AMENDED AND RESTATED CREDIT AGREEMENT

Exhibit 10.27

EXECUTION VERSION

AMENDED AND RESTATED CREDIT AGREEMENT

Between

SUNLINK HEALTH SYSTEMS, INC.,

SUNLINK HEALTHCARE, LLC,

DEXTER HOSPITAL, LLC,

CLANTON HOSPITAL, LLC,

SOUTHERN HEALTH CORPORATION OF ELLIJAY, INC.,

SOUTHERN HEALTH CORPORATION OF DAHLONEGA, INC.,

SOUTHERN HEALTH CORPORATION OF HOUSTON, INC.,

SOUTHERN HEALTH CORPORATION OF JASPER, INC.,

HEALTHMONT OF GEORGIA, INC.,

HEALTHMONT, LLC,

HEALTHMONT OF MISSOURI, LLC,

SUNLINK SERVICES, INC.,

SUNLINK HOMECARE SERVICES, LLC.,

KRUG PROPERTIES, INC.,

CENTRAL ALABAMA MEDICAL ASSOCIATES, LLC

DAHLONEGA CLINIC, LLC

CARMICHAEL’S CASHWAY PHARMACY, INC.,

CARMICHAEL’S NUTRITIONAL DISTRIBUTOR, INC., and

BREATH OF LIFE HOME HEALTH EQUIPMENT, INC.

(“Borrowers”)

And

THE OTHER PERSONS PARTY HERETO THAT

ARE DESIGNATED AS CREDIT PARTIES,

And

CHATHAM CREDIT MANAGEMENT III, LLC,

as Agent

UNION BANK OF CALIFORNIA, N.A.,

as Funding Agent

And

THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO,

as Lenders

TABLE OF CONTENTS

 

 

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AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 1, 2008, is by and between SUNLINK HEALTH SYSTEMS, INC., a corporation organized under the laws of the State of Ohio, SUNLINK HEALTHCARE LLC, a limited liability company organized under the laws of the State of Georgia, DEXTER HOSPITAL, LLC, a limited liability company organized under the laws of the State of Georgia, CLANTON HOSPITAL, LLC, a limited liability company organized under the laws of the State of Georgia, SOUTHERN HEALTH CORPORATION OF ELLIJAY, INC., a corporation organized under the laws of the State of Georgia, SOUTHERN HEALTH CORPORATION OF DAHLONEGA, INC., a corporation organized under the laws of the State of Georgia, SOUTHERN HEALTH CORPORATION OF HOUSTON, INC., a corporation organized under the laws of the State of Georgia, SOUTHERN HEALTH CORPORATION OF JASPER, INC., a corporation organized under the laws of the State of Georgia, HEALTHMONT OF GEORGIA, INC., a corporation organized under the laws of the State of Tennessee, HEALTHMONT, LLC, a limited liability company organized under the laws of the State of Georgia, HEALTHMONT OF MISSOURI, LLC, a limited liability company organized under the laws of the State of Georgia, SUNLINK SERVICES, INC., a corporation organized under the laws of the State of Georgia, SUNLINK HOMECARE SERVICES, LLC, a limited liability company organized under the laws of the State of Georgia, KRUG PROPERTIES, INC., a corporation organized under the laws of the State of Ohio, CENTRAL ALABAMA MEDICAL ASSOCIATES, LLC, a limited liability company organized under the laws of the State of Georgia, DAHLONEGA CLINIC, LLC, a limited liability company organized under the laws of the State of Georgia, CARMICHAEL’S CASHWAY PHARMACY, INC., a corporation organized under the laws of Louisiana, CARMICHAEL’S NUTRITIONAL DISTRIBUTOR, INC., a corporation organized under the laws of Louisiana, and BREATH OF LIFE HOME HEALTH EQUIPMENT, INC., a corporation organized under the laws of Louisiana (each individually, a “ Borrower ” and, collectively, the “ Borrowers ”), the other persons designated as “Credit Parties” on the signature pages hereof, the financial institutions who are or hereafter become parties to this Agreement as Lenders, CHATHAM CREDIT MANAGEMENT III, LLC, a Georgia limited liability company (in its individual capacity “ Chatham ”), as Agent, and UNION BANK OF CALIFORNIA, N.A. (in its individual capacity “ UBOC ”), as Funding Agent, amends and restates in its entirety the Credit Agreement (as amended to the date hereof, without giving effect to the amendments and restatements set forth herein, the “ Original Credit Agreement ”), dated as of April 23, 2008, among the Borrowers, the other persons designated as “Credit Parties” on the signature pages thereof, the financial institutions parties to the Original Credit Agreement as lenders, and Chatham, as agent for such lenders.

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.1 Defined Terms . As used in this Agreement the following terms shall have the following respective meanings (and such meanings shall be equally applicable to both the singular and plural form of the terms defined, as the context may require):

“ Acquisition ”: The purchase or other acquisition by one or more Borrowers or any Subsidiary of assets constituting a business, division, or product line of any Person or of the Equity Interest of any Person.

“ Adjusted Consolidated Net Income ”: For any period the Consolidated Net Income for such period and without giving effect to any extraordinary gains or losses from sales of assets plus, without duplication, (i) the sum of the amount of all non cash charges (including, without limitation, depreciation, amortization, depletion, deferred tax expense and non cash interest expense) and non cash losses which were included in arriving at Consolidated Net Income for such period less (ii) all non cash gains included in arriving at Consolidated Net Income for such period.

“ Adjusted Consolidated Working Capital ”: At any time shall mean Consolidated Current Assets (but excluding therefrom all cash and Cash Equivalents) less Consolidated Current Liabilities (but excluding therefrom any unpaid principal balance of the Revolving Loan and the current maturities of the Term Loan).

“ Advance ”: As defined in Section 2.1(a).

“ Advance Date ”: The date of the making of any Advance hereunder.

“ Affiliate ”: When used with reference to any Person, (a) each Person that, directly or indirectly, controls, is controlled by or is under common control with, the Person referred to, (b) each Person which beneficially owns or holds, directly or indirectly, twenty (20%) percent or more of any class of voting Equity Interests of the Person referred to, (c) each Person, twenty (20%) percent or more of the voting Equity Interests (or if such Person is not a corporation, twenty (20%) percent or more of the equity interest) of which is beneficially owned or held, directly or indirectly, by the Person referred to, and (d) each of such Person’s officers, directors, joint venturers and partners. The term control (including the terms “controlled by” and “under common control with”) means the possession, directly, of the power to direct or cause the direction of the management and policies of the Person in question.

“ Applicable Insolvency Laws ”: As defined in Section 8.18(j).

“ Applicable Revolving Margin ”: 3.50%.

“ Applicable Percentage ”: As defined in Section 2.10.

“ Applicable Term Loan Margin ”: 5.07%

“ Assessments ”: As defined in Section 4.13.

“ Availability ”: As of any date of calculation, the amount equal to (i) the lesser of (a) the Revolving Commitment Amount then in effect and (b) the Borrowing Base, less (ii) the unpaid principal balance of the Revolving Loan.

“ Beneficiaries ”: Agent, Funding Agent and each Lender.

 

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“ Board ”: The Board of Governors of the Federal Reserve System or any successor thereto.

“ Borrower ” and “ Borrowers ”: As defined in the opening paragraph hereof.

“ Borrowers’ Agent ”: SunLink Health Systems, Inc., a corporation organized under the laws of the State of Ohio.

“ Borrowing Base ”: As of any date of calculation, a dollar amount equal to the lesser of:

(A) 85% of the Net Collectible Value of Borrowers’ Eligible Accounts at such time less reserves established from time to time by Agent in its reasonable credit judgment. and

(B) (x) the product of (X)(i) Consolidated EBITDA of the Borrowers, as determined as of the end of the most recent fiscal month of the Borrowers for the twelve months ending thereon for which Financial Statements have been furnished to Agent (such twelve month being the “ Relevant Period ” for the purposes of this definition) plus (ii) with respect to each Person and any of its Subsidiaries acquired in a Permitted Acquisition during such Relevant Period, the Consolidated Pro Forma EBITDA of such Person and any of its Subsidiaries for all times during such Relevant Period prior to the acquisition of such Person and any of its Subsidiaries, multiplied by (Y) 3.5 less (y) the unpaid principal balance of the Term Loan;

“ Borrowing Base Certificate ”: A certificate in the form of Exhibit F hereto.

“ Business Day ”: Any day which is not a day on which banking institutions in any of the cities of Atlanta, Georgia and New York, New York are authorized or obligated by law or executive order to close.

“ Capital Expenditures ”: For any period, for the Borrowers, the sum of (a) all amounts that would be included as additions to property, plant and equipment set forth in the consolidated statement of cash flows in the section entitled Cash Flows from Investing Activities and (b) the amount for Assets Acquired under Capital Lease Obligations set forth in the consolidated statement of cash flows in the section entitled Non-cash Investing and Financing Activities, as prepared in accordance with GAAP, in respect of (a) the acquisition, construction, improvement, replacement or betterment of land, buildings, machinery, equipment or of any other fixed assets or leaseholds, (b) to the extent related to and not included in (a) above, materials, contract labor (excluding expenditures properly chargeable to repairs or maintenance in accordance with GAAP), and (c) other capital expenditures and other uses recorded as capital expenditures or similar terms having substantially the same effect.

“ Capitalized Lease ”: A lease of (or other agreement conveying the right to use) real or personal property with respect to which at least a portion of the rent or other amounts thereon constitute Capitalized Lease Obligations.

 

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“ Capitalized Lease Obligations ”: As to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board), and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13).

“ Captive Insurance Subsidiary ”: CastleLink Assurance, Ltd., an exempted company organized under the law of Cayman Islands, which is a company solely engaged in the business of providing insurance coverage to the Borrowers and their Subsidiaries and, to the extent the insurance coverage provided covers risks that (i) would be covered by a standard general malpractice liability policy and (ii) arise solely from providing services and products in the ordinary course of business of the Borrowers and their Subsidiaries.

“ Carmichael’s ”: Carmichael’s Cashway Pharmacy, Inc., a corporation organized under the laws of Louisiana.

“ Carmichael’s Acquisition ”: the acquisition of all of the issued and outstanding Equity Interest in Carmichael’s pursuant to the Carmichael’s Acquisition Agreement.

“ Carmichael’s Acquisition Agreement ”: that certain Stock Purchase Agreement, dated as of April 23, 2008, by and among Sellers, Carmichael’s and SunLink Homecare Services, LLC, a Georgia limited liability company, as the same may be amended, restated or otherwise modified from time to time prior to the Original Closing Date.

“ Carmichael’s Acquisition Documents ” means the Carmichael’s Acquisition Agreement and all other agreements, instruments, documents and certificates entered into in connection with the Carmichael’s Acquisition Agreement.

“ Carmichael’s Entity ” means Carmichael’s and each of its Subsidiaries which are consolidated with Carmichael’s in accordance with GAAP.

“ Cash Equivalents ”: As to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof ( provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any State thereof or the District of Columbia having capital, surplus and undivided profits aggregating in excess of $100,000,000, with maturities of not more than one year from the date of acquisition by such Person, (iii) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause

 

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(i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued by any Person incorporated in the United States rated at least A2 or the equivalent thereof by Standard & Poor’s Corporation or at least P2 or the equivalent thereof by Moody’s Investors Service, Inc. and in each case maturing not more than one year after the date of acquisition by such Person, and (v) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above.

“ CHAMPVA ”: Collectively, the Civilian Health and Medical Program of the Department of Veteran Affairs, a program of medical benefits covering retirees and dependents of former members of the armed services administered by the United States Department of Veteran Affairs, and all laws, rules, regulations, manuals, orders, guidelines or requirements pertaining to such program including (a) all federal statutes (whether set forth in 38 U.S.C. §1713 or elsewhere) affecting such program or, to the extent applicable to CHAMPVA, and (b) all rules, regulations (including 38 C.F.R. § 17.54), manuals, orders and administrative, reimbursement and other guidelines of all governmental authorities promulgated in connection with such program (whether or not having the force of law), in each case as the same may be amended, supplemented or otherwise modified from time to time.

