REVOLVING CREDIT AND SECURITY AGREEMENT

REVOLVING CREDIT AND SECURITY AGREEMENT

between

AMERICA SERVICE GROUP INC.
PRISON HEALTH SERVICES, INC.
PRISON HEALTH SERVICES OF INDIANA, L.L.C.
SECURE PHARMACY PLUS, LLC
CORRECTIONAL HEALTH SERVICES, LLC

and

CAPITALSOURCE BANK

Dated as of
July 28, 2009

TABLE OF CONTENTS

REVOLVING CREDIT AND SECURITY AGREEMENT

      THIS REVOLVING CREDIT AND SECURITY AGREEMENT (the “Agreement” ) dated as of July 28, 2009, is entered into between AMERICA SERVICE GROUP INC. , a Delaware corporation (“ ASG ”), PRISON HEALTH SERVICES, INC. , a Delaware corporation (“ PHS ”), PRISON HEALTH SERVICES OF INDIANA, L.L.C. , an Indiana limited liability company (“ PHS Indiana ”), SECURE PHARMACY PLUS, LLC , a Tennessee limited liability company (“ SPP ”), and CORRECTIONAL HEALTH SERVICES, LLC , a New Jersey limited liability company (“ CHS ” and together with ASG, PHS, PHS Indiana, and SPP, individually and collectively as the “ Borrower ”), CAPITALSOURCE BANK , a California industrial bank (“ CapitalSource” ), as administrative agent and collateral agent for Lenders (in such capacities, the “ Agent ”), and the Lenders party hereto.

     WHEREAS, Borrower has requested that Lenders make available to Borrower a revolving credit facility (the “Revolving Facility” ) in a maximum principal amount at any time outstanding of up to Forty Million Dollars ($40,000,000) (the “ Facility Cap ”) and within the Facility Cap, a sublimit of Fifteen Million Dollars ($15,000,000) (the “ L/C Sublimit ”), the proceeds of such Revolving Facility shall be used by Borrower for general corporate matters and purposes, and working capital needs in connection with its provision of medical and related services to correctional facilities;

     WHEREAS, the parties agree that the Existing Letters of Credit (as defined below) shall be governed by and deemed to be outstanding under the terms and conditions of this Agreement; and

     WHEREAS, Lenders are willing to make the Revolving Facility available to Borrower upon the terms and subject to the conditions set forth herein.

     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which hereby are acknowledged, Borrower, Agent and Lenders hereby agree as follows:

I. DEFINITIONS

      1.1 General Terms

          For purposes of this Agreement, in addition to the definitions above and elsewhere in this Agreement, the terms listed in Appendix A and Annex I hereto shall have the meanings given such terms in Appendix A and Annex I , which are incorporated herein and made a part hereof. All capitalized terms used which are not specifically defined shall have meanings provided in Article 9 of the UCC in effect on the date hereof to the extent the same are used or defined therein. Unless otherwise specified herein or in Appendix A , any agreement or contract referred to herein or in Appendix A shall mean such agreement as modified, amended, restated or supplemented from time to time. Unless otherwise specified, as used in the Loan Documents or in any certificate, report, instrument or other document made or delivered pursuant to any of the Loan Documents, all accounting terms not defined in Appendix A or elsewhere in this Agreement shall have the meanings given to such terms in and shall be interpreted in accordance with GAAP. References herein to “Eastern Time” shall mean eastern standard time or eastern daylight savings time as in effect on any date of determination in the eastern United States of America.

II. ADVANCES, PAYMENT AND INTEREST

      2.1 The Revolving Facility

          (a) Subject to the provisions of this Agreement, each Lender agrees to make available its Pro Rata Share of Advances, including Advances in connection with the issuance or collateralization of Letters of Credit, to Borrower under the Revolving Facility from time to time during the Term; provided, that (i) the Pro Rata Share of the Advances of any Lender shall not at any time exceed its separate Commitment, and (ii) the aggregate amount of all Advances at any time outstanding under the Revolving Facility, together with the then aggregate amount of L/C Exposure, shall not exceed the lesser of (A) the Facility Cap and (B) the Availability. The obligations of Lenders hereunder shall be several and not joint up to the amount of the Commitments. The Revolving Facility is a revolving credit facility, which may be drawn, repaid and redrawn, from time to time as permitted under this Agreement. Any determination as to whether there is availability within the Borrowing Base for Advances shall be made by Agent in its Permitted Discretion and is final and binding upon Borrower. Unless otherwise permitted by Agent, each Advance shall be in an amount of at least $100,000. Subject to the provisions of this Agreement, Borrower may request Advances under the Revolving Facility up to and including the value, in Dollars, of 85% of the Borrowing Base (such calculated amount being referred to herein as the “ Availability ”). Advances under the Revolving Facility automatically shall be made for the payment of interest on the Loans and other Obligations on the date when due to the extent available and as provided for herein.

          (b) Agent has established the above-referenced advance rate for Availability and, following an audit and review of Borrower’s financial statements and with not less than three (3) Business Days prior notice to Borrower (except that upon the occurrence, and during the continuance, of a Default or Event of Default, such notice shall not be required), may further adjust the Availability and such advance rate by applying percentages (known as “liquidity factors”) to Eligible Receivables based upon Borrower’s actual recent collection history all in a manner consistent with Agent’s underwriting practices and procedures, including, without limitation, Agent’s review and analysis of, among other things, Borrower’s historical returns, rebates, discounts, credits and allowances (collectively, the “ Dilution Items ”). Such liquidity factors and the advance rate for Availability may be adjusted by Agent, throughout the Term, subject to prior notice to Borrower, as warranted by Agent’s underwriting practices and procedures in its Permitted Discretion. Also, Agent shall have the right to establish and readjust from time to time, in its Permitted Discretion, reserves against the Borrowing Base, which reserves shall have the effect of reducing the amounts otherwise eligible to be disbursed to Borrower under the Revolving Facility pursuant to this Agreement.

      2.2 The Revolving Loans; Maturity

          All amounts outstanding under the Revolving Loans and other Obligations under the Revolving Facility shall be due and payable in full, if not earlier in accordance with this Agreement, upon the earliest of (i) any automatic acceleration upon an Event of Default as provided for herein; (ii) Agent’s acceleration and demand for payment following an Event of Default, and (iii) the last day of the Term (such earlier date being the “Maturity Date” ).

      2.3 Interest on the Revolving Facility

          Interest on outstanding Advances under the Revolving Loans shall be payable monthly in arrears on the first day of each calendar month at an annual rate of LIBOR plus 2.0%, calculated on the basis of a 360-day year and for the actual number of calendar days elapsed in each interest calculation period. Notwithstanding the foregoing (and without affecting Agent’s rights under Section 3.5 hereof),

during the continuance of an Event of Default and at any other time when Agent has determined that LIBOR cannot be readily determined or is otherwise unavailable, interest on outstanding Advances under the Revolving Facility shall be payable monthly in arrears on the first day of each calendar month at an annual rate of the Prime Rate; provided , however , that, notwithstanding any provision of any Loan Document, for the purpose of calculating interest at any time hereunder, LIBOR shall be not less than 3.14%, in each case calculated on the basis of a 360-day year and for the actual number of calendar days elapsed in each interest calculation period. Interest accrued on each Advance under the Revolving Loans shall be payable in accordance with the procedures provided for in Section 2.5 and Section 2.6 , commencing August 1, 2009 and continuing until the later of the expiration of the Term and the full performance and irrevocable payment in full in cash of the Obligations and termination of this Agreement. Interest on outstanding Advances under the Revolving Loans shall accrue from the respective funding dates of the Advances.

