as
      its attorney-in-fact, exercisable at Lender’s option, to endorse any check which
      may be payable to such Borrower in order to collect the proceeds of such
      insurance.

     

    (b) Public
      Liability and Business Interruption Insurance
      -
      Borrowers shall maintain, and shall deliver to Lender upon Lender’s request
      evidence of public liability and business interruption insurance in such amounts
      as is customary for companies in the same or similar businesses located in
      the
      same or similar area. 

     

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

     

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

     

    
      
        
        

      

      
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    (e) Compliance
      with Laws
      - Each
      Borrower shall be in material compliance with any and all laws, ordinances,
      governmental rules and regulations, and court or administrative orders or
      decrees to which it is subject, whether federal, state or local (including
      without limitation all environmental or environmental-related laws, statutes,
      ordinances, rules, regulations and notices), and shall obtain and maintain
      any
      and all licenses, permits, franchises, certificates of need or other
      governmental authorizations necessary to the ownership of its Property or to
      the
      conduct of its businesses, which violation or failure to obtain may materially
      adversely affect the business, Property, financial conditions or prospects
      of
      such Borrower, the Collateral, or Lender’s rights with respect to the
      Collateral.

     

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

     

    6.4 Litigation:
      Borrowers
      shall give prompt notice to Lender of any (a) litigation claiming in excess
      of
      $50,000 from Borrowers, or any of them, or which may otherwise have a material
      adverse effect on the business, financial condition, Property or prospects
      of
      Borrowers, or any of them, and (b) subpoena received by any Borrower from any
      governmental authority, including the Office of the Inspector General, the
      Department of Justice or the Centers for Medicare and Medicaid
      Services.

     

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

     

    6.6 Financial
      Covenants:
      Borrowers
      shall perform and comply with each of the following financial covenants as
      reflected and computed from their financial statements, it being acknowledged
      and agreed that such financial covenants shall be calculated solely on the
      financial results of NYH, and shall exclude the financial results of
      BioBalance:

     

    (a) Fixed
      Charge Coverage Ratio.
      Borrowers shall maintain at all times a Fixed Charge Coverage Ratio of not
      less
      than 1.25 to 1.00, measured on a trailing four quarter basis commencing with
      the
      fiscal quarter ending September 30, 2007 and measured on the last day of each
      fiscal quarter thereafter.

     

    (b) Minimum
      EBITDA.
      Borrowers shall maintain at all times EBITDA in an amount not less than
      $750,000, measured on a trailing four quarter basis commencing with the fiscal
      quarter ending September 30, 2007 and measured on the last day of each fiscal
      quarter thereafter. 

     

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

     

    (a) Financial
      Statements and Collateral Reports:
      

     

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

     

    
      
        
        

      

      
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    (ii) as
      soon
      as available but in any event within forty-five (45) days
      after the end of each calendar month, deliver to Lender Borrowers’ internally
      prepared monthly consolidated and consolidating financial statements, along
      with
      year to date information, including a balance sheet, income statement and
      statement of cash flows with respect to the periods measured; 

     

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

     

    (iv) at
      least
      thirty (30) days after the first day of each fiscal year, annual consolidated
      and consolidating projections for Borrowers for such year, including a balance
      sheet, income statement and statement of cash flow and a Borrowing Base
      Availability projections, all prepared on a monthly basis; and

     

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

     

    (vi) as
      soon
      as available, copies of: (A) all financial statements, reports, notices and
      proxy statements made publicly available by any Borrower to its security
      holders; (B) all regular and periodic reports and all registration statements
      and prospectuses, if any, filed by any Borrower with any securities exchange
      or
      with the Securities and Exchange Commission or any governmental or private
      regulatory authority; and (C) all press releases and other statements made
      available by any Borrower to the public concerning material changes or
      developments in the business of such Borrower or its Subsidiaries or
      Affiliates.