“ Chatham Fee Letter ”: As defined in Section 2.11.

“ Change of Control ”: The occurrence, after the Original Closing Date, of any of the following circumstances: (a) any Person or two or more Persons acting in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Equity Interests of any Borrower representing forty (40%) percent or more of the combined voting power of all Equity Interests of such Borrower entitled to vote in the election of directors; or (b) during any period of up to twelve consecutive months, whether commencing before or after the Original Closing Date, individuals who at the beginning of such twelve-month period were directors of any Borrower ceasing for any reason to constitute a majority of the Board of Directors of any Borrower (other than by reason of death, disability or scheduled retirement); provided , however , that, notwithstanding anything to the contrary herein, Agent and Lenders acknowledge and agree that SHSI shall be permitted to reduce the number of directors on its Board of Directors to five (5) members during the term hereof; or (c) any Person or two or more Persons acting in concert acquiring by contract or otherwise, or entering into a contract or arrangement which upon consummation will result in its or their acquisition of, control over Equity Interests of any Borrower representing forty (40%) percent or more of the combined voting power of all Equity Interests of any Borrower entitled to vote in the election of directors.

“ Charges ”: As defined in Section 8.19.

“ Code ”: The Internal Revenue Code of 1986, as amended.

 

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“ Collateral ”: The property of the Credit Parties described in the Security Documents as “Collateral” and Encumbered Real Estate.

“ Collateral Account ”: As defined in Section 7.3.

“ Collateral Coverage Ratio ”: The ratio as of the last day of any fiscal quarter or other date of determination of (i) the sum of (A) Receivables Collateral Coverage, (B) Real Estate Collateral Coverage, (C) Equipment Collateral Coverage, and (D) Inventory Collateral Coverage, to (ii) Total Outstandings.

“ Collections ”: Means all funds received from or on behalf of Obligors in payment of any amount owed with respect to Receivables.

“ Compliance Certificate ”: A certificate in the form of Exhibit G hereto.

“ Concentration Account ”: Means, (i) Account No. 129544 maintained in the name of SunLink Health Systems, Inc. at the Bank of North Georgia, (ii) Account No. 130351 maintained in the name of Healthmont, LLC at the Bank of North Georgia, (iii) Account No. 0099002 maintained in the name of SunLink Healthcare, LLC at the Bank of North Georgia, (iv) Account No. 5510206409 maintained in the name of Carmichael’s Cashway Pharmacy, Inc. at the Bank of Commerce, and (v) Accounts Nos. 330152269, 330161527 and 161527 maintained in the name of Carmichael’s Cashway Pharmacy, Inc. at the First National Bank of Louisiana, or any other account which the Agent may designate as a “Concentration Account” in writing from time to time, each of which shall be subject to a Control Agreement in favor of the Agent, in form and substance satisfactory to the Agent.

“ Consolidated ” or “ consolidated ”: Except as otherwise provided herein, with reference to any term defined herein, that term as applied to the accounts of the Borrowers and their Subsidiaries, consolidated in accordance with GAAP.

“ Consolidated Current Assets ”: As of any date, the consolidated current assets of the Borrowers, determined in accordance with GAAP.

“ Consolidated Current Liabilities ”: As of any date, the consolidated current liabilities of the Borrowers, determined in accordance with GAAP.

“ Consolidated EBITDA ”: With respect to the Borrowers and their Subsidiaries determined in accordance with GAAP for any fiscal period, without duplication, an amount equal to:

(a) Consolidated Net Income of the Borrowers and their Subsidiaries for such period determined in accordance with GAAP, minus

(b) on a consolidated basis, the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by the Borrowers and

 

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their Subsidiaries (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), and (v) any other non-cash gains that have been added in determining Consolidated Net Income, in each case to the extent included in the calculation of Consolidated Net Income of the Borrowers and their Subsidiaries for such period in accordance with GAAP, but without duplication, plus

(c) on a consolidated basis, the sum of (i) any provision for income taxes, (ii) Consolidated Interest Expense, (iii) loss from extraordinary items for such period, (iv) the amount of non-cash charges (including depreciation, amortization, depletion, deferred tax expense, and non-cash interest expense) for such period, (v) the amount, if any, of non-recurring costs or expenses related to any refinancing, acquisition, or merger transaction, including, without limitation, accounting, legal, consulting and other professional fees in connection therewith, for such period, (vi) amortized debt discount for such period, and (vii) the amount of any deduction to Consolidated Net Income as the result of any grant to any members of the management of the Borrowers and their Subsidiaries of any Equity Interests (in each case, as determined in accordance with GAAP), in each case to the extent included in the calculation of Consolidated Net Income of the Borrowers and their Subsidiaries for such period in accordance with GAAP, but without duplication.

Notwithstanding the foregoing, it is agreed that, for purposes of determining compliance with the financial covenants set forth in Section 6.16 {Leverage Ratio} , Section 6.17 {Senior Leverage Ratio} and Section 6.21 {Minimum EBITDA} and for the purpose of determining the Borrowing Base on each date of determination occurring on or prior to April 30, 2009, Consolidated EBITDA of the Borrowers and their Subsidiaries (and, in the case of determining the Borrowing Base, the Consolidated EBITDA of the Borrowers) shall be equal to the sum of (A) actual Consolidated EBITDA of the Consolidated SunLink Entity for the twelve (12) consecutive months ending on such date of determination plus (B) Consolidated EBITDA of the Carmichael’s Entity for the twelve (12) consecutive months ending on such date of determination; provided , however , that, in the case of determining the Consolidated EBITDA of the Carmichael’s Entity for any 12-consecutive month measuring period that includes any month ending prior to May 1, 2008, the Consolidated EBITDA of the Carmichael’s Entity for each such month shall be deemed to be $316,667.

“ Consolidated Excess Cash Flow ”: For any period, the remainder of (a) the sum of (i) Adjusted Consolidated Net Income for such period, and (ii) the decrease, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period, minus (b) the sum of (i) the amount of Capital Expenditures made by the Borrowers and its Subsidiaries on a consolidated basis during such period in accordance with Section 6.10 funded from cash flow that is generated by the operations of the Borrowers and, in any event, other than any such Capital Expenditure to the extent financed through the incurrence of Capitalized Lease Obligations or any other Indebtedness (including Revolving Loans), (ii) the aggregate amount of permanent principal payments of Indebtedness for borrowed money of the Borrowers and their Subsidiaries and the

 

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permanent repayment of the principal component of Capitalized Lease Obligations of the Borrowers and their Subsidiaries (excluding (A) payments as a result of a Prepayment Event hereunder with proceeds of asset sales and Net Insurance/Condemnation Proceeds other than the portion thereof which resulted in a gain on conversion of assets under GAAP and (B) payments with the proceeds of other Indebtedness or equity or equity contributions (but in the case of a voluntary prepayment of the Revolving Loans, only to the extent accompanied by a voluntary reduction to the Revolving Commitments, and in the case of any other Indebtedness which may be reborrowed, to the extent such payment results in a permanent reduction in commitments thereof)) during such period, (iii) the increase, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period and (iv) the aggregate amount of cash consideration paid from cash flow that is generated by the operations of the Borrowers to make Permitted Acquisitions during such period.

“ Consolidated Interest Expense ”: For any period of determination, the aggregate consolidated amount, without duplication, of interest (whether cash or non-cash) paid, accrued or scheduled to be paid in respect of any Indebtedness of the Borrowers and its Subsidiaries, including (a) all but the principal component of payments in respect of conditional sale contracts, Capitalized Leases and other title retention agreements, (b) commissions, discounts and other fees and charges with respect to letters of credit and bankers’ acceptance financings and (c) net costs under interest rate protection agreements, in each case determined in accordance with GAAP.

“ Consolidated Net Income ”: For any period, the consolidated net after tax income of the Borrowers and their Subsidiaries determined in accordance with GAAP; provided that the following items shall be excluded in computing Consolidated Net Income (without duplication): (i) the net income (or loss) of any Person which is not a Subsidiary of the Borrower, except to the extent of the amount of any dividends or other distributions actually paid to the Borrowers or any of their Subsidiaries during such period, (ii) except for determinations expressly required to be made on a pro forma basis, the net income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or all or substantially all of the property or assets of such Person are acquired by a Subsidiary, (iii) the net income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary, (iv) fees, expenses and charges incurred in connection with the consummation of the Carmichael’s Acquisition, (v) all amounts charged to expense by the Borrowers related to unsolicited takeover offer from Resurgence Health Group LLC, Berggruen Holdings Ltd and related parties as long as such amounts are charged to expense during the period through December 31, 2008, (vi) all amounts charged to expense by the Borrowers, including for consulting, legal and related expenses and committee meeting fees, for the Special Committee of the SunLink Board of Directors formed to review strategic alternatives in November 2007 as long as such amounts are charged to expense and excluded in computing Consolidated Net Income for any period ending on or prior to December 31, 2008; (vii) all amounts (other than legal fees and expenses) charged to expense by the Borrowers for the

 

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litigation between Piedmont Heathcare Inc. and Piedmont Mountainside Hospital Inc. (Piedmont) and SunLink Health Systems, Inc. SunLink Healthcare LLC and Southern Health Corporation of Jasper, Inc. (SunLink) for breach of agreement in the asset sale agreement in June 2004 in which Piedmont purchased Mountainside Medical Center from SunLink as long as such amounts are charged to expense and excluded in computing Consolidated Net Income for any period ending on or prior to the Original Closing Date, (vii) legal fees and expenses relating to the litigation described in the preceding clause (vi), (viii) all amounts (other than legal fees and expenses) charged to expense by the Borrowers for the settlement of the UK Obligations as long as such amounts are charged to expense and excluded in computing Consolidated Net Income for any period ending on or prior to the Original Closing Date, and (ix) legal fees and expenses relating to the settlement of the UK Obligations.

“ Consolidated Pro Forma EBITDA ”: Consolidated EBITDA of any Person and any of its Subsidiaries acquired in a Permitted Acquisition calculated in a manner satisfactory to the Agent (and agreed to in writing by the Agent), adjusted by verifiable expense reductions, if any, which are reasonably expected to be realized, in each case calculated by the Borrowers’ Agent and approved by the Agent in its reasonable discretion based on Agent’s customary underwriting policy.

“ Consolidated SunLink Entity ”: SHSI and each of its Subsidiaries (other than Carmichael’s Entity) which are consolidated with SHSI in accordance with GAAP.

“ Contingent Obligations ”: With respect to any Person at the time of any determination, without duplication, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the “ primary obligor ”) in any manner, whether directly or otherwise: (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any direct or indirect security therefor, (b) to purchase property, securities, Equity Interests or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain working capital, equity capital or other financial statement condition of the primary obligor so as to enable the primary obligor to pay such Indebtedness or otherwise to protect the owner thereof against loss in respect thereof, or (d) entered into for the purpose of assuring in any manner the owner of such Indebtedness of the payment of such Indebtedness or to protect the owner against loss in respect thereof; provided , that the term “Contingent Obligations” shall not include endorsements for collection or deposit, in each case in the ordinary course of business.

“ Control Agreement ”: An agreement which satisfies the requirements of “control” in favor of the Agent over a Deposit Account, investment property, electronic chattel paper or letter-of-credit rights, within the meaning of the UCC.

“ Credit Party ”: Any Borrower or any Guarantor and “ Credit Parties ” means, collectively, Borrowers and Guarantors.

 

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“ Cut-off Period ”: 150 days after the original invoice date for the applicable Receivable.

“ Default ”: Any event which, with the giving of notice (whether such notice is required under Section 7.1, or under some other provision of this Agreement, or otherwise) or lapse of time, or both, would constitute an Event of Default.