      2.4 Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate

          So long as no Default or Event of Default shall have occurred and be continuing, Borrower may give Agent irrevocable written notice requesting an Advance under the Revolving Facility by notifying Agent not later than 12:00 p.m. (New York City time) at least one (1) but not more than four (4) Business Days before the proposed borrowing date of such requested Advance (the “Borrowing Date” ), and delivering to Agent by noon (New York City time) on the date of the proposed borrowing, a completed Borrowing Certificate and relevant supporting documentation satisfactory to Agent in its Permitted Discretion (which shall only include an Accounts re-aging once each month, as specified below), which shall (a) specify the proposed Borrowing Date of such Advance which shall be a Business Day, (b) specify the principal amount of such requested Advance, (c) certify the matters contained in Section 4.2 , and (d) specify the amount of any known recoupments or setoffs by any third party payor being sought, requested or claimed, or, to Borrower’s knowledge, threatened against Borrower to the extent not otherwise reflected in the calculation of Availability. Each time a request for an Advance is made, and, in any event and regardless of whether an Advance is being requested, each month during the Term until the Obligations are indefeasibly paid in cash in full and this Agreement is terminated, Borrower shall deliver to Agent a Borrowing Certificate accompanied by a separate detailed aging and categorization of Borrower’s accounts receivable, and such other supporting documentation with respect to the figures and information in the Borrowing Certificate as Agent shall request in its Permitted Discretion from a credit or security perspective or otherwise. On each Borrowing Date, Borrower irrevocably authorizes Agent to disburse the proceeds of the requested Advance to the Borrower’s account(s) as set forth on Schedule 2.4 , in all cases for credit to the Borrower (or to such other account as to which the Borrower shall instruct Agent) via Federal funds wire transfer no later than 4:00 p.m. Eastern Time. If Borrower’s Borrowing Certificate does not request the same dollar amount as that which Borrower estimated in its notification to Agent, Borrower agrees to pay any interest cost incurred by Agent in connection with such estimated funds.

      2.5 Collections; Repayment; Borrowing Availability and Lockbox

          Borrower shall maintain a lockbox together with a blocked account (individually and collectively, the “Blocked Account” ) with one or more banks acceptable to Agent (each, a “Lockbox Bank” ), and shall execute with each Lockbox Bank one or more agreements acceptable to Agent in its Permitted Discretion (individually and collectively, the “Lockbox Agreement” ), and such other agreements related thereto as Agent may require in its Permitted Discretion. Borrower shall ensure that all collections of its Accounts and all other cash payments received by Borrower are paid and delivered directly from Account Debtors and other Persons into the Blocked Account. The Lockbox Agreements shall provide that the Lockbox Banks on each Business Day will promptly transfer all funds paid into the Blocked Accounts into a depository account or accounts maintained by Agent or an Affiliate of Agent at

such bank as Agent may communicate to Borrower from time to time (the “Concentration Account” ). Notwithstanding and without limiting any other provision of any Loan Document, Agent shall apply to the Obligations, on a daily basis, all funds transferred into the Concentration Account pursuant to the Lockbox Agreement and this Section 2.5 in such order and manner as determined by Agent. To the extent that any Accounts collections of Borrower or any other cash payments received by Borrower are not sent directly to the Blocked Account but are received by Borrower or any of its Affiliates, such collections and proceeds shall be held in trust for the benefit of Agent and Lenders and promptly remitted (and in any event within two (2) Business Days), to the Blocked Account for transfer to the Concentration Account. Borrower acknowledges and agrees that compliance with the terms of this Section 2.5 is an essential term of this Agreement, and that, in addition to and notwithstanding any other rights Agent may have hereunder, under any other Loan Document, under applicable law or at equity, upon each material failure by Borrower to comply with any such terms which is not promptly remedied, Agent shall be entitled to assess a non-compliance fee which shall operate to increase the Applicable Rate by two percent (2.0%) per annum during any period of non-compliance, whether or not a Default or an Event of Default occurs or is declared; provided , that nothing shall prevent Agent from considering any failure to comply with the terms of this Section 2.5 to be a Default or an Event of Default. All funds transferred to the Concentration Account for application to the Obligations under the Revolving Facility shall be applied to reduce the Obligations under the Revolving Facility, but, only for purposes of calculating interest hereunder, shall be subject to a two (2) Business Day clearance period unless the net Advance balance is zero or a credit at the end of the day in which case collection swept to the Concentration Account for such day will not be subject to the two (2) Business Day clearance period. If as the result of collections of Accounts and/or any other cash payments received by Borrower pursuant to this Section 2.5 a credit balance exists with respect to the Concentration Account, such credit balance shall not accrue interest in favor of a Borrower, but shall be available to Borrower upon Borrower’s demand therefor. If applicable, at any time prior to the execution of all or any of the Lockbox Agreements and operation of the Blocked Account, Borrower and its Subsidiaries shall direct all collections or proceeds it receives on Accounts or from other Collateral to the accounts(s) and in the manner specified by Agent in its sole discretion.

      2.6 Manner of Payment; Promise to Pay

          (a) Any payments made by Borrower (other than payments automatically paid through Advances under the Revolving Facility as provided herein), shall be made only by ACH or wire transfer on the date when due, without offset or counterclaim, in Dollars, in immediately available funds to such account as may be indicated in writing by Agent to Borrower from time to time. Any such payment received after 4:00 p.m. Eastern Time on any date shall be deemed received on the following Business Day. Whenever any payment hereunder shall be stated to be due or shall become due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made on, the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during such extension) and/or fees, as the case may be. Agent will provide detailed monthly invoices of such charges and payments.

          (b) Borrower absolutely and unconditionally promises to pay the Obligations hereunder in accordance with the manner and terms hereof, without any deduction whatsoever, without setoff, recoupment or counterclaim, each of which claim or defense hereby is waived.

      2.7 Repayment of Excess Advances

          If at any time the sum of outstanding Advances under the Revolving Facility plus any Unfunded L/C Exposure exceeds the lesser of the Facility Cap or the Availability, such excess amount shall be immediately due and payable by Borrower without the necessity of any demand, at the Payment

Office, whether or not a Default or Event of Default has occurred or is continuing and shall be paid in the manner specified in Section 2.6 .

      2.8 Payments by Agent

          Should any amount required to be paid under any Loan Document remain unpaid for ten (10) Business Days from the date due, such amount may be paid by Agent, for the account of Lenders, which payment shall be deemed a request for an Advance under the Revolving Facility as of the date such payment is due, and Borrower irrevocably authorizes disbursement of any such funds to Agent, for the benefit of Lenders, by way of direct payment of the relevant amount, interest or Obligations. No payment or prepayment of any amount by Agent, Lenders or any other Person shall entitle any Person to be subrogated to the rights of Agent and/or Lenders under any Loan Document unless and until the Obligations have been fully performed and paid irrevocably in cash and this Agreement has been terminated. Any sums expended by Agent and/or Lenders as a result of Borrower’s or any Guarantor’s failure to pay, perform or comply with any Loan Document or any of the Obligations may be charged to Borrower’s account as an Advance under the Revolving Facility and added to the Obligations.

      2.9 Grant of Security Interest; Collateral

          (a) To secure the payment and performance of the Obligations, each Borrower hereby grants to Agent, for the benefit of itself and the Lenders, a continuing first priority security interest in and Lien upon, and pledges to Agent, for the benefit of itself and the Lenders, all of its right, title and interest in and to the following, together with property of a similar nature which each such Borrower owns or in which each such Borrower hereafter acquires any right, title or interest (collectively and each individually, the “ Collateral ”):

               (i) all of such Borrower’s tangible personal property, including without limitation all present and future Goods, Inventory and Equipment (including items of Equipment which are or become Fixtures), now owned or hereafter acquired, but excluding any leased or financed Equipment;

               (ii) all of such Borrower’s intangible personal property, including without limitation all present and future Accounts, securities, contract rights, Permits, General Intangibles, Chattel Paper, Investment Property, Intellectual Property including goodwill, Documents, Instruments and Deposit Accounts, Letter of Credit Rights and supporting obligations rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds (including, without limitation, proceeds of any life insurance policy), now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing;

               (iii) all of such Borrower’s present and future Government Contracts and rights thereunder and the related Government Accounts and proceeds thereof, now or hereafter owned or acquired by such Borrower; provided , however , that Agent shall not have a Lien in any rights under any Government Contract of such Borrower or in the related Government Account where the taking of such security interest would be prohibited by applicable law (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, § 203 or Title 41, § 15 of the United States Code shall not be deemed an express prohibition against assignment thereof); and

               (iv) any and all additions and accessions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.