     

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

     

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

     

    (c) Notice
      of Claimed Default
      -
      promptly upon receipt by any Borrower, notice of default, oral or written,
      given
      to such Borrower by any creditor for borrowed money in excess of $50,000.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    (d) Notice
      of Sales of Capital Stock or Equity Interest
      -
      promptly upon becoming aware of the sale of capital stock and other equity
      interests of any Borrower by (a) any officer or director who is a Shareholder,
      (b) any Person owning an amount equal to or more than 5% of the authorized
      and
      outstanding shares of capital stock and other equity interests of any Borrower,
      (c) any Person who acquires any classes of capital stock or other equity
      interests of such Borrower which requires such purchaser to file a Schedule
      13-D
      under the Securities Exchange Act of 1934 or (d) any Person set forth on
      Schedule 2. 

     

    6.8 Officers’
      Certificates:
      Along
      with the set of financial statements delivered to Lender at the end of each
      fiscal quarter and fiscal year pursuant to Section 6.7(a) hereof, deliver to
      Lender a certificate (in the form of Exhibit
      6.8
      attached
      hereto and made a part hereof) from the chief financial officer of Borrowers
      setting forth: 

     

    (a) Covenant
      Compliance
      - the
      information (including detailed calculations) required in order to establish
      whether Borrowers are in compliance with the requirements of Sections 6.6 as
      of
      the end of the period covered by the financial statements then being furnished
      (and any exhibits appended thereto) under Section 6.7; and 

     

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

     

    6.9 Inspection:
      Borrowers
      will permit any of Lender’s officers or other representatives to visit and
      inspect any Borrowers’ location(s) or where any Collateral is kept during
      regular business hours to examine and audit all of such Borrower’s books of
      account, records, reports and other papers, to make copies and extracts
      therefrom and to discuss its affairs, finances and accounts with its officers,
      employees and independent certified public accountants and attorneys (each
      an
“Audit”).
      Borrowers shall pay to Lender all reasonable fees based on standard rates for
      each Audit; provided,
      however,
      that
      Borrowers shall only be obligated to pay such fees (a) two times during each
      twelve (12) month period, so long as (1) an Unmatured Event of Default or Event
      of Default has not occurred and is continuing, and (2) Total Liquidity has
      been
      greater than $1,750,000 for the previous six (6) consecutive calendar months,
      or
      (b) four times during each twelve (12) month period, so long as (1) an Unmatured
      Event of Default or Event of Default has not occurred and is continuing, and
      (2)
      Total Liquidity is less than $1,750,000; provided,
      further,
      that
      any reimbursements made by the Borrower pursuant to subsection (b) shall not
      count towards the Borrowers' reimbursement obligations under subsection (a).
      

     

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

     

    6.11 Material
      Adverse Developments:
      Each
      Borrower agrees that immediately upon it or any of its officers becoming aware
      of any development or other information which would reasonably be expected
      to
      materially and adversely affect the businesses, financial condition, Property,
      prospects of a Borrower or a Borrowers’ ability to perform under this Agreement,
      it shall give to Lender telephonic or facsimile notice specifying the nature
      of
      such development or information and such anticipated effect. In addition, such
      verbal communication shall be confirmed by written notice thereof to Lender
      on
      the next Business Day after such verbal notice is given.

     

    
      
        
        

      

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

     

    6.13 Notice
      of Action:
      Each
      Borrower will promptly notify Lender in the event of any legal action, dispute,
      setoff, counterclaim, defense or reduction in excess of $100,000 that is or
      may
      be asserted by an Obligor with respect to any Account that may have a material
      adverse effect on the collectibility of such Account or all Accounts
      collectively.

     

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

     

    6.15 Value
      Track SystemTM:
      Borrowers
      shall permit Lender to interface its Value Track SystemTM to Borrowers’ data
      files and will assist Lender in completing and maintaining such interface such
      that the interface can interpret, track and reconcile the Accounts Detail File
      provided by Borrowers.