“ Deposit Account ”: Any demand, lockbox, time, savings, passbook or similar account now or hereafter maintained by or for the benefit of a Credit Party, with an organization that is engaged in the business of banking (including, without limitation, banks, savings banks, savings and loan associations, credit unions and trust companies), and all funds and amounts therein, whether or not restricted or designated for a particular purpose, including without limitation, all Collateral Accounts, and all “deposit accounts” as defined in the UCC.

“ Domestic Subsidiary ”: Any Subsidiary incorporated in any of the states of the United States or in the District of Columbia.

“ Effective Date ”: August 1, 2008.

“ Eligible Inventory ”: Inventory owned by a Borrower which at all times continues to be acceptable to the Agent in its reasonable credit judgment exercised in good faith. In general, Inventory shall be Eligible Inventory if it meets all of the criteria set forth below:

(a) Such Inventory is not obsolete or unreasonably aged, as determined by the Agent in its reasonable credit judgment;

(b) Such Inventory is subject to a valid, first priority perfected security interest in favor of the Agent, for the benefit of the Beneficiaries, subject only to Permitted Liens; and

(c) Such Inventory is not held by a Borrower as a consignee or pursuant to a similar title retention arrangement with a vendor of such Inventory.

The criteria for Eligible Inventory set forth above may be changed and the Agent may establish any new criteria for Eligible Inventory from time to time in the Agent’s reasonable credit judgment exercised in good faith.

“ Eligible Receivables ”: Receivables created by a Borrower that continue to be acceptable to the Agent based on the Agent’s criteria of eligibility set forth below. In general, Receivables shall be Eligible Receivables if they meet all of the criteria set forth below:

(a) Such Receivables arise from the actual and bona fide sale and delivery of goods or rendition of services by a Borrower in the ordinary course of its business to a Person which is not an Affiliate of such Borrower, for which an invoice has been issued in accordance with such Borrower’s customary billing procedures;

 

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(b) Such Receivables are not unpaid more than the Cut-off Period;

(c) Such Receivables do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the Obligor may be conditional or contingent;

(d) The chief executive office of the Obligor with respect to such Receivables is located in the United States;

(e) The Obligor with respect to such Receivables has not asserted or threatened to assert a counterclaim, defense or dispute and does not have any right of setoff or recoupment against such Receivables (but the portion of the Receivables of such Obligor in excess of the amount at any time and from time to time subject to setoff or counterclaim may be deemed Eligible Receivables);

(f) There are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Receivables or reduce the amount payable or delay payment thereunder;

(g) Such Receivables are subject to the first priority, valid and perfected security interest of the Agent, for the benefit of the Beneficiaries;

(h) There are no proceedings or actions (including, without limitation, Insolvency Proceedings) which are threatened or pending against the Obligor with respect to such Receivables which would reasonably be expected to result in any material adverse change in any such Obligor’s financial condition;

(i) Such Receivables are not evidenced by or arising under any instrument or chattel paper (as such terms are defined in the UCC);

(j) Such Receivables for a single Obligor do not constitute more than 50% of the total aged beyond the Cut-off Period;

(k) Such Receivables are owed by Obligors deemed creditworthy at all times by the Agent in good faith;

(l) The Obligor obligated upon such Receivable has not suspended business, made a general assignment for the benefit of creditors or failed to pay its debts generally as they come due;

(m) A petition is not filed by or against any Obligor obligated upon such Receivable under any bankruptcy law or any other federal, state or foreign (including any provincial) receivership, insolvency relief or other law or laws for the relief of debtors;

 

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(n) Such Receivables are not owed by Obligors who are individual patients and do not constitute self-pay accounts;

(o) Such Receivables are not owed by any Credit Party or director, officer, other employee or Affiliate of any Credit Party, or any entity that has any common officer or director with any Credit Party; and

(p) Any other Receivables which the Agent, in its sole discretion, deems Eligible Receivables.

The criteria for Eligible Receivables set forth above may be changed and the Agent may establish any new criteria for Eligible Receivables from time to time in the Agent’s reasonable credit judgment exercised in good faith.

“ Encumbered Equipment ”: All equipment of Credit Parties subject to the first priority, valid and perfected security interest of the Agent, for the benefit of the Beneficiaries.

“ Encumbered Real Estate ”: All real property listed in Schedule 1.1(a) attached hereto and such additional real property as the Agent may request be mortgaged to it pursuant to Section 5.14, which real property is subject to the first priority, valid and perfected Lien of the Agent, for the benefit of the Beneficiaries.

“ Equipment Collateral Coverage ”: The amount equal to the net book value of the Encumbered Equipment, unless there exists a Qualifying Appraisal for such property issued no more than one year prior to any date of determination, in which case the applicable amount shall be the appraised value.

“ Equity Interests ”: All shares, interests, participation or other equivalents, however designated, of or in a corporation or limited liability company, whether or not voting, including but not limited to common stock, member interests, warrants, preferred stock, convertible debentures, and all agreements, instruments and documents convertible, in whole or in part, into any one or more or all of the foregoing.

“ ERISA ”: The Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ”: Any trade or business (whether or not incorporated) that is a member of a group of which a Borrower is a member and which is treated as a single employer under Section 414 of the Code.

“ Event of Default ”: Any event described in Section 7.1.

“ Existing Foreign Subsidiaries ”: The UK Subsidiaries and Klippan S.A.R.L., a company organized under the laws of France, and Klippan GmbH, a company organized under the laws of Germany.

“ Fees ”: Revolving Commitment Fees, Prepayment Fees, fees specified in the Chatham Fee Letter and any other fees due pursuant to the Loan Documents.

 

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“ Financial Statements ”: The consolidated financial statements, including, without limitation, income statements, statements of cash flows and balance sheets of SunLink Health Systems, Inc., Borrowers and their Subsidiaries, to be delivered in accordance with Section 5.1.

“ Fixed Charge Coverage Ratio ”: For any period of determination, the ratio of

(a) (i) Consolidated EBITDA less (ii) (A) Capital Expenditures other than Capital Expenditures to the extent financed through the incurrence of Capitalized Lease Obligations or any other Indebtedness (other than Revolving Loans) unless such Capital Expenditures constitute a portion of the purchase price for a Permitted Acquisition and (B) taxes paid in cash (other than taxes with respect to non-recurring capital gains),

to

(b) the sum of (i) Consolidated Interest Expense and (ii) all scheduled or otherwise required principal payments (excluding mandatory prepayments of the Term Loan under this Agreement) with respect to Total Liabilities (including but not limited to all payments with respect to Capitalized Lease Obligations of the Borrowers and the Subsidiaries), in each case determined for said period on a consolidated basis.

“ Funded Debt ”: As of each date of determination, without duplication (a) all Indebtedness for borrowed money of the Borrowers and their consolidated Subsidiaries on that date (including without limitation all obligations under Capitalized Lease Obligations) and other interest bearing Indebtedness of the Borrowers and their consolidated Subsidiaries maturing more than one year from the date of original issuance (including current maturities), (b) the aggregate amount available for drawing under all letters of credit outstanding on that date (net of the amount of any related certificate of deposit posted as security therefor) for which the Borrowers or a consolidated Subsidiary of the Borrowers is the account party ( excluding , however , the aggregate amount available for drawing under letters of credit issued to lenders and lessors of Indebtedness of the type described in clause (a) in support of such Indebtedness), (c) the aggregate amount drawn under all letters of credit (net of the amount of any related certificate of deposit posted as security therefor) for which the Borrowers or a consolidated Subsidiary of the Borrowers is the account party and for which the issuer of such letters of credit has not been reimbursed on that date, (d) all Indebtedness for borrowed money of the Borrowers and their consolidated Subsidiaries on that date owed to any bank or financial institution, and (e) all Indebtedness secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by the Borrowers or a consolidated Subsidiary of the Borrowers, even though the Borrowers or such consolidated Subsidiary has not assumed or become liable for the payment of such Indebtedness.

 

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“ GAAP ”: Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of any date of determination.

“ Governmental Authority ”: Any federal, state, local or other governmental department, commission, board, bureau, agency, central bank, court, tribunal or other instrumentality or authority or subdivision thereof, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“ Guarantor ”: Any Person who or which executes a Guaranty or similar agreement in favor of Agent, for the benefit of the Beneficiaries.

“ Guaranty ”: Guaranty dated as of the Original Closing Date made by the Credit Parties party thereto for the benefit of the Agent, on behalf of the Beneficiaries, substantially in the form attached thereto as Exhibit M and any other guaranty executed by any Person in favor of Agent, for the benefit of the Beneficiaries, with respect to the Obligations, in form and substance satisfactory to Agent.

“ Health Care Laws ”: Means (i) any and all federal, state and local healthcare fraud and abuse laws, including, without limitation, the federal Anti–Kickback Statute (42 U.S.C. § 1320a–7(b)), the Stark Law (42 U.S.C. § 1395nn and §1395(q)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), Sections 1320a–7 and 1320a–7a of Title 42 of the United States Code and the regulations promulgated pursuant to such statutes; (ii) the federal Food, Drug & Cosmetic Act (21 U.S.C. §§ 301 et seq.) and the regulations promulgated thereunder; (iii) the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104–191) and the regulations promulgated thereunder; (iv) Medicare (Title XVIII of the Social Security Act) and the regulations promulgated thereunder; (v) Medicaid (Title XIX of the Social Security Act) and the regulations promulgated thereunder; (vi) the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108–173) and the regulations promulgated thereunder; (vi) quality, safety and accreditation standards and requirements of all applicable state laws or regulatory bodies; (vii) federal, state and local laws regulating the ownership or operation of a health care facility or business, or assets used in connection therewith; (viii) federal, state and local laws relating to the billing or submission of claims, collection of accounts receivable, underwriting the cost of, or provision of management or administrative services in connection with, any and all of the foregoing, by any Credit Party and its Subsidiaries, including, but not limited to, laws and regulations relating to practice of medicine and other health care professions, professional fee splitting, tax–exempt organization and charitable trust law applicable to health care organizations, certificates of need, certificates of operations and authority; and (ix) any and all other applicable health care laws, regulations, manual provisions, policies and material administrative guidance, each of (i) through (ix) as may be amended from time to time.

 

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“ HIPAA ”: Means the Health Insurance Portability and Accountability Act of 1996, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.

“ HIPAA Compliance Plan ”: As defined in Section 4.13.

“ HIPAA Compliant ”: Means that to the extent applicable, the applicable Credit Party or Subsidiary (A) is, or on or before any applicable compliance date will be, in material compliance with any and all of the applicable requirements of HIPAA, including all requirements of the Transactions Rule and the Privacy and Security Rules and (B) is not subject to, and would not reasonably be expected to become subject to, any civil or criminal penalty or any investigation, claim or process that would reasonably be expected to cause a Material Adverse Occurrence in connection with any violation by a Credit Party or Subsidiary of a Credit Party of the then effective requirements of HIPAA.

“ Immediately Available Funds ”: Funds with good value on the day and in the city in which payment is received.

“ Immaterial Subsidiary ”: Each Subsidiary of SHSI (other than Borrowers (except for KRUG Properties, Inc. and Dahlonega Clinic LLC) with respect to which each of the following is satisfied (a) the aggregate revenues of such Subsidiary do not exceed $5,000,000 in any calendar year and during the period of twelve consecutive months most recently ended prior to such Subsidiary being designated as an Immaterial Subsidiary, and (b) the book value of the tangible assets of such Subsidiary does not exceed $5,000,000, in each case that has been designated as an Immaterial Subsidiary by the Borrowers’ Agent in a written notice delivered to the Agent but other than any such Subsidiary as to which the Borrowers’ Agent has revoked such designation by written notice to the Agent. On the Original Closing Date, KRUG Properties, Inc., Dahlonega Clinic LLC, KRUG International (UK) Limited, Bradley International Holdings Limited, Klippan S.A.R.L. and Klippan GmbH are Immaterial Subsidiaries.