          (b) Notwithstanding the foregoing provisions of this Section 2.9 , such grant of a security interest shall not extend to, and the term “Collateral” shall not include, any General Intangibles of Borrower to the extent that (but only to the extent that) (i) such General Intangibles are not assignable or capable of being encumbered as a matter of law or under the terms of any license or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law) without the consent of the licensor thereof or other applicable party thereto, and (ii) such consent has not been obtained; provided , however , that the foregoing grant of a security interest shall extend to, and the term “Collateral” shall include, each of the following: (a) any General Intangible which is in the nature of an Account or a right to the payment of money or a proceed of, or otherwise related to the enforcement or collection of, any Account or right to the payment of money, or goods which are the subject of any Account or right to the payment of money, (b) any and all proceeds of any General Intangible that is otherwise excluded to the extent that the assignment, pledge or encumbrance of such proceeds is not so restricted, and (c) upon obtaining the consent of any such licensor or other applicable party with respect to any such otherwise excluded General Intangible, such General Intangible as well as any and all proceeds thereof that might theretofor have been excluded from such grant of a security interest and from the term “Collateral.”

          (c) In addition to the foregoing, to secure the payment and performance of the Obligations, ASG has pledged to Agent, for the benefit of the Lenders, all of the securities of its Subsidiaries pursuant to the Stock Pledge Agreement.

          (d) Each Borrower has full right and power to grant to Agent a perfected, first priority security interest and Lien in the Collateral pursuant to this Agreement. Upon the execution and delivery of this Agreement, and upon the filing of the necessary financing statements, which Borrower hereby authorizes Agent to file, and delivery of any necessary stock certificates, without any further action, Agent will have a good, valid and perfected first priority Lien and security interest in the Collateral, subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. No financing statement relating to any of the Collateral will be, on the Closing Date, on file in any public office except those (a) on behalf of Agent, and (b) in connection with Permitted Liens. Borrower is not a party to any agreement, document or instrument that conflicts with this Section 2.9 or that otherwise relates to a security interest in, assignment of, or Lien upon the Collateral.

      2.10 Collateral Administration

          (a) Except as permitted pursuant to Sections 7.8(a) and 7.8(b) , all Collateral (except Deposit Accounts and Collateral having an aggregate value of $50,000 or less at any one location) will at all times be kept by Borrower at the locations set forth on Schedule 5.4 hereto, which may be amended from time to time, and shall not, without thirty (30) calendar days prior written notice to Agent, be moved therefrom, and in any case shall not be moved outside the continental United States. Whether or not an Event of Default has occurred, any of the Agent’s officers, employees, representatives or agents shall have the right, at any time during normal business hours, in the name of Agent, any designee of Agent, or Borrower, to verify the validity, amount or any other matter relating to the Collateral. Borrower shall cooperate fully with Agent in an effort to facilitate and promptly conclude such verification process. Notwithstanding anything in this subsection to the contrary, Agent shall have the right at all times after the occurrence and during the continuation of an Event of Default to notify Persons owing Accounts to Borrower that their Accounts have been assigned to Agent and to collect such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorney’s fees, to Borrower.

          (b) As and when determined by Agent in its Permitted Discretion, Agent will perform the searches described in clauses (i) and (ii) below against Borrower or any Guarantor (the results

of which are to be consistent with Borrower’s representations and warranties under this Agreement), on a quarterly basis at Borrower’s expense, unless an Event of Default has occurred and is continuing in which case such searches shall be conducted as often as Agent deems reasonably appropriate at Borrower’s expense: (i) UCC searches with the Secretary of State and local filing offices of each jurisdiction where Borrower and/or any Guarantors are organized; and (ii) judgment, federal tax lien and corporate and partnership tax lien searches, in each jurisdiction searched under clause (i) above, and in any jurisdiction where Borrower or Guarantors maintain their respective offices or place of business or material assets to the extent that the UCC would permit a filing in such jurisdiction to attach a security interest in or Lien upon any Collateral. Agent will (i) upon Borrower’s request and at Borrower’s expense, provide copies of any such searches to Borrower and (ii) will use a search service with which Agent has a discount arrangement in an effort to minimize the expense of such searches.

          (c) Upon Agent’s request, Borrower shall immediately deliver to Agent all items for which Lender must receive possession to obtain a perfected Lien and all notes, certificates, and documents of title, Chattel Paper, warehouse receipts, Instruments, and any other similar instruments constituting Collateral.

          (d) Borrower shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit such records to Agent on such periodic bases as Agent may request in its Permitted Discretion. In addition, if Accounts of Borrower in an aggregate face amount in excess of $500,000 become ineligible because they fall within one of the specified categories of ineligibility set forth in the definition of Eligible Billed Receivables or Eligible Unbilled Receivables, Borrower shall notify Agent of such occurrence within two (2) Business Days following its discovery of such occurrence and the Borrowing Base shall thereupon be adjusted to reflect such occurrence. After the occurrence and during the continuation of an Event of Default, and upon Agent’s request, Borrower shall execute and deliver to Agent formal written assignments of all of its Accounts weekly or daily as Agent may request, including all Accounts created since the date of the last assignment, together with copies of claims, invoices and/or other information related thereto.

          (e) Borrower (i) shall provide prompt written notice to its current bank to transfer all items, collections and remittances to the Concentration Account, and to any Account Debtor not remitting to the Blocked Account, to do so promptly, (ii) after the occurrence and during the continuation of an Event of Default, and upon Agent’s request, shall provide prompt written notice to each Account Debtor that Agent has been granted a lien and security interest in, upon and to all Accounts applicable to such Account Debtor, and shall direct each Account Debtor to make payments directly to Lender’s Concentration Account; and (iii) shall do anything further that may be lawfully required by Agent to secure Agent, for the benefit of itself and Lenders, and to effectuate the intentions of the Loan Documents. Borrower hereby authorizes Agent, for purposes of clause (i) hereof, upon any failure to send such notices and directions within twenty (20) calendar days after the date of this Agreement (or twenty (20) calendar days after the Person becomes an Account Debtor), and for purposes of clause (ii) hereof, promptly following the occurrence and continuation of such Event of Default, to send any and all similar notices and directions to such Account Debtors.

      2.11 Power of Attorney

          Agent hereby is irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring Borrower to act as such) with full power of substitution, coupled with an interest, to do the following: (i) upon the occurrence and during the continuance of an Event of Default, endorse the name of any such Person upon any and all checks, drafts, money orders and other instruments for the payment of money that are payable to such Person and constitute collections on such Person’s Accounts; (ii) upon the occurrence and during the continuance of an Event of Default, execute in the

name of Borrower any financing statements, schedules, assignments, instruments, documents, and statements that it is obligated to give Agent under any of the Loan Documents; and (iii) do such other and further acts and deeds in the name of Borrower that Agent may deem necessary or desirable to enforce or to perfect Agent’s security interest or lien or rights in any Collateral. In addition, if the Borrower breaches its obligation hereunder to direct payments of Accounts within the time periods specified herein to the Blocked Account, Agent, as the irrevocably made, constituted and appointed true and lawful attorney for the Borrower pursuant to this paragraph, may, by the signature or other act of any of Agent’s officers or authorized signatories (without requiring any of them to do so), direct any federal, state or private payor or fiscal intermediary to pay proceeds of Accounts or any other Collateral to the Blocked Account.