     

    6.16 Commercial
      Tort Claim:
      Borrowers
      shall provide written notice to Lender of any commercial tort claim in excess
      of
      $100,000 to which a Borrower is or becomes a party or which otherwise inures
      to
      the benefit of a Borrower. Such notice shall contain a sufficient description
      of
      such commercial tort claim including the parties, the court in which the claim
      was commenced (if applicable), the docket number assigned to the case (if
      applicable), and a detailed explanation of the events giving rise to such claim.
      Borrowers shall grant Lender a security interest in such commercial tort claim
      to secure payment of the Obligations. Borrowers shall execute and deliver such
      instruments, documents and agreements as Lender may require in order to obtain
      and perfect such security interest including, without limitation, a security
      agreement or amendment to this Agreement all in form and substance satisfactory
      to Lender. Each Borrower authorizes Lender to file (without such Borrower’s
      signature) financing statements or amendments to existing financing statements
      as Lender deems necessary to perfect the security interest in such commercial
      tort claim.

     

    
      
        
        

      

      
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    6.17 Post-Closing
      Covenants:

     

    (a) 
      The
      Borrowers agree to 

     

    (a) close
      for
      deposit all bank accounts other than those maintained at Lockbox Bank by no
      later than 90 days after the Closing Date; provided,
      however,
      that
      Borrowers may keep such bank accounts open for the limited purpose of permitting
      the clearance of checks that were issued by the Borrowers prior to the Closing
      Date; 

     

    (b) on
      or
      before the 60th
      day
      following the Closing Date, use best efforts to obtain executed landlord waivers
      in form and substance satisfactory to the Lender for any location where any
      books and records of Borrowers may be kept.

     

    SECTION
      7. BORROWERS’
      NEGATIVE COVENANTS

     

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

     

    7.1 Merger,
      Consolidation, Dissolution or Liquidation: 

     

    (a) No
      Borrower shall sell, lease, license, transfer or otherwise dispose of its
      Property other than inventory sold in the ordinary course or ordinary operation
      of such Borrower’s business, without Lender’s prior written consent.

     

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

     

    (c) For
      the
      avoidance of doubt, the restrictions set forth in this Section 7.1 shall not
      apply to any assets or property of Borrowers’ Subsidiary, BioBalance or the
      capital stock of BioBalance; provided,
      however,
      that
      under no circumstance shall NYH be permitted to merge or consolidate with or
      into, or acquire any of the assets of BioBalance.

     

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

     

    7.3 Negative
      Pledge:
      No
      Borrower shall permit a lien or security interest to exist on its common stock,
      partnership interests or membership units nor shall any such Borrower permit,
      pledge or grant a lien or security interest to exist on the common stock,
      partnership interests or membership units of its subsidiaries and/or
      Affiliates.

     

    7.4 Transactions
      With Affiliates or Subsidiaries: 

     

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

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    (b) Notwithstanding
      anything contained in Section 7.4(a), Borrowers may loan, capitalize or give
      funds to BioBalance so long as (i) an Unmatured Event of Default or Event of
      Default has not occurred, (ii) such transaction is not otherwise prohibited
      hereunder, and (iii) Total Liquidity as of the end of the most recent calendar
      month has been not less than One Million Seven Hundred Fifty Thousand Dollars
      ($1,750,000). 

     

    (c) Subject
      in any event to the limitations of Section 7.4(a) above and except with the
      prior written consent of Lender, no Borrower shall create or acquire any
      Subsidiary unless such Subsidiary engages in a business substantially related
      to
      the business of such Borrower as conducted immediately prior to the Closing
      Date, and if required by Lender, such Subsidiary becomes a Borrower
      hereunder.