“ Indebtedness ”: With respect to any Person at the time of any determination, without duplication, all obligations, contingent or otherwise, of such Person which in accordance with GAAP should be classified upon the balance sheet of such Person as liabilities, but in any event including: (a) all obligations of such Person for borrowed money (including non-recourse obligations), (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid or accrued, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services, (f) all obligations of others secured by any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all Capitalized Lease Obligations of such Person,

 

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(h) all obligations of such Person in respect of interest rate swap agreements, cap or collar agreements, interest rate futures or option contracts, currency swap agreements, currency futures or option agreements and other similar contracts (i) all obligations of such Person, actual or contingent, as an account party in respect of letters of credit or bankers’ acceptances, (j) all obligations of any partnership or joint venture as to which such Person is or may become personally liable, (k) all obligations of such Person under any Equity Interests issue by such Person, and (l) all Contingent Obligations of such Person.

“ Indemnitee ” and “ Indemnitees ”: As defined in Section 8.12.

“ Insolvency Proceeding ”: Any proceeding commenced by or against any Person, under any provision of any bankruptcy, insolvency or receivership law, including, but not limited to, assignments for the benefit of creditors, formal or informal moratoriums, compositions, receiverships, readjustments of debt, dissolutions, liquidations, or extensions with some or all creditors.

“ Inventory ”: Goods, other than farm products, which are leased by a Person as lessor, are held by a person for sale or lease or to be furnished under a contract of service, are furnished by a Person under a contract of service, or consist of raw materials, work in process, or materials used or consumed in a business or incorporated or consumed in the production of any of the foregoing and supplies, in each case wherever the same shall be located, whether in transit, on consignment, in retail outlets, warehouses, terminals or otherwise, and all property the sale, lease or other disposition of which has given rise to an Account and which has been returned to a Borrower or repossessed by a Borrower or stopped in transit.

“ Inventory Collateral Coverage ”: The amount equal to the net book value of all Eligible Inventory of the Borrowers, unless there exists a Qualifying Appraisal for all Eligible Inventory issued no more than three months prior to any date of determination, in which case the applicable amount shall be the appraised value.

“ Investment ”: The acquisition, purchase, making or holding of any Equity Interests or other security, any loan, advance, contribution to capital, extension of credit (except for trade and customer accounts receivable for inventory sold or services rendered in the ordinary course of business and payable in accordance with customary trade terms), any acquisitions of real or personal property (other than real and personal property acquired in the ordinary course of business) and any purchase or commitment or option to purchase Equity Interests, securities or other debt of or any interest in another Person or any integral part of any business or the assets comprising such business or part thereof and the formation of, or entry into, any partnership as a limited or general partner or the entry into any joint venture. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.

 

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“ Keyman Life Insurance ”: a keyman life insurance policy on the life of Robert M. Thornton, Jr. in an amount of at least $5,000,000 and on other terms and conditions and from an insurance company acceptable to the Agent.

“ KRUG Pension Plan ”: The defined benefit pension plan of SHSI, formerly known as KRUG International Corp., an Ohio corporation, which is entitled the “KRUG International Corp. Retirement Plan.”

“ Leverage Ratio ”: For any period of determination, the ratio of (i) Total Debt as of the end of such period to (ii) the sum of (A) Consolidated EBITDA for such period plus (B) with respect to each Person and any of its Subsidiaries acquired in a Permitted Acquisition during such period, the Consolidated Pro Forma EBITDA of such Person and any of its Subsidiaries for all times during such period prior to the acquisition of such Person and any of its Subsidiaries.

“ LIBOR Rate ”: The greater of (a) 2.75% per annum or (b) the Thirty-Day LIBOR rate, as published in the Bloomberg Professional Service page BBAM 1 for the last Business Day of the month immediately preceding the month for which interest is being calculated or if such published rate ceases to be available, such other published “LIBOR Rate” as the Agent may reasonably select; provided , however , that in no event shall “LIBOR Rate” exceed 5.5% per annum. For purposes of clarity, the Borrowers, Agent, Funding Agent and Lenders agree that it is their intention to utilize the Thirty-Day LIBOR rate described above for each one-month period with the applicable LIBOR Rate being reset for each successive one-month period as described above, including with respect to outstanding Advances.

“ Lien ”: With respect to any Person, any security interest, mortgage, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device (including the interest of each lessor under any Capitalized Lease), in, of or on any assets or properties of such Person, now owned or hereafter acquired, whether arising by agreement or operation of law.

“ Loan ”: The Revolving Loan or Term Loan.

“ Loan Documents ”: This Agreement, the Security Documents, the Notes and all other documents, instruments and agreements, including lockbox agreements, control agreements, servicing agreements, financing statements, and deeds of trust or mortgages, executed in connection herewith or therewith.

“ Local Bank Account ”: As defined in Section 5.15(a).

“ Local Bank Account Agreement ”: As defined in Section 5.15(a).

“ Material Adverse Occurrence ”: Any occurrence of whatsoever nature (including, without limitation, any adverse determination in any litigation, arbitration, or governmental investigation or proceeding) which would reasonably be expected to materially and adversely affect (a) the financial condition or operations of the Credit Parties and their Subsidiaries taken as a whole, (b) impair the ability of the Credit Parties

 

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and their Subsidiaries, taken as a whole, to perform their obligations under any Loan Document, (c) the validity or enforceability of the material obligations of any Credit Party or any Subsidiary other than an Immaterial Subsidiary under any Loan Document, (d) the rights and remedies of the Agent or any Lender against any Credit Party or any Subsidiary other than an Immaterial Subsidiary, (e) the timely payment of the principal of and interest on the Loans or other amounts payable by the Credit Parties hereunder, or (f) the validity of the joint and several nature of the obligations of the Borrowers with respect to all of the Obligations.

“ Maximum Rate ”: As defined in Section 8.19.

“ Medicaid ”: Collectively, the healthcare assistance program established by Title XIX of the Social Security Act (42 U.S.C. §§1396 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders, guidelines or requirements pertaining to such program, including (a) all federal statutes (whether set forth in Title XIX of the Social Security Act or elsewhere) affecting such program, (b) all state statutes and plans for medical assistance enacted in connection with such program and federal rules and regulations promulgated in connection with such program, and (c) all applicable provisions of all rules, regulations, manuals, orders and administrative, reimbursement, guidelines and requirements of all government authorities promulgated in connection with such program (whether or not having the force of law), in each case as the same may be amended, supplemented or otherwise modified from time to time.

“ Medicare ”: Collectively, the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§1395 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders or guidelines pertaining to such program, including (a) all federal statutes (whether set forth in Title XVIII of the Social Security Act or elsewhere) affecting such program, and (b) all applicable provisions of all rules, regulations, manuals, orders and administrative, reimbursement, guidelines and requirements of all governmental authorities promulgated in connected with such program (whether or not having the force of law), in each case as the same may be amended, supplemented or otherwise modified from time to time.

“ Mortgages ”: Each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents with respect to the Encumbered Real Estate.

“ Multiemployer Plan ”: A multiemployer plan, as such term is defined in Section 4001(a)(3) of ERISA, which is maintained (on the Original Closing Date, within the five years preceding the Original Closing Date, or at any time after the Original Closing Date) for employees of a Credit Party or any ERISA Affiliate.

“ Net Collectible Value ” or “ NCV ”: With respect to any Type of Eligible Receivables, the percentage determined by the Agent, in its reasonable credit judgment, by which the gross amount of such Eligible Receivables is multiplied to determine the net collectible value of such Receivables. Net Collectible Value is generally calculated in the manner described in Exhibit H . The initial Net Collectible Value for each Obligor Type shall be as set forth on Exhibit H . The Agent may adjust Net Collectible Value for any Type of Receivables as provided in Section 2.15.

 

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“ Net Insurance/Condemnation Proceeds ”: Any cash payments or proceeds received by any of the Credit Parties (i) under any casualty insurance policy in respect of a covered loss thereunder or (ii) as a result of the taking of any assets of the Credit Parties by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, in each case net of any actual and documented fees, expenses and costs incurred by the Credit Parties in connection with the adjustment or settlement of any claims of the Credit Parties in respect thereof, including (i) income taxes reasonably estimated to be actually payable within two years of the date of receipt of such payments or proceeds as a result of any gain recognized in connection with the receipt of such payment or proceeds and (ii) payment of the outstanding amount of principal, premium or penalty, if any, and interest of any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is repaid as a result of receipt of such payments or proceeds.

“ Note ”: Each Term Note or the Revolving Note (collectively, the “ Notes ”).

“ Obligations ”: All loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Agent, Funding Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement, letter of credit agreement or other instrument, arising under the Agreement or any of the other Loan Documents. This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against any Credit Party in bankruptcy, whether or not allowed in such case or proceeding), Fees, expenses, attorneys’ fees and any other sum chargeable to any Credit Party under the Agreement or any of the other Loan Documents.

“ Obligor ”: Any Person that is obligated to make payment with respect to any Receivables.

“ Offset ”: Any amount, including any overpayment made to any Borrower or any of its Affiliates, with respect to any Obligor that is to be repaid by offset against amounts then due to such Borrower by such Obligor. Offsets shall include any amounts constituting penalties or assessments due to any state or federal tax authorities, amounts deemed by any Obligor to be recoupments, inter-agency or inter-creditor offsets and recoupments and any other amounts withheld or paid to any person or entity other than the Agent and the Lender to offset against any purported liability of the Borrowers.

“ Original Closing Date ”: April 23, 2008.

“ Original Credit Agreement ”: As defined in the opening paragraph hereof.

 

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“ Original Lenders ” means, collectively, all “Lenders” (as defined in the Original Credit Agreement on the date hereof) under the Original Credit Agreement on the Effective Date.

“ Original Loans ” means collectively, all “Loans” (as defined in the Original Credit Agreement on the date hereof) under the Original Credit Agreement on the Effective Date.

“ Original Obligations ” collectively, all “Obligations” (as defined in the Original Credit Agreement on the date hereof) under the Original Credit Agreement on the Effective Date.

“ Other Taxes ”: As defined in Section 2.16(b).

“ PBGC ”: The Pension Benefit Guaranty Corporation, established pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the functions thereof.

“ Permitted Acquisitions ”: (i) Any Acquisition by any Borrower where (a) the business or division acquired is for use, or the Person acquired is engaged, in a business similar to that engaged in by the Borrowers on the Original Closing Date, (b) immediately before and after giving effect to such Acquisition, no Default or Event of Default shall exist, (c) not less than ten (10) Business Days prior to the consummation of such Acquisition, Agent shall have received pro forma financial statements, certified by the chief financial officer of SHSI as to the matters described in Section 4.5(b), giving effect to the Acquisition showing that the Borrowers are, and are reasonably anticipated to remain in pro forma compliance with all the financial ratios and restrictions set forth in Section 6.16, Section 6.17, Section 6.18, Section 6.19, Section 6.20 and Section 6.21, (d) reasonably prior to such Acquisition, the Agent shall have received drafts of each material document, instrument and agreement to be executed in connection with such Acquisition together with all lien search reports and lien release letters and other documents as the Agent may require to evidence the termination of Liens on the assets or business to be acquired and including subordination agreement in form and substance satisfactory to the Agent with respect to Indebtedness permitted to be incurred, if any, under Section 6.13(f), (e) no less than ten Business Days prior the consummation of such Acquisition, the Agent shall have received the financial statements of the Person or business to be acquired for the lesser time period of the prior three years or the period from the inception of such Person or business, in form and substance satisfactory to the Agent, (f) the provisions of Section 5.14 have been satisfied with respect to any Subsidiary to be formed or acquired in connection with such Acquisition and (g) the Agent has consented to such Acquisition in advance in writing; or (ii) any other Acquisition consented to in advance in writing by the Agent and Lenders.

“ Permitted Encumbrances ”: As defined in Section 6.14.

“ Permitted Investments ”: As defined in Section 6.12.