      2.12 Letters of Credit

          (a) Subject to the terms and conditions of this Agreement, Agent agrees to cause an L/C Issuer at any time and from time to time after the date hereof and prior to the Termination Date to issue standby letters of credit which comply with the provisions of this Section 2.12 for the account of Borrower (each such standby letter of credit, and each Existing Letter of Credit, a “ Letter of Credit ”) or to purchase participations or execute indemnities or reimbursement obligations (each such undertaking, an “ L/C Undertaking ”) with respect to Letters of Credit issued by an Underlying Issuer for the account of Borrower (in which case, Agent agrees to cause such Underlying Issuer to issue Letters of Credit which comply with the provisions of this Section 2.12 for the account of Borrower; provided , however , that an L/C Issuer will not be required to issue, purchase or execute a requested Letter of Credit, and Agent will not be required to cause same, if any of the following would result after giving effect thereto: the L/C Exposure would (i) exceed the L/C Sublimit or (ii) when taken together with the outstanding Advances, would exceed the lesser of the Facility Cap or the Availability, without duplication. As of the Closing Date, the Existing Letters of Credit will be deemed to be outstanding under this Agreement and subject to the provisions herein.

          (b) Borrower may from time to time request L/C Issuer to assist Borrower in establishing or opening a Letter of Credit by delivering to L/C Issuer, with a copy to Agent, the L/C Issuer’s standard form of standby letter of credit application (the “ Letter of Credit Application ”) completed to the satisfaction of the L/C Issuer (in the exercise of its sole discretion), and such other certificates, documents and other papers and information as Agent or L/C Issuer may reasonably request. If requested by Agent or L/C Issuer, Borrower also shall be an applicant under the application with respect to any Underlying Letter of Credit that is to be the subject of an L/C Undertaking. Borrower acknowledges that the issuance of any Letter of Credit shall occur no sooner than five (5) Business Days following the submission of a Letter of Credit Application to, and to the satisfaction of, the L/C Issuer (in its sole discretion); provided, however, that Agent shall use good faith efforts to cause the L/C Issuer to issue an Letter of Credit within ten (10) Business Days following the submission of a Letter of Credit Application to, and to the satisfaction of, the L/C Issuer (in its sole discretion).

          (c) Each Letter of Credit (and each corresponding Underlying Letter of Credit) shall, among other things, (i) be for a standby letter of credit, (ii) be in form and substance acceptable to the L/C Issuer (in the exercise of its Permitted Discretion), including the requirement that the amounts payable thereunder must be payable in Dollars, (iii) subject to Section 2.12(e) , have an expiry date not later than twelve (12) months after such Letter of Credit’s date of issuance and in no event later than 30 days prior to the Termination Date and (iv) be issued for the purpose for which the Borrower has historically obtained letters of credit, or for such other purpose as is reasonably acceptable to Agent, and, in all cases, for a purpose permitted for use of proceeds hereunder. Each Letter of Credit Application and each Letter of Credit shall be subject to the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, and any amendments or revisions thereof (“ UCP ”).

          (d) Borrower shall authorize and direct the L/C Issuer and each Underlying Issuer to name Borrower as the “ Account Party ” therein and to accept and rely upon the Agent’s instructions and agreements with respect to all matters arising in connection with the issuance of the Letters of Credit and the applications therefor.

          (e) If a requested Letter of Credit is to have or is for the purpose of replacing an existing Letter of Credit that has an expiry date which is after the Maturity Date, then Borrower shall, at least 15 days prior to the Maturity Date, provide a “back-to-back” letter of credit to Agent in form, and substance satisfactory to Agent in its sole discretion. Such back-to-back letter of credit shall be issued by a bank satisfactory to Agent in its sole discretion, in an amount equal to the Relevant Percentage of the then undrawn stated amount of all outstanding Letters of Credit. In the alternative, Borrower may deposit cash in the Agent Collateral Account in an amount equal to the Relevant Percentage of the then undrawn stated amount of each such outstanding Letter of Credit with respect to which a “back-to-back” letter of credit has not been issued to Agent. Notwithstanding the provision of such “back-to-back letter(s) of credit and/or the funding of such Agent Collateral Account, Borrower shall remain liable pursuant to the terms of this Agreement for all L/C Exposure until such time as (i) each such Letter of Credit (x) expires by its terms without any draws being made in respect thereof or (y) has been returned to Agent undrawn and marked “cancelled” and, (ii) all Funded L/C Exposure continued as Advances pursuant to Section 2.12(f) has been repaid in full in cash by Borrower. For this purpose “ Relevant Percentage ” means, as of the Maturity Date and each date prior to the one-year anniversary thereof, 105%, and from and after each one-year anniversary of the Maturity Date, two percent (2%) more than the Relevant Percentage as of the preceding annual anniversary.

          (f) Any payment by Agent in respect of any Letter of Credit or L/C Undertaking shall constitute for all purposes of this Agreement the making by Agent of an Advance in the amount of such payment. All Funded L/C Exposure shall bear interest at a per annum rate equal to the interest rate charged to other Advances. With respect to each Advance made pursuant to this Section 2.12 , the Borrower shall be deemed to have certified the statements contained in Section V as of the date the payment constituting such Advance was made by Agent; provided , however , that in the event any such statement was not true and correct as of such date, such Advance shall be repayable on demand; provided , further , that upon any such repayment on demand, the failure of any such statement to be true and correct as of such date shall not constitute an Event of Default hereunder, unless the failure of any such statement to be true and correct as of such date would have constituted an Event of Default hereunder even if such repaid Advance had never been made.

          (g) The obligations of Borrower for Advances that arise as a result of payments in respect of or draws under Letters of Credit or L/C Undertakings shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, to the extent permitted by law, including without limitation, (i) any lack of validity or enforceability of any Letter of Credit or L/C Undertaking, (ii) the existence of any claim, setoff, defense or other right which Borrower may have at any time against a beneficiary of any Letter of Credit or L/C Undertaking or against Agent, any Lender, any L/C Issuer or Underlying Issuer; (iii) the fact that, or any allegation that, any draft, demand, certificate or other document presented under such Letter of Credit or L/C Undertaking is or was forged, fraudulent, invalid or insufficient in any respect, or any statement therein is or was untrue or inaccurate in any respect; (iv) any breach of contract or dispute among or between the Borrower, Agent, any Lender, any L/C Issuer or any other Person; (v) payment by the Agent, any Lender or L/C Issuer under any Letter of Credit or L/C Undertaking against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit or L/C Undertaking; (vi) any other circumstance or happening whatsoever, which is similar to any of the foregoing; or (vii) the fact that any Default or Event of Default shall have occurred and be continuing (it

being understood that any such payment by the Borrower of its Obligations in respect of any such Advance shall be without prejudice to, and shall not constitute a waiver of any rights any party hereto may have or might acquire against the beneficiary of any Letter of Credit or L/C Undertaking or against any L/C Issuer).

          (h) On the first day of each month, commencing on the first such day following the Closing Date and continuing thereafter until the date the Unfunded L/C Exposure has been reduced to zero, including on the Termination Date, the Borrower shall pay to Agent, in arrears, for the account of Agent and each other Lender in accordance with their respective participations in each Letter of Credit, the Letter of Credit Fee.

          (i) The aggregate stated amount available for Letters of Credit and L/C Undertakings guaranteed or issued by any L/C Issuer from time to time outstanding shall not exceed the L/C Sublimit.

          (j) On demand by Agent at any time following the occurrence and during the continuance of an Event of Default, Borrower will cause to be deposited and maintained in an account as directed by Agent, cash collateral in an amount equal to one hundred five percent (105%) of the Unfunded L/C Exposure, and Borrower hereby irrevocably authorizes Agent, in its discretion, on Borrower’s behalf and in Borrower’s name, to open such an account and to make and maintain deposits therein, or in an account opened by Borrower, in the amounts required to be maintained by Borrower, out of the proceeds of Accounts or other Collateral or out of any funds of Borrower coming into Agent’s possession at any time. Borrower may not withdraw amounts credited to any such account except upon the earlier of (i) payment and performance in full of all Obligations (other than indemnity obligations under the Loan Documents that are not then due and payable or for which any events or claims that would give rise thereto are not then pending), termination of this Agreement and termination, replacement or cash collateralization of all then outstanding Letters of Credit in accordance with the terms of this Agreement, and (ii) at such time as such Event of Default no longer exists.