     

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

     

    7.6 Indebtedness:
      Without
      Lender’s prior written consent, no Borrower shall create, incur, assume or
      suffer to exist any Indebtedness (exclusive of trade debt) except (subject
      to
      compliance with Section 6.6 hereof):

     

    (a) Indebtedness
      to Lender, 

     

    (b) Indebtedness
      specifically identified on Schedule
      2
      hereto
      and any refinancings, refundings, renewals, or extensions thereof;

     

    (c) Indebtedness
      constituting purchase money indebtedness for the financing of capital
      expenditures in an aggregate principal amount not to exceed $250,000, so long
      as
      (i) such Indebtedness is secured only by a security interest in the equipment
      being financed, (ii) the terms of such Indebtedness are reasonably satisfactory
      to Lender, and (iii) such Indebtedness does not cause, or result in, an Event
      of
      Default or Unmatured Event of Default; and

     

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

     

    7.7 Loans
      to Other Persons:
      No
      Borrower shall make or be permitted to have outstanding any loans, advances
      or
      extensions of credit to any Person (other than another Borrower). 

     

    7.8 Change
      in Ownership/Management:
      No
      Borrower, unless consented to in writing by Lender, shall permit any current
      or
      future Shareholder together with any Affiliate of such Shareholder, to own
      an
      aggregate amount greater than 15% of all of the outstanding capital stock or
      other equity interests of such Borrower. In addition, unless consented to by
      Lender, or if a replacement acceptable to Lender is employed within 90 days
      of
      any terminations (such consent not to be unreasonably withheld) current senior
      management shall continue as senior management of Borrowers actively involved
      in
      the date to day management of such Borrowers.  

     

    
      
        
        

      

      
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    7.9 Subordinated
      Debt Payments:
      No
      Borrower shall make any payment in contravention of the terms and conditions
      of
      the Subordination Agreements.

     

    7.10 Distributions:
      Borrowers
      shall not declare or pay or make any forms of Distributions to its Shareholders,
      Subsidiaries, Affiliates, officers or directors or their respective successors
      or assigns; provided,
      however,
      that
      Borrowers shall be permitted to make Distributions or capital contributions
      to
      BioBalance so long as an Unmatured Event of Default or Event of Default has
      not
      occurred and Total Liquidity, as of the end of the most recent calendar month
      and after giving effect to such Distribution, is not less than One Million
      Seven
      Hundred Fifty Thousand Dollars ($1,750,000).

     

    SECTION
      8. DEFAULT

     

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

     

    (a) Payments
      - if
      Borrowers fail to make any payment of principal or interest on the date when
      such payment is due and payable and such failure continues for a period of
      one
      (1) Business Day; provided,
      however,
      that
      the one
      (1) Business Day grace period
      shall
      not be applicable if such payments are due and payable due to maturity,
      acceleration or demand, whether following an Event of Default or otherwise;
      or

     

    (b) Other
      Charges
      - if
      Borrowers fail to pay any other charges, fees, Expenses or other monetary
      obligations owing to Lender, arising out of or incurred in connection with
      this
      Agreement on the date when such payment is due and payable, whether upon
      maturity, acceleration, demand or otherwise and such failure continues for
      a
      period of
      five (5) Business Days
      after
      the earlier of a Borrower becoming aware of such failure or a Borrower receiving
      written notice of such failure; provided,
      however,
      that
      the five (5) Business Day grace period shall not be applicable if such payments
      are due and payable due to maturity, acceleration or demand, whether following
      an Event of Default, or otherwise; or 

     

    (c) Particular
      Covenant Defaults
      - if any
      Borrower fails to perform, comply with or observe any covenant or undertaking
      contained in this Agreement not otherwise described in this Section 8.1, and
      such failure continues for a period of
      five (5) Business Days
      after
      the earlier of a Borrower becoming aware of such failure or a Borrower receiving
      written notice of such failure; or 

     

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

     

    (e) Uninsured
      Loss
      - if
      there shall occur any uninsured damage to or loss, theft, or destruction in
      excess of $100,000
      with
      respect to any portion of any Borrower’s Property; or 

     

    
      
        
        

      