“ Permitted Refinancing Indebtedness ”: Any Indebtedness of the Borrowers issued or given in exchange for, or the proceeds of which are used to, extend, refinance,

 

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renew, replace, substitute or refund Indebtedness incurred pursuant to Section 6.13(b), Section 6.13(c), Section 6.13(d), Section 6.13(e), or Section 6.13(f) or any Indebtedness issued to so extend, refinance, renew, replace, substitute or refund any such Indebtedness, so long as (a) such Indebtedness has a weighted average life to maturity greater than or equal to the weighted average life to maturity of the Indebtedness being refinanced, (b) such refinancing or renewal does not add any Borrower as guarantor, obligor or grantor of security from that which applied to such Indebtedness being refinanced or renewed, (c) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, substituted or refunded ( plus all accrued interest thereon and the amount of all fees, commissions, discounts, costs, expenses and premiums incurred in connection therewith), and (d) such refinancing or renewal Indebtedness has substantially the same (or, from the perspective of Lender, more favorable) subordination provisions, if any, as applied to the Indebtedness being renewed or refinanced.

“ Person ”: Any natural person, corporation, partnership, limited partnership, limited liability company, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in an individual, fiduciary or other capacity.

“ Plan ”: Each employee benefit plan (whether in existence on the Original Closing Date or thereafter instituted), as such term is defined in Section 3 of ERISA, maintained for the benefit of employees, officers or directors of a Credit Party or of any ERISA Affiliate.

“ Pledge Agreement ”: Pledge Agreement dated as of the Original Closing Date made by the Credit Parties for the benefit of the Agent, on behalf of the Beneficiaries, substantially in the form attached thereto as Exhibit E .

“ Prepayment Event ”: Means:

(a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of any Credit Party other than dispositions described in Section 6.2(a), Section 6.2(b), Section 6.2(c) and Section 6.2(d); provided , however , that in the case of dispositions permitted only pursuant to Section 6.2(d) that result in net proceeds in excess of $5,000,000 in the aggregate for the term of this Agreement such excess amount shall be subject to prepayment pursuant to Section 2.6(a); provided , further , however, that notwithstanding the foregoing, as long as no Default or Event of Default has occurred and is continuing, no Prepayment Event arising from the dispositions described in this clause (a) shall occur to the extent net proceeds of such dispositions have been reinvested, or committed pursuant to a written agreement (including any purchase orders) to be reinvested, in productive assets (other than Inventory) of a kind then used or usable in the business of a Credit Party within 180 days after the date of such disposition and subsequently such reinvestment is made;

 

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(b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of any Credit Party, but only to the extent that the Net Insurance/Condemnation Proceeds therefrom have not been applied, or committed pursuant to a written agreement (including any purchase orders) to be applied, to repair, restore or replace such property or asset within 180 days after such event, or within such longer period as agreed to by the Agent with respect to the repair, restoration, or replacement of any real property;

(c) any receipt by any Credit Party of any indemnity payments under the Carmichael’s Acquisition Agreement from any of the Sellers or under any purchase agreement relating to any Permitted Acquisition from any sellers thereof which exceed (A) $100,000 individually or (B) when added to all other such indemnity payments received after the Original Closing Date, $500,000 in the aggregate (the “ Indemnity Payment Deductibles ”); provided , however , that (i) any indemnity payments that relate to the reimbursement of, or payment by, any Credit Party of any out-of-pocket costs in connection with the Carmichael’s Acquisition or a Permitted Acquisition and (ii) any indemnity amounts that are offset against the principal amounts of any promissory notes issued to any of the Sellers in connection with the Carmichael’s Acquisition or any of the sellers in connection with a Permitted Acquisition shall be excluded from the determination of the foregoing Indemnity Payment Deductibles; and

(d) any issuance of (i) Equity Interest in any Credit Party (other than pursuant to stock options issued in accordance with stock option plans or other benefit plans for management or employees of any Credit Party) or (ii) Indebtedness of any Credit Party.

“ Prepayment Fees ”: As defined in Section 2.10.

“ Privacy and Security Rules ”: As defined in Section 4.13.

“ Pro Rata Share ”: With respect to all matters relating to any Lender (a) with respect to the Revolving Loan, the percentage obtained by dividing (i) the Revolving Commitment of that Lender by (ii) the aggregate Revolving Commitments of all Lenders, (b) with respect to any Term Loan, the percentage obtained by dividing (i) the applicable Term Loan of that Lender by (ii) the aggregate applicable Term Loan of all Lenders, (c) with respect to all Loans, the percentage obtained by dividing (i) the aggregate Revolving Commitments and Term Loan of that Lender by (ii) the aggregate Revolving Commitments and Term Loans of all Lenders, and (d) with respect to all Loans on and after the Termination Date, the percentage obtained by dividing (i) the aggregate outstanding principal balance of the Loans held by that Lender, by (ii) the outstanding principal balance of the Loans held by all Lenders, as any such percentages may be adjusted by assignments pursuant to Section 9.1.

“ Prohibited Transaction ”: The respective meanings assigned to such term in Section 4975 of the Code and Section 406 of ERISA.

 

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“ Qualifying Appraisal ”: As defined in Section 2.17.

“ Qualified Transferee ”: (a) Any Lender or any Affiliate of any Lender that extends or invests in commercial loans, and (b) any commercial bank, savings and loan association or savings bank or any other entity having total assets in excess of $500,000,000, which extends credit or buys loans as one of its businesses, and which, through its applicable lending office, is capable of lending to Borrowers without the imposition of any withholding or similar taxes; provided that no Person proposed to become a Lender after the Original Closing Date and reasonably determined by the Borrowers’ Agent to be acting in the capacity of a vulture fund or distressed debt purchaser shall be a Qualified Transferee.

“ Rate Protection Agreement ”: Any interest rate swap, cap or option agreement, or any other agreement pursuant to which any Borrower hedges interest rate risk with respect to a portion of the Obligations.

“ Real Estate Collateral Coverage ”: The amount equal to the net book value of the Encumbered Real Estate, unless there exists a Qualifying Appraisal for such property issued no more than three (3) years prior to any date of determination, in which case the applicable amount shall be the appraised value.

“ Receivables ”: Any right to payment, whether constituting an account, chattel paper, instrument, general intangible, payment intangible, healthcare insurance receivable, contract or otherwise, arising from the sale, rental or lease of healthcare goods or equipment, or the provision of services and any ancillary sales, including all rights and remedies to payment relating thereto, together with any and all proceeds in any way derived, directly or indirectly therefrom. The term “Receivables” shall include amounts due under capitation and similar agreements, amounts due the Borrowers for cost adjustments or undercharges for prior services, amounts due as any part of a disproportionate share or risk share payment, workmen’s compensation claims, or other right to payment for any work, service, work in progress or other thing of value performed by the Borrowers whether billed or not by the Borrowers, and any other claims to payment held by the Borrowers.

“ Receivables Collateral Coverage ”: The amount equal to the Net Collectible Value of all Eligible Receivables.

“ Remittance Account ”: As defined in Section 2.2.

“ Reportable Event ”: A reportable event as defined in Section 4043 of ERISA and the regulations issued under such Section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any waiver in accordance with Section 412(d) of the Code.

 

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“ Required Control Agreements ”: The Control Agreements described on Schedule 1.1(b) hereto by and among the Agent and each Borrower, bank, issuer or securities intermediary listed thereon.

“ Required Lenders ”: means Lenders having (a) 51% or more of the sum of the Revolving Commitments of all Lenders plus the Term Loans held by all Lenders, or (b) if the Revolving Commitments have been terminated, 51% or more of the aggregate outstanding amount of the Loans.

“ Required Revolving Lenders ” means Revolving Lenders having (a) 51% or more of the Revolving Commitments of all Revolving Lenders, or (b) if the Revolving Commitments have been terminated, 51% or more of the aggregate outstanding amount of the Revolving Loan.

“ Restricted Payments ”: With respect to any Borrower and its Subsidiaries, collectively, (i) all dividends or other distributions of any nature (cash, Equity Interests other than common stock of such Borrower, assets or otherwise), (ii) all payments on any class of Equity Interests (including warrants, options or rights therefor) issued by such Borrower, whether such Equity Interests are authorized or outstanding on the Original Closing Date or at any time thereafter and any redemption or purchase of, or distribution in respect of, any of the foregoing, whether directly or indirectly, and (iii) all payments or prepayments of interest on, principal of, premium, if any, fees, redemptions, conversions, exchanges, purchases, retirements, defeasances, sinking fund or similar payments with respect to, any Indebtedness subordinated in right of payment to the Obligations.

“ Revolving Commitment ”: (a) As to any Lender, the obligation of such Lender to make its Pro Rata Share of Advances to the Borrowers, which commitment shall be as set forth on Annex A or in the most recent Assignment Agreement, if any, executed by such Lender and (b) as to all Lenders, the obligations of all Lenders to make the Advances, which aggregate commitment shall be equal to the Revolving Commitment Amount on the Effective Date, as such amount may be adjusted, if at all, from time to time in accordance with this Agreement.

“ Revolving Commitment Amount ”: Initially $12,000,000 but as the same may be reduced from time to time, if at all, in accordance with this Agreement, including pursuant to Section 2.8.

“ Revolving Commitment Fees ”: As defined in Section 2.9.

“ Revolving Lenders ”: Those Lenders having a Revolving Commitment or holding a Revolving Loan.

“ Revolving Loan ” and “ Revolving Loans ”: As defined in Section 2.1(a).

“ Revolving Note ”: As defined in Section 2.1(a); one or more promissory notes of the Borrowers evidencing the obligation of the Borrowers to repay the Revolving Loan.

 

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“ Security Agreement ”: Security Agreement dated as of the Original Closing Date made by the Credit Parties for the benefit of the Agent, on behalf of the Beneficiaries, substantially in the form attached thereto as Exhibit D .

“ Security Documents ”: The Security Agreement, the Required Control Agreements and any other Control Agreements, the Pledge Agreement, the Guaranty, the Mortgages and any other security agreements, pledge agreements, control agreements, mortgages, financing statements and other security documents entered into by the parties hereto or any other Persons or authorized to be filed or recorded pursuant to or in connection with this Agreement.

“ Senior Officer ”: As to any Person, the Chief Executive Officer, President, Executive Vice President, Vice President, Chief Financial Officer, or Controller, of such Person.

“ Senior Leverage Ratio ”: For any period of determination, the ratio of (i) Total Debt as of the end of such period less Subordinated Debt as of the end of such period to (ii) the sum of (A) Consolidated EBITDA for such period plus (B) with respect to each Person and any of its Subsidiaries acquired in a Permitted Acquisition during such period, the Consolidated Pro Forma EBITDA of such Person and any of its Subsidiaries for all times during such period prior to the acquisition of such Person and any of its Subsidiaries.

“ Sellers ” means Theodore S. Carmichael and Judy Chiasson Carmichael.

“ SHSI ”: SunLink Health Systems, Inc., an Ohio corporation.

“ Specified Lien ”: As defined in Section 8.18(j).

“ Subordinated Debt ”: Any Indebtedness of any Borrower, now existing or hereafter created, incurred or arising, which is subordinated in right of payment to the payment of the Obligations in a manner and to an extent (a) that the Agent have approved in writing prior to the creation of such Indebtedness, or (b) as to any Indebtedness of any Borrower existing on the date of this Agreement, that the Agent have approved as Subordinated Debt in a writing delivered by the Agent to the Borrowers’ Agent on or prior to the Original Closing Date.

“ Subordinated Intercompany Note ” Master Subordinated Intercompany Note, executed by each Credit Party in favor of each other Credit Party, which is subordinated to the payment of the Obligations in a manner satisfactory to Agent and having other terms reasonably satisfactory to Agent, and which is pledged and delivered to Agent, for the benefit of the Beneficiaries, as security for the Obligations.

“ Subsidiary ”: Any corporation or other entity of which Equity Interests having ordinary voting power for the election of a majority of the board of directors or other Persons performing similar functions are owned by any Credit Party either directly or through one or more Subsidiaries, excluding Existing Foreign Subsidiaries.