          (k) In connection with the issuance of any Letter of Credit, Borrower shall indemnify, save and hold Agent, each Lender and each L/C Issuer harmless from any loss, cost, expense or liability, including, without limitation, payments made by Agent, any Lender or any L/C Issuer, and reasonable out-of-pocket expenses and reasonable attorneys’ fees incurred by Agent, any Lender or any L/C Issuer arising out of, or in connection with, any Letter of Credit to be issued for the account of Borrower, except for any such losses, costs, expenses or liabilities arising out of Agent’s, such Lender’s or such L/C Issuer’s gross negligence or willful misconduct. Borrower shall be bound by the L/C Issuer’s regulations and reasonable good faith interpretations of any Letter of Credit issued or created for Borrower’s account, although this interpretation may be different from Borrower’s own; and neither Agent, any Lender nor any L/C Issuer, nor any of their respective correspondents shall be liable for any error, negligence, or mistakes, whether of omission or commission, in following Borrower’s instructions or those contained in any Letter of Credit or any modifications, amendments or supplements thereto or in issuing or paying any Letter of Credit, except for, and solely to the extent of, Agent’s, such Lender’s, such L/C Issuer’s or such correspondents’ gross negligence or willful misconduct.

          (l) Any other lender hereafter participating in the Revolving Facility (a “ Participant ”) may also participate in the issuance of Letters of Credit and L/C Undertakings contemplated by this Section 2.12 pursuant to the terms hereof, at such percentage interest as is acceptable to Agent and such Participant without any consent of any other party or any further amendment hereto.

          (m) If by reason of (i) any change in any applicable law, treaty, rule, or regulation or any change in the interpretation or application thereof by any Governmental Authority, or (ii) compliance by any L/C Issuer, Underlying Issuer, Agent or any Lender with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority including Regulation D of the Federal Reserve Board as from time to time in effect (and any successor thereto):

     (1) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued hereunder, or

     (2) there shall be imposed on Lender, L/C Issuer or any Underlying Issuer any other condition regarding any Letter of Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost to Agent, such Lender, L/C Issuer or any Underlying Issuer of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by Agent, such Lender, L/C Issuer or any Underlying Issuer, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Borrower, and Borrower shall pay within two Business Days such amounts as Agent may specify to be necessary to compensate Agent, such Lender L/C Issuer or Underlying Issuer, as the case may be, for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the Applicable Rate for Advances. The determination by Agent of any amount due pursuant to this Section 2.12 , as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

      2.13 Evidence of Loans

          (a) Agent shall maintain, in accordance with its usual practice, electronic or written records evidencing the indebtedness and obligations to each Lender resulting from each Loan made by such Lender from time to time, including without limitation, the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

          (b) The entries made in the electronic or written records maintained pursuant to this Section 2.13 (the “ Register ”) shall be prima facie evidence of the existence and amounts of the obligations and indebtedness therein recorded; provided , however , that the failure of the Agent to maintain such records or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans or Obligations in accordance with their terms.

          (c) Agent will account to Borrower monthly with a statement of Advances under the Revolving Facility, and any charges and payments made pursuant to this Agreement, and in the absence of manifest error, such accounting rendered by Agent shall be deemed final, binding and conclusive unless Agent is notified by Borrower in writing to the contrary within fifteen (15) calendar days of Receipt of each accounting, which notice shall be deemed an objection only to items specifically objected to therein.

          (d) The Borrower agrees that:

               (i) upon written notice by any Lender to the Borrower that a promissory note or other evidence of indebtedness is requested by such Lender to evidence the Loans and other Obligations owing or payable to, or to be made by, such Lender, the Borrower shall promptly (and in any event within three (3) Business Days of any such request) execute and deliver to such Lender an

appropriate promissory note or notes in form and substance reasonably acceptable to such Lender and Borrower, payable to the order of such Lender or in a principal amount equal to the amount of the Loans owing or payable to such Lender;

               (ii) all references to Notes in the Loan Documents shall mean Notes, if any, to the extent issued (and not returned to the Borrower for cancellation) hereunder, as the same may be amended, modified, divided, supplemented and/or restated from time to time; and

               (iii) upon any Lender’s written request, and in any event within three (3) Business Days of any such request, Borrower shall execute and deliver to such Lender new Notes and/or divide the Notes in exchange for then existing Notes in such smaller amounts or denominations as such Lender shall specify in its sole and absolute discretion; provided , that the aggregate principal amount of such new Notes shall not exceed the aggregate principal amount of the Notes outstanding at the time such request is made; and provided, further, that such Notes that are to be replaced shall then be deemed no longer outstanding hereunder and replaced by such new Notes and returned to the Borrower within a reasonable period of time after such Lender’s receipt of the replacement Notes.

III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE

      3.1 Unused Line Fee

          Borrower shall pay to Agent, for the ratable benefit of Lenders, an unused line fee (the “Unused Line Fee” ) in an amount equal to 0.0375% per month of the difference derived by subtracting (a) the daily average amount of the balances under the Revolving Facility (including any Unfunded L/C Exposure under the L/C Sublimit) outstanding during the preceding month, from (b) the amount of the Facility Cap on the last day of such month. The Unused Line Fee shall be payable monthly in arrears on the first day of each successive calendar month (starting with August 1, 2009).

      3.2 Collateral Management Fee

          Borrower shall pay Agent a monthly collateral management fee (the “ Collateral Management Fee ”) equal to 0.042% per month of the daily average amount of the balances under the Revolving Facility outstanding during the preceding month. The Collateral Management Fee shall be payable monthly in arrears on the first day of each successive calendar month (starting with August 1, 2009).

      3.3 Early Termination Fee

          If (i) Borrower terminates the Revolving Facility under Section 11.1 hereof, (ii) Agent or any Lender accelerates any Revolving Loan or Borrower is otherwise required to make payment in full of the Obligations relating to the Revolving Facility or Lender’s obligation to make Advances pursuant to the Revolving Facility shall terminate in each case upon the occurrence of an Event of Default, or (iii) a Change of Control or final payment of the Revolving Facility pursuant to Section 11.1 occurs, any voluntary or involuntary termination of the Revolving Facility and final prepayment of the Obligations relating to the Revolving Facility by Borrower or any other Person occurs (other than reductions to zero of the outstanding balance of the Revolving Facility resulting from the ordinary course operation of the provisions of Section 2.5 ), whether by virtue of Agent’s exercising its right of set off or otherwise; or (iv) any payment in full of the principal amount of any Revolving Loan or other satisfaction of the outstanding balance of any Revolving Loan and/or the Revolving Facility is made during a bankruptcy, reorganization or other proceeding or is made pursuant to any plan of reorganization or liquidation or any Debtor Relief Law (each, a “Revolver Termination” ), then, at the effective date of any such Revolver

Termination, Borrower shall pay Agent, for the account of Lenders (in addition to the then outstanding principal, accrued interest and other Obligations pursuant to the terms of this Agreement and any other Loan Document), as yield maintenance for the loss of bargain and not as a penalty, an amount equal to the Termination Fee. Notwithstanding any other provision hereof, no Termination Fee shall be due if Borrower merges or enters into a business combination with another person and the surviving person becomes the Borrower hereunder, or enters into economically similar, financing arrangements with Agent in which Agent remains, at least, a co-lead lender and collateral agent.

      3.4 Computation of Fees; Lawful Limits

          All fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed in each calculation period, as applicable. In no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the interest and other charges paid or agreed to be paid to Agent, for the benefit of Lenders, for the use, forbearance or detention of money hereunder exceed the maximum rate permissible under applicable law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. If, due to any circumstance whatsoever, fulfillment of any provision hereof, at the time performance of such provision shall be due, shall exceed any such limit, then, the obligation to be so fulfilled shall be reduced to such lawful limit, and, if Agent or the Lenders shall have received interest or any other charges of any kind which might be deemed to be interest under applicable law in excess of the maximum lawful rate, then such excess shall be applied first to any unpaid fees and charges hereunder, then to unpaid principal balance owed by Borrower hereunder, and if the then remaining excess interest is greater than the previously unpaid principal balance, Agent and the Lenders shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate. The terms and provisions of this Section 3.4 shall control to the extent any other provision of any Loan Document is inconsistent herewith.