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

     

    (g) Agreements
      with Others
      - if
      Borrowers, or any of them, shall default beyond any grace period under any
      agreement with respect to any Indebtedness not to exceed $250,000 in the
      aggregate and (i) such default consists of the failure to pay any principal,
      premium or interest with respect to such Indebtedness for borrowed money or
      (ii)
      such default consists of the failure to perform any covenant or agreement with
      respect to such Indebtedness for borrowed money, if the effect of such default
      is to cause or permit such Indebtedness to become due prior to its maturity
      date
      or prior to its regularly scheduled date of payment;

     

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

     

    (i) Judgments
      - if any
      final judgment for the payment of money in excess of $50,000
      shall be
      rendered against Borrowers, or any of them, which is not fully and
      unconditionally covered by insurance or an appeal bond, or for which such Person
      has not established a cash or cash equivalent reserve in the amount of such
      judgment; 

     

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

     

    (k) Bankruptcy,
      Dissolution, etc.
      - upon
      the commencement of any action for the dissolution or liquidation of Borrowers,
      or any of them, or the commencement of any proceeding to avoid any transaction
      entered into by Borrowers, or any of them, or the commencement of any case
      or
      proceeding for reorganization or liquidation of Borrowers’, or any of their
      debts under the Bankruptcy Code or any other state or federal law, now or
      hereafter enacted for the relief of debtors, whether instituted by or against
      any Borrower; provided, however, that Borrowers shall have forty-five (45)
      days
      to obtain the dismissal or discharge of involuntary proceedings filed against
      a
      Borrower, it being understood that during such forty-five (45) day period,
      Lender shall be not obligated to make Advances hereunder and Lender may seek
      adequate protection in any bankruptcy proceeding; or

     

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

     

    
      
        
        

      

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

     

    (n) Termination
      of Business
      - if
      Borrowers, or any of them, cease any material portion of their business
      operations as presently conducted; or

     

    (o) Pension
      Benefits, etc.
      - if
      Borrowers, or any of them, fail to comply with ERISA, so that grounds exist
      to
      permit the appointment of a trustee under ERISA to administer Borrower’s
      employee plans or to allow the Pension Benefit Guaranty Corporation to institute
      proceedings to appoint a trustee to administer such plan(s), or to permit the
      entry of a Lien to secure any deficiency or claim; or

     

    (p) Investigations
      - any
      indication or evidence received by Lender that reasonably leads it to believe
      Borrowers, or any of them, may have directly or indirectly been engaged in
      any
      type of activity which would be reasonably likely to result in the forfeiture
      of
      any Property of Borrowers, or any of them, to any governmental entity, federal,
      state or local; or

     

    (q) Material
      Adverse Events
      -

     

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

     

    (ii) a
      material adverse change occurs in the business or condition of Borrowers, or
      any
      of them.

     

    (r) Lockbox
      Instructions
      - any
      instruction or agreement regarding the Commercial Lockbox or the Government
      Lockbox or the bank accounts related thereto is amended or terminated without
      the written consent of Lender, or if any Borrower fails, within one Business
      Day
      of receipt, to forward Collections it receives with respect to any Accounts
      to
      the Commercial Lockbox or the Government Lockbox, as the case may
      be.

     

    8.2 Cure:
      Nothing
      contained in this Agreement or the Loan Documents shall be deemed to compel
      Lender to accept a cure of any Event of Default hereunder.

     

    8.3 Rights
      and Remedies on Default: 

     

    (a) In
      addition to all other rights, options and remedies granted or available to
      Lender under this Agreement or the Loan Documents, or otherwise available at
      law
      or in equity, upon or at any time after the occurrence and during the
      continuance of an Event of Default or Unmatured Event of Default, Lender may,
      in
      its discretion, withhold or cease making Advances under the Credit
      Facility.