 

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“ Taxes ”: As defined in Section 2.16(a).

“ Termination Date ”: The earliest of (a) the seventh anniversary of the Original Closing Date, (b) the date on which the Revolving Commitment is terminated pursuant to Section 7.2 hereof or (c) the date on which the Revolving Commitment Amount is reduced to zero pursuant to Section 2.8 hereof.

“ Term Loan ”: As defined in Section 2.1(b).

“ Term Loan Lenders ” Those Lenders holding the Term Loan.

“ Term Notes ”: One or more Notes described in Section 2.1(b)(iii), evidencing the obligation of the Borrowers to repay the Term Loan.

“ Total Liabilities ”: At the time of any determination, the amount, on a consolidated basis, of all items of Indebtedness of the Borrowers and their Subsidiaries that would constitute “liabilities” for balance sheet purposes in accordance with GAAP.

“ Total Debt ”: At the time of any determination, the aggregate stated balance sheet amount of the Funded Debt of the Borrowers and their Subsidiaries determined on a consolidated basis.

“ Total Outstandings ”: At the time of any determination, the sum of the unpaid principal balance of the Revolving Loan and the unpaid principal balance of the Term Loan and all interest, cost or expenses due to the Agent and Lenders under this Agreement and the other Loan Documents.

“ Transactions Rule ”: As defined in Section 4.13.

“ TRICARE ”: Collectively, a program of medical benefits covering former and active members of the uniformed services and certain of their dependents, financed and administered by the United States Departments of Defense, Health and Human Services and Transportation, which program was formerly known as CHAMPUS (Civilian Health and Medical Program of the Uniformed Services), and all laws, rules, regulations, manuals, orders and administrative, reimbursement and other guidelines of all governmental authorities promulgated in connection with such program (whether or not having the force of law), in each case as the same may be amended, supplemented or otherwise modified from time to time.

“ Type ”: Relative to any Receivables, each applicable aging category (e.g., 0-30 days, 31-60 days, 61-90 days, etc.) up to and exceeding the Cut-off Period, Obligor type (e.g., Medicare, Medicaid, MediCal, institutional payors, commercial insurance payors, or individual/self pay (if applicable)), and/or other category or subset of Receivables used by the Agent to calculate the Net Collectible Value applicable to Receivables pursuant to the Agent’s NCV calculation methodology described in Exhibit H .

“ UCC ”: The Uniform Commercial Code, as adopted in the State of Georgia, as amended or supplemented from time to time.

 

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“ UK Subsidiaries ”: KRUG International (“ U.K. ”), Ltd., a company organized under the laws of the United Kingdom, and Bradley International Holdings, Ltd., a company organized under the laws of the United Kingdom.

“ UK Obligations ”: The inter-company payables and other obligations, including, without limitation, any contingent obligations (including those arising under certain preferred stock issued and outstanding to KRUG International (“ U.K. ”), Ltd. by SunLink Healthcare Investments, Inc.) due from the Borrowers or any of them to, or on behalf of, the UK Subsidiaries, as set forth on Schedule 6.15 hereto.

“ Unused Revolving Commitment ”: As of any date of determination, the amount by which the Revolving Commitment Amount exceeds the principal amount of unpaid Advances on such date.

“ United States ”: Shall have the meanings specified in Section 7701 of the Internal Revenue Code.

“ U.S. Taxes ”: As defined in Section 2.16(e).

“ Working Capital ”: The amount of the excess, if any, of the Consolidated Current Assets over the Consolidated Current Liabilities of the Borrowers.

Section 1.2 Accounting Terms and Calculations . Except as may be expressly provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP. To the extent any change in GAAP affects any computation or determination required to be made pursuant to this Agreement, such computation or determination shall be made as if such change in GAAP had not occurred unless the Borrowers and the Agent agree in writing on an adjustment to such computation or determination to account for such change in GAAP.

Section 1.3 Computation of Time Periods . In this Agreement, in the computation of a period of time from a specified date to a later specified date, unless otherwise stated the word “from” means “from and including” and the word “to” or “until” each means “to but excluding”.

Section 1.4 Other Definitional Terms . The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Sections, Exhibits, Schedules and like references are to this Agreement unless otherwise expressly provided. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context in which used herein otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or.” All incorporation by reference of covenants, terms, definitions or other provisions from other agreements are incorporated into this Agreement as if such provisions were fully set forth herein, and such incorporation shall include all necessary definitions and related provisions from such other agreements but including only amendments thereto agreed to by the Lenders required pursuant to Section 8.1 hereof, and shall survive any termination of such other agreements until the obligations of the Borrowers under this Agreement and the Notes are irrevocably paid in full, and the commitments of the Lenders to advance funds to any Borrower are terminated. Whenever the word “knowledge” or a word of

 

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similar import relating to the knowledge or awareness of the Borrowers is used in this Agreement or the other Loan Documents, such phrase shall mean or refer to the actual knowledge of a Senior Officer of Borrower having responsibility for such matters and assumes that each Borrower maintains and applies appropriate policies and procedures to ensure that each Senior Officer is advised of all material matters and occurrences within the responsibility of such Senior Officer.

ARTICLE II

TERMS OF THE CREDIT FACILITIES

Section 2.1 Loans . On the terms and subject to the conditions hereof:

(a) Revolving Credit .

(i) Each Revolving Lender agrees, severally and not jointly, to make available to the Borrowers jointly and severally its Pro Rata Share of advances (each, an “ Advance ”) as part of a revolving loan facility (each a “ Revolving Loan ” and, collectively, the “ Revolving Loans ”) on a revolving basis at any time and from time to time from the Original Closing Date to the Termination Date, during which period the Borrowers may borrow, repay and reborrow in accordance with the provisions hereof as long as the amount of each such requested Advance does not exceed Availability then in effect and each of the other conditions precedent in Section 3.2 are satisfied; provided , however , that Borrowers shall not be entitled to request more than one (1) Advance during any period of 7 consecutive days without the consent of the Agent (it being understood and agreed that the Revolving Loans made pursuant to Section 2.5(c) shall be disregarded for the purposes of determining compliance with the foregoing limitation on requests) . No Revolving Lender shall have any obligation to make, and the Borrowers shall have no right to obtain or to permit to remain outstanding, any Advance or Advances that would cause such Revolving Lender’s Pro Rata Share of the total outstanding Advances to exceed its separate Revolving Commitment.

(ii) At the request of Agent on behalf of any Revolving Lender, the Borrowers shall jointly and severally execute and deliver to Agent for delivery to such Revolving Lender a note to evidence the Revolving Loans. The note shall be in the principal amount of the Revolving Commitment of such Revolving Lender, substantially in the form of Exhibit A (the “ Revolving Note ”).

(iii) The aggregate principal amount of Revolving Loan advanced to each Borrower shall be the primary obligation of that Borrower (but shall also be guaranteed, jointly and severally, by all other Borrowers pursuant to Section 8.18).

(b) Term Loan . On the Original Closing Date, each Term Loan Lender (as defined in the Original Credit Agreement on such date), severally and not jointly, made to Borrowers, jointly and severally, in one draw, its Pro Rata Share (as defined in the Original Credit Agreement) of a term loan in an aggregate amount of $35,000,000 (the “ Term Loan ”). The aggregate principal amount of Term Loan outstanding on the Effective Date is $34,708,333.34.

 

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(i) The Borrowers, jointly and severally, shall repay the Term Loan through periodic payments as indicated in Section 2.5(b) below.

(ii) The final installment of the Term Loan shall in all events equal the entire remaining principal balance of the Term Loan and shall be due and payable in full on the Termination Date. Amounts borrowed under this Section 2.1(b) and repaid may not be reborrowed.

(iii) At the request of Agent on behalf of any Term Loan Lender, the Borrowers shall jointly and severally execute and deliver to Agent for delivery to such Term Loan Lender a promissory note substantially in the form of Exhibit B (“ Term Note ”), to evidence the Term Loan in the amount of such Term Loan Lender’s Pro Rata Share of the Term Loan. Each Term Note shall represent the joint and several obligation of each Borrower to pay Term Loan, together with interest thereon.

(iv) The aggregate principal amount of Term Loan advanced to each Borrower shall be the primary obligation of that Borrower (but shall also be guaranteed, jointly and severally, by all other Borrowers pursuant to Section 8.18).

Section 2.2 Procedure for Revolving Loans . Any request by the Borrowers’ Agent for an Advance hereunder shall be in writing, or by telephone and in writing, and must be given so as to be received by the Funding Agent (with a copy to the Agent when in writing) not later than noon (New York time) two (2) Business Days prior to the requested Advance Date. Each request for an Advance hereunder shall be irrevocable and shall be deemed a representation by each Borrower that on the requested Advance Date and after giving effect to the requested Advance the applicable conditions specified in Article III have been and will be satisfied, except for those conditions waived in writing by the Required Revolving Lenders with respect to such request. Each request for an Advance hereunder shall specify (i) the requested Advance Date and (ii) the amount of the Advance to be made on such date which shall be in a minimum amount of $100,000 or, if more, integral multiples of $100,000 in excess thereof. The Funding Agent may rely on any telephone request by a Senior Officer of the Borrowers’ Agent for an Advance hereunder which it believes in good faith to be genuine ( provided that the Borrowers’ Agent shall also be required to promptly confirm to the Funding Agent each telephone request in writing, with a copy to the Agent); and each Borrower hereby waives the right to dispute the Funding Agent’s record of the terms of such telephone request. Unless the Required Revolving Lenders or the Agent determine that any applicable condition specified in Article III has not been satisfied, the Funding Agent will make available to the Borrowers’ Agent by remittance to the deposit account designated by the Borrowers’ Agent from time to time in writing to the Funding Agent, provided that such deposit account is subject to a security interest in favor of the Agent, for the benefit of the Beneficiaries, (the “ Remittance Account ”) in Immediately Available Funds not later than 4:00 p.m. (New York time) on the requested Advance Date the amount of the requested Advance.

Section 2.3 Records . The Funding Agent shall enter in its ledgers and records (the “ Funding Agent Loan Account ”) the amount of the Term Loan and the Advances made or distributed by the Funding Agent and the repayments thereon made to or distributed by the Funding Agent, and the Agent shall enter in its ledgers and records (the “ Agent Loan Account ”;

 

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and together with the Funding Agent Loan Account, the “ Loan Accounts ”) all other the amount of the Term Loan and the Advances made and the repayments made thereon. All entries in the Loan Accounts shall be made in accordance with the customary accounting practices of the Funding Agent as in effect from time to time. The balance in the Loan Accounts, as recorded on the most recent printout or other written statement of the Funding Agent and the Agent, as the case may be, shall, absent manifest error, be presumptive evidence of the amounts due and owing to the Funding Agent, the Agent and Lenders by the Borrowers; provided that any failure to so record or any error in so recording shall not limit or otherwise affect Borrowers’ duty to pay the Obligations. Each Lender is authorized by each Borrower to enter on a schedule attached to a Term Note or the Revolving Note, as appropriate, a record of the Term Loan, Advances and repayments; provided , however that the failure by any Lender to make any such entry or any error in making such entry shall not limit or otherwise affect the obligation of the Borrowers hereunder and on the Notes, and, in all events, the principal amounts owing by the Borrowers in respect of the Revolving Note shall be the aggregate amount of all Revolving Loans made by Lenders less all payments of principal thereof made by the Borrowers and the principal amount owing by the Borrowers in respect of the Term Notes shall be the aggregate amount of the Term Loan less all payments of principal thereof made by the Borrowers.

Section 2.4 Interest Rates, Interest Payments and Default Interest .

(a) The Advances . Interest shall accrue and be payable on the Revolving Loans as follows:

(i) Subject to subsection (a)(ii) below, each Advance shall bear interest on the unpaid principal amount thereof at a varying rate per annum equal to the sum of (A) the LIBOR Rate, plus (B) the Applicable Revolving Margin.