      3.5 Default Rate of Interest

          Upon the occurrence and during the continuation of an Event of Default, the Applicable Rate of interest in effect at such time with respect to the Obligations shall be increased by 3.0% per annum (the “ Default Rate ”).

      3.6 Acknowledgement of Joint and Several Liability

          Each Borrower acknowledges that it is jointly and severally liable for all of the Obligations under the Loan Documents. Each Borrower expressly understands, agrees and acknowledges that (i) it is an Affiliated entity by common ownership of each other Borrower, (ii) it desires to have the availability of one common credit facility instead of separate credit facilities, (iii) it has requested that Agent and Lenders extend such a common credit facility on the terms herein provided, (iv) Agent and Lenders will be lending against, and relying on a lien upon, all of Borrowers’ assets even though the proceeds of any particular loan made hereunder may not be advanced directly to a particular Borrower, (v) it will nonetheless benefit by the making of all such loans by Agent and Lenders and the availability of a single credit facility of a size greater than each could independently warrant, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Loan Documents shall be applicable to and shall be binding upon Borrower. Each Borrower, in the event it shall be held or deemed to be a guarantor of the Obligations of any other Borrower hereby expressly waives any rights and defenses that are or may become available to such Borrower by reason of Sections 2787 to 2855, inclusive, and Sections 2899 and 3433 of the California Civil Code. As provided by Section 15.1 , this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. The foregoing waivers and the provisions which pertain to California law are

included solely out of an abundance of caution, and shall not be construed to mean that any of the above-referenced provisions of California law are in any way applicable to this Agreement or the Obligations.

IV. CONDITIONS PRECEDENT

      4.1 Conditions to Effectiveness of Agreement and Closing

          This Agreement shall become effective upon the satisfaction, in the judgment of Agent in its Permitted Discretion, of the following conditions:

          (a) Borrower shall have delivered to Agent the Loan Documents to which it is a party, each duly executed by an authorized officer of Borrower and the other parties thereto;

          (b) all in form and substance satisfactory to Agent in its Permitted Discretion, Agent shall have received (i) a report of Uniform Commercial Code financing statement, tax and judgment lien searches performed with respect to Borrower and Guarantor in each jurisdiction determined by Agent in its Permitted Discretion, and such report shall show no Liens on the Collateral (other than Permitted Liens), (ii) each document (including, without limitation, any Uniform Commercial Code financing statement) required by any Loan Document or under law or requested by Agent to be filed, registered or recorded to create, in favor of Agent, for the benefit of Lenders, a perfected first priority security interest upon the Collateral;

          (c) Agent shall have received (i) the Charter and Good Standing Documents, all in form and substance reasonably acceptable to Agent, (ii) a certificate of the corporate secretary or assistant secretary of Borrower dated the Closing Date, as to the incumbency and signature of the Persons executing the Loan Documents, in form and substance acceptable to Agent, (iii) the written legal opinion of counsel for Borrower, in form and substance satisfactory to Agent in its Permitted Discretion, and (iv) a certificate executed by an authorized officer of Borrower, which shall constitute a representation and warranty by Borrower as of the Closing Date that the conditions contained in this Section 4.1 have been satisfied;

          (d) Agent shall have received a certificate of the chief financial officer (or, in the absence of a chief financial officer, the chief executive officer) of Borrower, in form and substance satisfactory to Agent (each, a “Solvency Certificate” ), certifying (i) the solvency of Borrower after giving effect to the transactions and the Indebtedness contemplated by the Loan Documents, and (ii) as to Borrower’s financial resources and ability to meet its obligations and liabilities as they become due, to the effect that as of the Closing Date and after giving effect to such transactions and Indebtedness: (A) the assets of such Person, at a Fair Valuation, exceed the total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person, and (B) no unreasonably small capital base with which to engage in its anticipated business exists with respect to Borrower;

          (e) Agent shall have completed or waived examinations, the results of which shall be satisfactory in form and substance to Agent, of the Collateral, the financial statements and the books, records, business, obligations, financial condition and operational state of Borrower, and Borrower shall have demonstrated to Agent’s satisfaction that (i) its operations comply, in all respects reasonably deemed material by Agent, in its reasonable judgment, with all applicable federal, state, foreign and local laws, statutes and regulations, (ii) its operations are not the subject of any governmental investigation, evaluation or any remedial action which could reasonably result in any Material Adverse Effect, and (iii) it has no liability (whether contingent or otherwise) that could reasonably give rise to a Material Adverse Effect;

          (f) Agent shall have received all fees, charges and expenses payable to Agent and Lenders on or prior to the Closing Date pursuant to the Loan Documents;

          (g) all in form and substance satisfactory to Agent in its Permitted Discretion, Agent shall have received such consents, approvals and agreements, including, without limitation, Landlord Waivers and Consents with respect to the leases for those locations specifically identified on Schedule 5.18B where a complete set of books and records relating to Accounts or the Borrower’s Inventory is kept, from such third parties as Agent and its counsel shall determine are reasonably necessary or desirable with respect to (i) the Loan Documents and/or the transactions contemplated thereby, and/or (ii) claims against Borrower or the Collateral;

          (h) Borrower shall be in compliance with Section 5.17 and Section 6.5 , and Agent shall have received (i) copies of all such insurance policies, and (ii) original certificates of such insurance policies as Agent shall request in its Permitted Discretion confirming that they are in effect and that the premiums due and owing with respect thereto have been paid in full and naming Agent, for the benefit of itself and Lenders, as loss payee on Borrower’s property insurance;

          (i) all corporate and other proceedings, documents, instruments and other legal matters in connection with the transactions contemplated by the Loan Documents (including, but not limited to, those relating to corporate and capital structures of Borrower) shall be reasonably satisfactory to Agent;

          (j) No default shall exist pursuant to any of Borrower’s obligations under any material contract (including this Agreement, after giving effect to the terms hereof); Borrower shall be in compliance with all applicable laws in all material respects;

          (k) Borrower shall have established a Lockbox and Blocked Account pursuant to Section 2.5 ;

          (l) Agent shall have received copies of all (i) material licenses and permits required for Borrower to conduct the business in which it is currently engaged or is contemplated pursuant to the Loan Documents, and (ii) all intercompany agreements, management agreements, documents related to borrowed money, capital leases and other material contracts;

          (m) Agent shall have completed or waived its legal due diligence examinations of Borrower, the results of which shall be satisfactory in form and substance to Agent, as evidenced by Agent’s execution of the Loan Documents;

          (n) Agent shall have received evidence, in form and substance satisfactory to Agent, of the release and termination of any and all Liens, security interest and/or Uniform Commercial Code financing statements in, on, against or with respect to any of the Collateral (other than Permitted Liens);

          (o) there shall not have occurred any Material Adverse Change or Material Adverse Effect from that which was reflected on the financial statements dated May 31, 2009, and provided to Agent;

          (p) Borrower shall have executed and filed IRS Form 8821 with the appropriate office of the Internal Revenue Service; and

          (q) Agent shall have received such other documents, certificates, information or legal opinions as Agent may reasonably request, all in form and substance reasonably satisfactory to Agent in its Permitted Discretion.