     

    (b) In
      addition to all other rights, options and remedies granted or available to
      Lender under this Agreement or the Loan Documents (each of which is also then
      exercisable by Lender), Lender may, in its discretion, upon or at any time
      after
      the occurrence of an Event of Default, terminate the Credit Facility (it also
      being understood that the occurrence of any of the events or conditions set
      forth in subparagraphs (j), (k) or (l) of Section 8.1 hereof shall automatically
      cause a termination of the Credit Facility without notice or demand).

     

    
      
        
        

      

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

     

    (i) Subject
      to all applicable laws and regulations governing payment of Medicare and
      Medicaid receivables, the right to “take possession” of the Collateral, and
      notify all Obligors of Lender’s security interest in the Collateral and require
      payment under the Accounts to be made directly to Lender and Lender may, in
      its
      own name or in the name of the applicable Borrower, exercise all rights of
      a
      secured party with respect to the Collateral and collect, sue for and receive
      payment on all Accounts, and settle, compromise and adjust the same on any
      terms
      as may be satisfactory to Lender, in its sole and absolute discretion for any
      reason or without reason and Lender may do all of the foregoing with or without
      judicial process (including without limitation notifying the United States
      postal authorities to redirect mail addressed to Borrowers, or any of them,
      to
      an address designated by Lender); or

     

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

     

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

     

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

     

    (e) Lender
      is
      hereby granted, until the Obligations are paid in full and all obligations
      of
      Lender hereunder are terminated, a worldwide license to use, after the
      occurrence and during the continuance of an Event of Default and without charge,
      all of Borrowers’ labels, trademarks (and associated goodwill), copyrights,
      patents and advertising matter, as they pertain to the Collateral, in completing
      production of, advertising for sale and selling of any Collateral.

     

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

     

    
      
        
        

      

      
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    8.5 Set-Off:
      If
      any
      bank account or other Property held by or with Lender, or any Affiliate of
      Lender, or any participant is attached or otherwise liened or levied upon by
      any
      third party, Lender (and such participant) shall have and be deemed to have,
      without notice to Borrowers, the immediate right of set-off and may apply the
      funds or other amounts or property thus set off against any of Borrowers’
Obligations hereunder. 

     

    SECTION
      9. MISCELLANEOUS

     

    9.1 GOVERNING
      LAW:
      THIS
      AGREEMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, SHALL
      BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
      OF THE STATE OF NEW YORK.
      THE
      PROVISIONS OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS
      AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY
      OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING
      PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT. 

     

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

     

    9.3 Waiver
      and Indemnity: 

     

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

     

    (b) Each
      Borrower releases and shall indemnify, defend and hold harmless Lender, and
      its
      respective officers, employees and agents, of and from any claims, demands,
      liabilities, obligations, judgments, injuries, losses, damages and costs and
      expenses (including, without limitation, reasonable legal fees) resulting from
      (i) acts or conduct of a Borrower under, pursuant or related to this Agreement
      and the other Loan Documents, (ii) any Borrower’s breach, or alleged breach, or
      violation of any representation, warranty, covenant or undertaking contained
      in
      this Agreement or the other Loan Documents, and (iii) any Borrower’s failure, or
      alleged failure, to comply with any or all laws, statutes, ordinances,
      governmental rules, regulations or standards, whether federal, state or local,
      or court or administrative orders or decrees (including without limitation
      environmental laws, etc.), and all costs, expenses, fines, penalties or other
      damages resulting therefrom, unless resulting from acts or conduct of Lender
      constituting willful misconduct or gross negligence.