(ii) Upon the occurrence and during the continuation of an Event of Default, each Advance shall, at the option of the Agent or Required Lenders, bear interest at a rate per annum equal to the sum of (A) the LIBOR Rate, plus (B) the Applicable Revolving Margin, plus (C) 2.0%.

(iii) Interest shall be payable (A) on the first Business Day of each month in respect of the immediately preceding month, (B) upon any permitted prepayment (on the amount prepaid) made in connection with a reduction of the Revolving Commitment Amount, and (C) on the Termination Date; provided that interest under subsection (a)(ii) of this Section shall be payable on demand.

(b) The Term Loan . Interest shall accrue and be payable on the Term Loan as follows:

(i) Subject to subsection (b)(ii) below, the Term Loan shall bear interest on the unpaid principal balance thereof at a varying rate per annum equal to the sum of (A) the LIBOR Rate, plus (B) the Applicable Term Loan Margin.

(ii) Upon the occurrence and during the continuation of an Event of Default, Term Loan shall, at the option of the Agent or Required Lenders, bear interest at a rate per annum equal to the sum of (A) the LIBOR Rate, plus (B) the Applicable Term Loan Margin, plus (C) 2.0%.

 

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(iii) Interest shall be payable (A) on the first Business Day of each month in respect of the immediately preceding month; (B) upon any permitted prepayment (on the amount prepaid); and (C) on the scheduled maturity date of the Term Notes; provided that interest under subsection (b)(ii) of this Section shall be payable on demand.

Section 2.5 Repayment .

(a) The unpaid principal balance of the Revolving Loan, together with all accrued and unpaid interest thereon, shall be due and payable on the Termination Date.

(b) The principal of the Term Loan shall be payable in (i) equal installments of One Hundred Forty-Five Thousand Eight Hundred Thirty-Three Dollars and 33/100 cents ($145,833.33) on the first Business Day of each month and (ii) one balloon payment on the Termination Date equal to any unpaid principal balance, together with all accrued and unpaid interest.

(c) Each of the Borrowers hereby authorizes the Funding Agent and each Lender to make a Revolving Loan to pay interest and principal and Revolving Commitment Fees, in each instance, on the date due, and each of the Borrowers hereby authorizes the Agent and each Lender to make a Revolving Loan to pay agent fees on the date due and other fees, costs or expenses payable by any Borrower or any of its Subsidiaries hereunder or under the other Loan Documents.

(d) All of the Obligations shall become due and payable as otherwise set forth herein, but in any event all of the remaining Obligations shall become due and payable upon the Termination Date. Until all Obligations have been fully paid and satisfied (other than contingent indemnification obligations to the extent no unsatisfied claim has been asserted) and the Revolving Commitment has been terminated, Agent shall be entitled to retain the security interests in the Collateral granted under the Security Documents and otherwise and the ability to exercise all rights and remedies available to them under the Loan Documents and applicable laws.

Section 2.6 Prepayments .

(a) Mandatory Prepayments for a Prepayment Event . If at any time a Prepayment Event occurs, the Borrowers shall immediately repay the Loans in the amount of (i) 100% of the net cash proceeds realized by a Prepayment Event described in clause (a), clause (b) or clause (c) of the definition of the term “Prepayment Event” and (ii) 50% of the net cash proceeds realized by a Prepayment Event described in clause (d) of the definition of the term “Prepayment Event”. Any such prepayments shall be applied to the Loans in accordance with Section 2.6(e).

(b) Prepayments from Proceeds of Keyman Life Insurance . Any and all proceeds of Keyman Life Insurance (whether such proceeds arise by reason of death benefit, at

 

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maturity, surrendering the policy and receiving the surrender value thereof or otherwise) shall be immediately used to prepay the Obligations in an amount equal to such proceeds, which shall be applied in accordance with Section 2.6(e).

(c) Other Mandatory Prepayments .

(i) If at any time Availability is less than zero Dollars ($0), the Borrowers shall immediately pay to the Funding Agent, for the ratable benefit of the Revolving Lenders, the amount of such deficiency to the extent of Revolving Loan then outstanding.

(ii) If at any time a Change of Control shall occur (other than, so long as no Event of Default has occurred and is continuing, a Change of Control resulting from an acquisition of Borrowers by any one or more of Resurgence Health Group, LLC and/or its affiliates, Berggruen Holdings North America Ltd. and/or its affiliates) or Health Management Associates, Inc., the Borrowers shall immediately prepay the Loans in full and terminate all Revolving Commitments hereunder.

(d) Optional Prepayments . The Borrowers may prepay Advances or the Term Loan, in whole or in part, at any time, subject to the payment of the fees specified in Section 2.10, if applicable, upon prior written notice given by Borrowers’ Agent and received by Funding Agent, with a copy to Agent, not later than 11 a.m. (New York time) two Business Days prior to the date of the prepayment. Any such prepayment of the Term Loan and any prepayments in full of all Advances and termination of the Revolving Commitment shall be made to the Funding Agent, for the ratable benefit of the applicable Lenders, and must be accompanied by accrued and unpaid interest on the amount prepaid. Each partial prepayment on the Term Loan shall be in a minimum amount of $100,000 or an integral multiple thereof. Amounts paid (unless following an acceleration or upon termination of the Revolving Commitment in whole) or prepaid on the Revolving Loan under this subsection (d) may be reborrowed upon the terms and subject to the conditions and limitations of this Agreement. Amounts prepaid on the Term Loan may not be reborrowed.

(e) Application of Proceeds . With respect to any prepayments made by any Borrower pursuant to Section 2.6(d), the Borrowers’ Agent may elect to have any such prepayment applied to the Advances or the Term Loan. With respect to any prepayments made by any Borrower pursuant to Section 2.6(c)(i), such prepayments shall be applied to reduce the outstanding principal balance of the Advances (without any reduction of the Revolving Commitment Amount). With respect to any prepayments made by any Borrower pursuant to Section 2.6(a) or Section 2.6(b), such prepayments shall first be applied in payment of the Term Loan, and, in each instance, against remaining payments thereon in the inverse order of maturity (starting with the balloon payment thereon due on the Termination Date) and, at any time after Term Loan shall have been prepaid in full, such prepayments shall, second , be applied to reduce the outstanding principal balance of the Advances if applicable (without any reduction of the Revolving Commitment Amount).

Section 2.7 Mandatory Prepayment of Term Loan from Excess Cash Flow . Within one hundred twenty (120) days after the end of each fiscal year commencing with the fiscal year

 

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ended June 30, 2009, Borrowers, jointly and severally, shall prepay the outstanding principal of the Term Loan in an amount equal to twenty-five percent (25%) of the Consolidated Excess Cash Flow for such fiscal year, which prepayment shall be made to Funding Agent, for the ratable benefit of Lenders, and shall be applied in payment of the Term Loan, and, in each instance, against remaining payments thereon in the inverse order of maturity (starting with the balloon payment thereon due on the Termination Date) until the Term Loan shall have been prepaid in full. The calculation shall be based on the consolidated audited Financial Statements for the Borrowers and their Subsidiaries. Such prepaid amounts may not be reborrowed.

Section 2.8 Optional Reduction of Revolving Commitment Amount or Termination of Revolving Commitment . The Borrowers may, at any time, upon not less than three (3) Business Days prior written notice from the Borrowers’ Agent to the Funding Agent, with a copy to the Agent, reduce the Revolving Commitment Amount with any such reduction in a minimum amount of $500,000, or, if more, in integral multiples of $100,000 in excess thereof; provided , however , that the Borrowers may not at any time reduce the Revolving Commitment Amount below the unpaid principal balance of the Revolving Loan. The Borrowers’ Agent may, at any time, upon not less than three (3) Business Days prior written notice from the Borrowers’ Agent to the Funding Agent, with a copy to the Agent, terminate the Revolving Commitment in its entirety. Upon termination of the Revolving Commitment pursuant to this Section, the Borrowers shall pay to the Funding Agent the full amount of all outstanding Advances, all accrued and unpaid interest thereon, all unpaid Revolving Commitment Fees accrued to the date of such termination, all Prepayment Fees, if applicable, and all other unpaid Obligations of the Borrowers to the Agent, Funding Agent and Lenders hereunder.

Section 2.9 Revolving Commitment Fee . From the Original Closing Date until all Advances have been paid in full and the Revolving Commitments have expired or been terminated, the Borrowers shall pay, without duplication of any such fee paid pursuant to the Original Credit Agreement, to the Funding Agent for the account of the Revolving Lenders fees (the “ Revolving Commitment Fees ”) in an amount determined by applying a rate of 0.30% per annum to the average daily Unused Revolving Commitment during the period for which such fee is due. Such Revolving Commitment Fees are payable in arrears monthly on the first Business Day of each month in respect of the immediately preceding month and on the Termination Date.

Section 2.10 Prepayment Fee . If any Borrower pays after acceleration or prepays all or any portion of the Term Loan or prepays the Revolving Loan and terminates or reduces the Revolving Commitment, whether voluntarily or involuntarily and whether before or after acceleration of the Obligations or if any of the Revolving Commitments are terminated as a result of the occurrence of an Event of Default or otherwise, Borrower shall pay to Funding Agent, for the benefit of Lenders, as liquidated damages and compensation for the costs of being prepared to make funds available hereunder a fee (the “ Prepayment Fee ”) in an amount equal to the Applicable Percentage (as defined below) multiplied by the sum of (i) the principal amount of the Term Loan paid after acceleration or prepaid, and (ii) the amount of the Revolving Commitment terminated or reduced. As used herein, the term “ Applicable Percentage ” shall mean (w) two percent (2.0%), in the case of a prepayment on or prior to the first anniversary of the Original Closing Date, (x) one and a half percent (1.5%), in the case of a prepayment after the first anniversary of the Original Closing Date but prior to the second anniversary thereof, (y) one percent (1.0%), in the case of a prepayment after the second anniversary of the Original

 

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Closing Date but prior to the third anniversary thereof and (z) thereafter no prepayment fee shall be payable. The Credit Parties agree that the Applicable Percentages are a reasonable calculation of Lenders’ lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early termination of the Revolving Commitments and the related loan facility provided hereunder. Notwithstanding the foregoing, no Prepayment Fee shall be payable by Borrowers upon a repayment made pursuant to Section 2.5(b), a mandatory prepayment made pursuant to Section 2.6(a), 2.6(b), 2.6(c)(i) or 2.7 or a repayment of Advances without a simultaneous reduction in or termination of the Revolving Commitment, provided that Borrowers do not terminate the Revolving Commitment upon any such prepayment and, in the case of prepayments made pursuant Section 2.6(a), the transaction giving rise to the applicable prepayment is expressly permitted under Section 6.2.

Section 2.11 Fee Letter . Borrowers shall pay to Chatham, for the account of Chatham, the fees specified in that certain fee and syndication letter dated on or about the Original Closing Date among Borrowers and Chatham (the “ Chatham Fee Letter ”), at the times specified for payment therein; it being acknowledged by Chatham that those fees that were payable pursuant thereto on the Original Closing Date have been paid by the Borrowers on the Original Closing Date.

Section 2.12 Computation . The Fees and interest on the Loans shall be computed on the basis of actual days elapsed and a year of 360 days.

Section 2.13 Payments .

(a) Payments and prepayments of principal of, and interest on, the Loans under Sections 2.4(a), 2.4(b), 2.5(a), 2.5(b), 2.6(c)(i), 2.6(d), and 2.7, all Revolving Commitment Fees under Section 2.9 and all Prepayment Fees under Section 2.10 payable to the Funding Agent and/or Lenders shall be made without setoff or counterclaim in Immediately Available Funds not later than 1:00 p.m. (New York time) on the dates called for under this Agreement to the Funding Agent for the benefit of the Funding Agent, Agent and/or Lenders, as applicable, in accordance with the wire instructions set forth on the attached Exhibit K-1 or to such other account as the Funding Agent may from time to time designate in writing. Funds received after such time shall be deemed to have been received on the next Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time, in the case of a payment of principal, shall be included in the computation of any interest on such principal payment.