      4.2 Conditions to Each Advance and Issuance of Each Letter of Credit

          The obligations of Lenders to make any Advance and to issue each Letter of Credit are subject to the satisfaction, in the reasonable judgment of Agent, of the following conditions precedent:

          (a) Borrower shall have delivered to Agent a Borrowing Certificate for the Advance, executed by an authorized officer of Borrower, which shall constitute a representation and warranty by Borrower as of the Borrowing Date, that the conditions contained in this Section 4.2 have been satisfied; provided , however , that any determination as to whether to extend credit shall be made by Agent in its Permitted Discretion;

          (b) each of the representation and warranties made by Borrower in or pursuant to this Agreement shall be accurate, before and after giving effect to such Advance, and no Default or Event of Default shall have occurred or be continuing or would exist after giving effect to the requested Advance on such date; provided , however , that for any representation or warranty limited to the date hereof, such limitation shall not apply, and the representation shall be true as if made at the time of any request for an Advance or issuance of a Letter of Credit, except with respect to representations that would be inconsistent with Section 6.15 ;

          (c) immediately after giving effect to the requested Advance, the sum of (i) the aggregate outstanding principal amount of Advances under the Revolving Facility, including Advances in connection with the Letters of Credit, and (ii) the Unfunded L/C Exposure, shall not exceed the lesser of the Availability and the Facility Cap, and the Unfunded L/C Exposure shall not exceed the L/C Sublimit;

          (d) except as disclosed in the financial information delivered to Agent hereunder, there shall be no liabilities or obligations with respect to Borrower of any nature whatsoever which, either individually or in the aggregate, reasonably would be likely to have a Material Adverse Effect;

          (e) Agent shall have received all fees, charges and expenses due and payable to Agent on or prior to such date pursuant to the Loan Documents;

          (f) there shall not have occurred any Material Adverse Change or Material Adverse Effect; and

          (g) no default or Event of Default shall have occurred or be continuing or would exist after giving effect to the Advance under the Revolving Facility or the issuance of a Letter of Credit on such date.

V. REPRESENTATIONS AND WARRANTIES

     Each Borrower, jointly and severally, represents and warrants as of the date hereof and, except for such representations and warranties that are as a specified date, each Borrowing Date and each date of issuance of a Letter of Credit as follows:

      5.1 Organization and Authority

          Borrower is a corporation, limited partnership or limited liability company duly organized, validly existing and in good standing under the laws of its state of formation. Borrower (a) has all requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, (b) is duly qualified to do business in every jurisdiction in which it is a party to a Government Contract, and, except as set forth on Schedule 5.1 , every other jurisdiction in which failure so to qualify could reasonably be expected to have a Material Adverse Effect, and (c) has all requisite power and authority (i) to execute, deliver and perform the Loan Documents to which it is a party, (ii) to borrow hereunder, (iii) to consummate the transactions contemplated under the Loan Documents, and (iv) to grant the Liens with regard to the Collateral pursuant to the Security Documents to which it is a party. Borrower is not an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such an “investment company.”

      5.2 Loan Documents

          The execution, delivery and performance by Borrower of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby, (a) have been duly authorized by all requisite action of Borrower and have been duly executed and delivered by or on behalf of Borrower; (b) do not violate any provisions of (i) applicable law, statute, rule, regulation, ordinance or tariff, (ii) any order of any Governmental Authority binding on Borrower or any of its properties, or (iii) the certificate of incorporation or bylaws (or any other equivalent governing agreement or document) of Borrower, or any agreement between Borrower and its shareholders, members, partners or equity owners or among any such shareholders, members, partners or equity owners; (c) are not in conflict with, and do not result in a breach or default of or constitute an event of default, or an event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in a conflict, breach, default or event of default under, any indenture, agreement or other instrument to which Borrower is a party, or by which the properties or assets of Borrower are bound, the effect of which could reasonably be expected to have a Material Adverse Effect; and (d) except as set forth therein, will not result in the creation or imposition of any Lien of any nature upon any of the properties or assets of Borrower, and (e) except as set forth on Schedule 5.2 , do not require the consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person. When executed and delivered, each of the Loan Documents to which Borrower is a party will constitute the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors’ rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity).

      5.3 Subsidiaries, Capitalization and Ownership Interests

          As of the date of this Agreement, Borrower has no Subsidiaries (other than EMSA Limited Partnership) other than those Persons listed as Subsidiaries on Schedule 5.3 , each of which (other than EMSA Limited Partnership) either are other Borrowers or Guarantors of the Obligations of Borrower herein. Schedule 5.3 also states the authorized and issued capitalization of Borrower and each such Subsidiary, and the number and class of equity securities and/or ownership, voting or partnership interests (except for ASG) issued and outstanding (including options, warrants and other rights to acquire any of the foregoing). The ownership or partnership interests of each Borrower that is a limited partnership or a limited liability company are not certificated, the documents relating to such interests do not expressly state that the interests are governed by Article 8 of the Uniform Commercial Code, and the interests are

not held in a securities account. Schedule 5.3 also lists the directors, members, managers and/or partners of Borrower, as well as any beneficial or record holders of more than twenty-five percent (25%) of the equity of ASG, and ASG owns, directly or indirectly, all of the issued and outstanding equity securities and/or ownership or voting or partnership interests of each other Borrower. The outstanding equity securities and/or ownership, voting or partnership interests of each Borrower have been duly authorized and validly issued and are fully paid and nonassessable. Except as listed on Schedule 5.3 , Borrower does not own an interest or participate or engage in any joint venture, partnership or similar arrangements with any Person.

      5.4 Properties

          Borrower (a) is the sole owner and has good, valid and marketable title to all of its properties and assets, including the Collateral, whether personal or real, subject to no transfer restrictions or Liens of any kind except for Permitted Liens, and (b) is in compliance in all material respects with each lease to which it is a party or otherwise bound, except for such noncompliance as would not reasonably be expected to have a Material Adverse Effect. Schedule 5.4 lists all real properties (and their locations) owned or leased or utilized in client owned facilities by or to Borrower, and all assets or property that are leased pursuant to capital leases or licensed by Borrower, and any other material leases. Borrower enjoys peaceful and undisturbed possession under all such leases and such leases are all the leases necessary for the operation of such properties and are valid and subsisting and are in full force and effect.

      5.5 Other Agreements

          Except as set forth on Schedule 5.5 , Borrower is not (a) a party to any judgment, order or decree or any agreement, document or instrument, or subject to any restriction, which would materially adversely affect its ability to execute and deliver, or perform under, any Loan Document or to pay the Obligations, or (b) in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any agreement, document or instrument to which it is a party or to which any of its properties or assets are subject, which default, if not remedied within any applicable grace or cure period, could reasonably be expected to have a Material Adverse Effect, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period could reasonably be expected to have a Material Adverse Effect.

      5.6 Litigation

          Except as set forth on Schedule 5.6 , there is no action, suit, proceeding or investigation pending or, to its knowledge, threatened against Borrower that (a) questions or could prevent the validity of any of the Loan Documents or the right of Borrower to enter into any Loan Document or to consummate the transactions contemplated thereby, (b) would reasonably be expected to result in an outcome that would, either individually or in the aggregate, (i) have any material adverse effect upon or change in the validity or enforceability of any Loan Document, (ii) be material and adverse to the value of the Collateral taken as a whole or to the business, operations, prospects, properties, assets, liabilities or condition of Borrower or any Guarantors, taken as a whole, or (iii) materially impair or be reasonably expected to materially impair the ability of Borrower or any Guarantor, taken as a whole, to perform the Obligations or to consummate the transactions under the Loan Documents executed by such Person, or (c) would reasonably be likely to result in any Change of Control or other change in the current ownership, control or management of Borrower. Except as set forth on Schedule 5.6 , as of the date hereof Borrower is not a party or subject to any order, writ, injunction, judgment or decree of any Governmental Authority. Except as set forth on Schedule 5.6 , as of the date hereof there is no action, suit or proceeding initiated by

Borrower currently pending, and Borrower has no existing accrued and/or unpaid Indebtedness to any Governmental Authority or any other governmental payor, except for Permitted Indebtedness.

      5.7 Hazardous Materials

          Borrower is in compliance in all material respects with all applicable Environmental Laws. Borrower has not been notified of any action, suit, proceeding or investigation (a) relating in any way to compliance by or liability of Borrower under any Environmental Laws, (b) which otherwise deals with any Hazardous Substance or any Environmental Law, or (c) which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Substance which, in any case, could have a Material Adverse Effect.