     

    
      
        
        

      

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

     

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

     

    9.5 Expenses
      of Lender: 

     

    (a) At
      Closing and from time to time thereafter, Borrowers will pay all reasonable
      expenses of Lender on demand and in no event later than three (3) days after
      such demand is made (including, without limitation, search costs, audit fees,
      appraisal fees, and the fees and expenses of legal counsel for Lender) relating
      to this Agreement, and all related agreements and documents, including, without
      limitation, expenses incurred in the analysis, negotiation, preparation,
      closing, administration and enforcement of this Agreement and the other Loan
      Documents, the enforcement, protection and defense of the rights of Lender
      in
      and to the Loans and Collateral or otherwise hereunder, and any reasonable
      expenses relating to extensions, amendments, waivers or consents pursuant to
      the
      provisions hereof, or any related agreements and documents or relating to
      agreements with other creditors, or termination of this Agreement (collectively,
      the “Expenses”).
      Any
      Expenses not paid upon demand by Lender shall bear interest at the highest
      per
      annum rate of interest applicable to the Loans. 

     

    (b) In
      addition, at any time following the date of this Agreement, Borrowers effect
      any
      changes which results in a change in the format or sequence of Borrowers’ data,
      Borrowers shall pay to Lender its reasonable charge for implementing such
      changes as are necessary to accommodate the changes in the format or sequence
      of
      the data such that the Value Track SystemTM is capable of importing such data,
      including an hourly fee of $125. 

     

    9.6 Confidentiality:
      Except
      as
      provided in Section 9.19 hereof or to the extent required by law or applicable
      regulations, Borrowers and Lender agree to maintain the confidentiality of
      this
      Agreement and not to disclose the contents hereof or provide a copy hereof
      to
      any third party, except (i) accountants, lawyers and financial advisers of
      the
      parties who are informed of and agree to be bound by this Section 9.6, and
      (ii)
      that copies hereof may be provided to any assignee or participant (or potential
      assignee or participant) of Lender’s interests herein, any investors or
      prospective investors who acquire or may acquire Securities backed by Accounts
      and any parties which facilitate the issuance of such Securities, including
      rating agencies, guarantors and insurers. Lender agrees to maintain the
      confidentiality of patient information obtained as a result of its interests
      in,
      or duties with respect to, the Accounts and as otherwise may be required
      pursuant to the Business Associate Agreement.

     

    
      
        
        

      

      
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    9.7 Notices: 

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    9.16 Waivers: 

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    SECTION
      10. SPECIAL
      INTER-BORROWER AND GUARANTOR PROVISIONS

     

    10.1 Certain
      Borrower Acknowledgments and Agreements:

     

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

     

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

     

    (c) Each
      Borrower has determined that it has and, after giving effect to the transactions
      contemplated by this Agreement and the other Loan Documents (including, without
      limitation, the inter-Borrower arrangement set forth in this Section 10.1)
      will
      have, assets having a fair saleable value in excess of the amount required
      to
      pay its probable liability on its existing debts as they fall due for payment
      and that the sum of its debts is not and will not then be greater than all
      of
      its Property at a fair valuation, that such Borrower has, and will have, access
      to adequate capital for the conduct of its business and the ability to pay
      its
      debts from time to time incurred in connection therewith as such debts mature
      and that the value of the benefits to be derived by such Borrower from the
      access to funds under this Agreement (including, without limitation, the
      inter-Borrower arrangement set forth in this Section 10.1) is reasonably
      equivalent to the obligations undertaken pursuant hereto.

     

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

     

    10.2 Maximum
      Amount Of Joint and Several Liability:
      To
      the
      extent that applicable law otherwise would render the full amount of the joint
      and several obligations of any Borrower hereunder and under the other Loan
      Documents invalid or unenforceable, such Borrower’s obligations hereunder and
      under the other Loan Documents shall be limited to the maximum amount which
      does
      not result in such invalidity or unenforceability, provided,
      however, that each Borrower’s obligations hereunder and under the other Loan
      Documents shall be presumptively valid and enforceable to their fullest extent
      in accordance with the terms hereof or thereof, as if this Section 10.2 were
      not
      a part of this Agreement.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

    10.3 Authorization
      of NYH_by Borrowers: 

     

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

     

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

     

    10.4 Single
      Borrower.
      Notwithstanding
      anything to the contrary contained in this Agreement, as of the Closing Date
      the
      parties contemplate a single Borrower, namely, NYH, which shall be liable in
      all
      respects for all Obligations. In the event one or more additional Borrowers
      join
      this Agreement and become liable for the Obligations hereunder, the plural
      term
“Borrowers” shall be applicable in all respects and all Borrowers shall be
      jointly and severally liable for all Obligations as otherwise provided
      herein.