(b) All other payments and other obligations under this Agreement and the other Loan Documents payable to the Agent and/or Lenders shall be made without setoff or counterclaim in Immediately Available Funds not later than 1:00 p.m. (New York time) on the dates called for under this Agreement to the Agent for the benefit of the Agent, Funding Agent and/or Lenders, as applicable, in accordance with the wire instructions set forth on the attached Exhibit K-2 or to such other account as the Agent may from time to time designate in writing. Funds received after such time shall be deemed to have been received on the next Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time, in the case of a payment of principal, shall be included in the computation of any interest on such principal payment.

 

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Section 2.14 Use of Loan Proceeds . The proceeds of Term Loan shall be used for refinancing the Borrower’s existing Indebtedness, funding the payment of the purchase price for the Carmichael’s Acquisition (and any related transaction expenses), funding the payment of fees and expenses hereunder and for general business purposes in a manner not in conflict with any of the Borrowers’ covenants in this Agreement, but excluding funding of Permitted Acquisitions. The proceeds of the Advances shall be used for refinancing the Borrower’s existing indebtedness, funding the payment of fees and expenses hereunder, funding the payment of expenses relating to Carmichael’s Acquisition and general business purposes in a manner not in conflict with any of the Borrowers’ covenants in this Agreement, but excluding funding of Permitted Acquisitions.

Section 2.15 Adjustment of NCV . Until notice of a change has been delivered to Borrowers’ Agent by the Agent, the applicable NCV of Eligible Receivables by Obligor Type shall be as set forth in Exhibit H . The Agent has the right, in its reasonable credit judgment, to adjust any applicable NCV Percentage at any time, based upon the criteria, and in accordance with the Agent’s methodology of calculating such NCV, as set forth in Exhibit H . Each change in any NCV shall be effective immediately upon receipt by the Borrowers’ Agent of the Agent’s notification of such change.

Section 2.16 Taxes .

(a) Any and all payments by the Borrowers hereunder or under the Notes shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding , in the case of the Agent, the Funding Agent and Lenders, taxes imposed on its overall net income and franchise taxes imposed on it in lieu of net income taxes (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as “ Taxes ”).

(b) The Borrowers agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as “ Other Taxes ”).

(c) The Borrowers shall indemnify the Agent, the Funding Agent and Lenders for the full amount of Taxes or Other Taxes imposed on or paid by the Agent, the Funding Agent or any Lender and any penalties, interest and expenses with respect thereto. Payments on this indemnification shall be made within 30 days from the date the Agent, the Funding Agent and such Lender makes written demand therefor.

(d) The Borrowers shall furnish to the Agent, upon the Agent’s request, at the Agent’s address referred to on the signature page hereof a certified copies of receipts evidencing payment of Taxes.

 

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(e) If any Borrower shall be required by law or regulation to make any deduction, withholding or backup withholding of any taxes, levies, imposts, duties, fees, liabilities or similar charges of the United States, any possession or territory of the United States (including the Commonwealth of Puerto Rico) or any area subject to the jurisdiction of the United States (“ U.S. Taxes ”) from any payments to the Agent, the Funding Agent or any Lender pursuant to any Loan Document in respect of the Obligations payable to the Agent, the Funding Agent or any Lender then or thereafter outstanding, such Borrower shall make such withholdings or deductions and pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with applicable law, unless such payments are being diligently contested and such Borrower has established adequate reserves with respect to such amounts, but in any event, the sum payable hereunder shall be increased as may be necessary so that, after making all required withholdings or deductions, such Lender or Agent receives an amount equal to the sum it would have received had no such withholding or deductions been made.

Section 2.17 Appraisals . The Agent, in its reasonable credit judgment, may, and upon the written request of the Borrowers’ Agent will, obtain an appraisal of any Encumbered Real Estate, Encumbered Equipment or Eligible Inventory from an AMI certified appraiser reasonably satisfactory to the Agent and the Borrowers’ Agent in case of the Encumbered Real Estate and any experienced equipment or inventory appraiser reasonably satisfactory to the Agent and the Borrowers’ Agent in case of the Encumbered Equipment or Eligible Inventory, each of which shall be conducted on a “going concern” basis in the case of assets of any Borrower that is a going concern and otherwise on an orderly liquidation value basis (a “ Qualifying Appraisal ”). Upon obtaining any such Qualifying Appraisal, the Agent shall notify the Borrowers’ Agent of the appraised value of the property that is the subject thereof and upon such notification such appraised value shall be used to determine the Collateral Coverage Ratio for one year after the date of the issuance of the appraisal in the case of Encumbered Real Estate and Encumbered Equipment, and three months in the case of Eligible Inventory, except as otherwise provided herein. Unless an Event of Default has occurred and is continuing, (a) the Borrowers shall be responsible only for the payment of costs and expenses for a Qualified Appraisal requested by it and (b) no more than one appraisal shall be conducted for any particular item of Collateral during each calendar year in the case of Encumbered Real Estate and Encumbered Equipment, and each calendar quarter in the case of Eligible Inventory. If an Event of Default has occurred and is continuing the Borrowers shall be responsible for the payment of costs and expenses for a Qualified Appraisal.

Section 2.18 Wire Transfer Fee . The Borrowers shall pay to the Agent and the Funding Agent, as the case may be, $20.00 for each wire transfer initiated by the Agent and the Funding Agent, as the case may be, in connection with this Agreement.

Section 2.19 Application and Allocation of Payments . So long as no Event of Default has occurred and is continuing, (i) payments matching specific scheduled payments then due shall be applied to those scheduled payments; (ii) voluntary prepayments shall be applied in accordance with the provisions of Section 2.6(d) and (iii) mandatory prepayments shall be applied as set forth in Section 2.6(e). All payments and prepayments applied to a particular Loan shall be applied ratably to the portion thereof held by each Lender as determined by its Pro Rata Share. As to any other payment, and as to all payments made when an Event of Default has occurred and is continuing or following the Termination Date, Borrowers hereby irrevocably

 

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waives the right to direct the application of any and all payments received from or on behalf of any Borrower, and Borrowers hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the Obligations as Agent may deem advisable. In all circumstances, after acceleration or maturity of the Obligations, all payments and proceeds of Collateral shall be applied to amounts then due and payable in the following order: (1) to Fees and Agent’s expenses reimbursable hereunder; (2) to interest on the Loans, ratably in proportion to the interest accrued as to each Loan; (3) to principal payments on the Loans, ratably to the aggregate, combined principal balance of the Loans and (4) to all other Obligations including expenses of Lenders to the extent reimbursable hereunder.

Section 2.20 Yield Protection . In the event that any Lender shall have determined that the adoption after the Effective Date of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from any central bank or governmental agency or body having jurisdiction does or shall have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender or any corporation controlling such Lender and thereby reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder, then Borrowers shall from time to time within fifteen (15) days after notice and demand from such Lender (together with the certificate referred to in the next sentence and with a copy to the Agent and the Funding Agent) pay to the Funding Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of such cost and showing the basis of the computation of such cost submitted by such Lender to Borrowers’ Agent and the Funding Agent shall, absent manifest error, be final, conclusive and binding for all purposes.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.1 Conditions Precedent to Effectiveness . The effectiveness of this Agreement, including the making of any Advance on the Revolving Loan on the Effective Date, shall be subject to the prior or simultaneous fulfillment of the following conditions, unless waived in writing by the Agent and Lenders:

(a) Documents . The Agent shall have received the following:

(i) Counterparts to this Agreement, duly executed by Borrowers, each other Credit Party, Funding Agent, Agent and Lenders;

(ii) The Revolving Notes and Term Notes, as requested by Lenders, executed by a duly authorized officer (or officers) of the Borrowers.

(iii) A certificate of the Secretary or Assistant Secretary (or other appropriate officer), of the Borrower’s Agent, on behalf of each Credit Party dated as of the Effective Date and certifying to the following:

(A) A true and accurate copy of the corporate (or other) resolutions of each Credit Party authorizing the execution, delivery and performance of the Loan Documents to which such Credit Party is a party contemplated hereby and thereby;

 

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(B) The incumbency, names, titles and signatures of the officers of each Credit Party authorized to execute the Loan Documents to which such Credit Party is a party and, in the case of the Borrowers’ Agent to request Advances (or a certification that there has been no change to such incumbency name, title and signature of the respective officers from the date such incumbency was last delivered to Agent and certified to be correct and complete);

(C) A true and accurate copy of the Articles of Incorporation or Certificate of Incorporation (or the equivalent) of each Credit Party with all amendments thereto, certified by the appropriate governmental official of the jurisdiction of organization as of a date not more than thirty (30) days prior to the Effective Date (or a certification that there have been no changes to such Articles of Incorporation or Certificate of Incorporation (or the equivalent) from the date such Articles of Incorporation or Certificate of Incorporation (or the equivalent) (or a copy thereof) was last delivered to the Agent and certified to be complete and correct); and

(D) A true and accurate copy of the bylaws (or other constitutive documents) for each Credit Party (or a certification that there have been no changes to such bylaws (or other constitutive documents) from the date such bylaws (or other constitutive documents) (or a copy thereof) was last delivered to the Agent and certified to be complete and correct).

(iv) A certificate dated the Effective Date of the chief executive officer or chief financial officer (or other appropriate officer) of the Borrower’s Agent on behalf of each Credit Party, certifying that (x) with respect to each Credit Party (other than the Carmichael’s Entity) there has been no Material Adverse Occurrence since June 30, 2007, (y) with respect to each Carmichael Entity that there has been no Material Adverse Occurrence since December 31, 2007, and (z) the conditions set forth in Section 3.2(a) and Section 3.2(b) below have been satisfied.

(b) Compliance . Each Credit Party shall have performed and complied with all agreements, terms and conditions contained in this Agreement required to be performed or complied with by such Credit Party prior to or simultaneously with the Effective Date.

(c) Other Matters . All corporate and legal proceedings relating to the Credit Parties and all instruments and agreements in connection with the transactions contemplated by this Agreement shall be satisfactory in scope, form and substance to the Agent and its counsel, and the Agent shall have received all information and copies of all documents, including records of corporate proceedings, as the Agent or its counsel may reasonably have requested in connection therewith, such documents where appropriate to be certified by proper corporate or governmental authorities.

 

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(d) Assignment of Original Loans . All Lenders on the Effective Date that are not Original Lenders shall have purchased, for a purchase price equal to the principal amount thereof, from the Original Lenders their Pro Rata Share of the Original Loans and other Original Obligations. Upon such purchase, such Original Loans shall be assigned to such Lenders. The purchase price shall be allocated among such Original Lenders according to their “Pro Rata Share” thereof, under and as defined in the Original Credit Agreement.

Any one or more of the conditions set forth above which have not been satisfied by the Borrowers on or prior to the Effective Date shall not be deemed permanently waived by the Agent and Lenders unless the Agent and Lenders shall waive the same in a writing which expressly states that the waiver is permanent, and in all cases in which the waiver is not stated to be permanent the Agent and Lenders may at any time subsequent thereto insist upon compliance and satisfaction of any such condition as a condition to any subsequent Loan hereunder and failure by the Borrowers to comply with any such condition within five (5) Business Day’s written notice from the Agent to the Borrowers’ Agent shall constitute an Event of Default under this Agreement.

Section 3.2 Conditions Precedent to the Term Loan and all Advances . The obligation of the Lenders to make any Advances hereunder are further conditioned upon the satisfaction of the following, except those conditions waived by the Agent and Lenders (with respect to conditions to be satisfied on the Effective Date) and by the Agent and Required Revolving Lenders (with respect to conditions to be satisfied on the date of each Advance) in writing:

(a) Representations and Warranties . The representations and warranties contained in Article IV shall be true and correct in all material respects (except with re