     

    [Remainder
      of Page Intentionally Left Blank]

     

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

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

     

    
      	 	 	 
	BORROWER:	
              NEW
                YORK HEALTH CARE, INC.

            
	Address
              for notices to Borrowers:	 
 	 
 
	1850
              McDonald
              Avenue	By:  	/s/ Murry
              Englard
	New York, NY 11223
Attn: Murry
              Englard	Name:	
              
Murry
              Englard
	
              Fax:
                718-375-4007

            	Title:	
              Chief
                Executive Officer

            

    

    
       

      
        	 	 	 
	LENDER:	
                CIT
                  HEALTHCARE LLC

              
	
                Address
                  for notices to Lender:

              	 
 	 
 
	CIT
                Healthcare
                LLC	By:  	/s/ Norman
                R.
                Smith 
	305 Fellowship Road, Suite 300
Mount
                Laurel, NJ 08054	Name:	
                
Norman
                R. Smith 
	
                Attention:
                  Portfolio Manager

              	Title:	
                Vice
                  President

              
	
                Facsimile:
                  856-727-5170

              	 	 

      

       

      
        
          
          

        

        44EXHIBIT
      10.2

     

    REVOLVING
      CREDIT NOTE

     

    
      	
              $5,000,000.00
                

            	
              September
                20, 2007

            

    

    

     

    FOR
      VALUE RECEIVED,
      New
      York Health Care, Inc.,
      a New
      York corporation (“Borrower”),
      hereby promises to pay to the order of CIT
      Healthcare LLC,
      a
      Delaware limited liability company (the “Lender”),
      the
      principal amount of FIVE MILLION and No/100 DOLLARS ($5,000,000), or such lesser
      amount as shall have been advanced as Revolving Loans under the Loan Agreement
      referred to below and shall be outstanding, such payment to be made at such
      time
      or times and in the manner specified in the Loan Agreement; provided, however,
      that all Revolving Loans shall be repaid in full on or before the Maturity
      Date.

     

    This
      Revolving Credit Note (as the same may be amended, restated, supplemented or
      otherwise modified from time to time, the “Note”)
      is
      issued under and secured by that certain Loan and Security Agreement dated
      as of
      even date herewith among the Borrowers and the Lender (as from time to time
      amended, restated, supplemented or otherwise modified, the “Loan
      Agreement”).
      Terms
      used herein and not defined herein are used with the respective meanings set
      forth in the Loan Agreement.

     

    Interest
      on the outstanding principal amount evidenced by this Note shall accrue at
      the
      rate or rates specified in, and be payable in accordance with the terms of,
      the
      Loan Agreement.

     

    Borrower
      may prepay this Note only in accordance with the terms and conditions of the
      Loan Agreement.

     

    The
      Loan
      Agreement provides for the acceleration of the payment of principal of and
      interest on such Revolving Loans upon the happening of certain Events of Default
      as defined in the Loan Agreement.

     

    Borrower
      waives presentment, demand for payment, notice of dishonor or acceleration,
      protest and notice of protest, and any and all other notices or demands in
      connection with this Note, except any notice expressly required by the Loan
      Agreement.

     

    This
      Note
      shall be governed by and construed in accordance with the internal laws of
      the
      State of New Jersey.

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      this
      Revolving Credit Note has been duly executed as of the day and year first above
      written.

     

    
      	 	 	 
	 	NEW
              YORK
              HEALTH CARE, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Murry
              Englard
	 	
              
Murry
              Englard
	 	
              Chief
                Executive Officer

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