      5.8 Tax Returns; Governmental Reports

          Borrower (a) has filed all material federal, state, foreign (if applicable) and local tax returns and other reports which are required by law to be filed by Borrower, and (b) has paid all material taxes, assessments, fees and other governmental charges, including, without limitation, payroll and other employment related taxes, in each case that are due and payable, except only for items that Borrower is currently contesting in good faith and that are identified on Schedule 5.8 .

      5.9 Financial Statements and Reports

          All financial statements relating to Borrower that have been or may hereafter be delivered to Agent by Borrower are accurate and complete in all material respects and have been prepared in accordance with GAAP consistently applied with prior periods. ASG has no material obligations or liabilities of any kind not disclosed in such financial statements that would be required to be disclosed therein in accordance with GAAP, and since the date of the most recent financial statements submitted to Agent, there has not occurred any Material Adverse Change or Material Adverse Effect or, to Borrower’s knowledge, any other event or condition that could reasonably be expected to have a Material Adverse Effect.

      5.10 Compliance with Law

          (a) Borrower (a) is in compliance with all laws, statutes, rules, regulations, ordinances and tariffs of any Governmental Authority applicable to Borrower and/or Borrower’s business, assets or operations, including, without limitation, ERISA and HIPPA, as applicable, and (b) is not in violation of any order of any Governmental Authority or other board or tribunal, except where such noncompliance or violation would not reasonably be likely to have a Material Adverse Effect. There is no event, fact, condition or circumstance known to Borrower which, with notice or passage of time, or both, would constitute or result in any noncompliance with, or any violation of, any of the foregoing, in each case except where noncompliance or violation could not reasonably be expected to have a Material Adverse Effect. Borrower has not received any notice that Borrower is not in compliance in any respect with any of the requirements of any of the foregoing. Borrower has (i) not engaged in any Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, (ii) not failed to meet any applicable minimum funding requirements under Section 302 of ERISA in respect of its plans and no funding requirements have been postponed or delayed, (iii) no knowledge of any event or occurrence which would cause the Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate any of the employee benefit plans, (iv) no fiduciary responsibility under ERISA for investments with respect to any plan existing for the benefit of Persons other than its employees or former employees, or (v) not withdrawn, completely or partially, from any multi-employer pension plans so as to incur

liability under the MultiEmployer Pension Plan Amendments of 1980. With respect to Borrower, there exists no event described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12 C.F.R. § 2615.3 has not been waived.

          (b) Borrower is in compliance, in all material respects, with the Patriot Act.

      5.11 Intellectual Property

          Except as set forth on Schedule 5.11 , as of the date hereof Borrower does not own, and is not a party to, any patents, patent applications, trademarks, trademark applications, service marks, registered copyrights, copyright applications, copyrights, trade names, trade secrets, proprietary software or licenses (collectively, the “Intellectual Property” ).

      5.12 Licenses and Permits; Labor

          Borrower is in compliance with and has all Permits necessary or required by applicable law or Governmental Authority for the operation of its businesses except where the failure to be in compliance would not reasonably be likely to have a Material Adverse Effect. All of the foregoing are in full force and effect and not in known conflict with the rights of others, except as would not reasonably be likely to have a Material Adverse Effect. Borrower (a) is not in breach of or default under the provisions of any of the foregoing, nor is there any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period would reasonably be likely to have a Material Adverse Effect, and (b) has not been involved in any labor dispute, strike, walkout or union organization activity which would reasonably be likely to have a Material Adverse Effect

      5.13 No Default

          There does not exist any Default or Event of Default or any event, fact, condition or circumstance which, with the giving of notice or passage of time or both, would constitute or result in a Default or Event of Default.

      5.14 Disclosure

          No Loan Document nor any other agreement, document, certificate, or statement furnished to Agent by or on behalf of Borrower in connection with the transactions contemplated by the Loan Documents, nor any representation or warranty made by Borrower in any Loan Document, contains any untrue statement of material fact or omits to state any fact necessary to make the statements therein not materially misleading. There is no fact known to Borrower which has not been disclosed to Agent in writing which reasonably would be likely to have a Material Adverse Effect.

      5.15 Existing Indebtedness; Investments, Guarantees and Certain Contracts

          Except as permitted by the Loan Documents, Borrower (a) has no outstanding Indebtedness (b) is not subject or party to any mortgage, note, indenture, indemnity or guarantee of, with respect to or evidencing any Indebtedness of any other Person, or (c) does not own or hold any equity or long-term debt investments in, and does not have any outstanding advances to or any outstanding guarantees for, the obligations of, or any outstanding borrowings from, any Person other than with respect to a Guarantor or another Borrower as set forth on Schedule 5.15 . Borrower has performed all material obligations required to be performed by Borrower under any document evidencing such Indebtedness and

there has occurred no breach, default or event of default under any document evidencing any such items or any fact, circumstance, condition or event which, with the giving of notice or passage of time or both, would constitute or result in a breach, default or event of default thereunder.

      5.16 Other Agreements

          Except as described in the filings of ASG with the Securities and Exchange Commission, as of the date hereof there are no existing or proposed material agreements, arrangements, understandings or transactions between Borrower and any of Borrower’s officers, members, managers, directors, stockholders, partners, other interest holders, employees or any members of their respective immediate families.

      5.17 Insurance

          Borrower has in full force and effect such insurance policies as are customary in its industry and as may be required pursuant to Section 6.5 hereof. All such insurance policies as in force on the date of this Agreement are listed and described on Schedule 5.17 .

      5.18 Names; Location of Offices, Records and Collateral

          During the preceding five years, Borrower has not conducted business under or used any name (whether corporate, partnership or assumed) other than as shown on Schedule 5.18A . Borrower is the sole owner of all of its names listed on Schedule 5.18A , and any and all business done and invoices issued having a value in excess of $50,000, in such names are Borrower’s sales, business and invoices. Borrower maintains its places of business and chief executive offices only at the locations set forth on Schedule 5.18B or with respect to which notice is provided to the Agent pursuant to Section 7.4(a) , and all Accounts of Borrower arise, originate and are located, and all of the Collateral and all books and records in connection therewith or in any way relating thereto or evidence the Collateral are located and shall be only, in and at such locations. All of the Collateral is located only in the United States.

      5.19 Non-Subordination

          The Obligations are not subordinated in any way to any other obligations of Borrower or to the rights of any other Person.

      5.20 Accounts

          In determining which Accounts are Eligible Receivables, Agent may rely on all statements and representations made by Borrower with respect to any Account. Unless otherwise indicated in writing to Agent, each Account of Borrower (a) is genuine and in all respects what it purports to be and is not evidenced by a judgment, (b) arises out of a completed, bona fide sale and delivery of goods or rendering of services by Borrower in the ordinary course of business and in accordance with the terms and conditions of all purchase orders, contracts, certifications, participations and other documents relating thereto or forming a part of the contract between Borrower and the Account Debtor, (c) is for a liquidated amount maturing as stated in a claim or invoice covering such sale of goods or rendering of services, a copy of which has been furnished or is available to Agent, (d) if included on a Borrowing Base Certificate, is not, subject to any known offset, lien, deduction, defense, dispute, counterclaim or other adverse condition, is absolutely owing to Borrower and is not contingent in any respect or for any reason, (e) there are no known facts, events or occurrences which in any way impair the validity or enforceability thereof or if included on a Borrowing Base Certificate, reduce the amount payable thereunder from the face amount of the claim or invoice and statements delivered to Agent with respect thereto, (f) to the best

of Borrower’s knowledge, there are no proceedings or actions which are threatened or pending against any Account Debtor thereunder which in Borrower’s opinion is likely to result in any Material Adverse Change in the collectability of any such Account, and (g) Borrower has obtained and currently has all Permits necessary in the generation thereof except for any failure to obtain a Permit which would not be reasonably likely to have a Material Adverse Effect. Unless otherwise indicated in writing to Agent, to the best of Borrower’s knowledge, (i) the Account Debtor under each Account of Borrower had the capacity to contract at the time any contract or other document giving rise thereto was executed, and (ii) such Account Debtor is solvent.

      5.21 Survival

          Borrowers, jointly and severally, make the representations and warranties contained herein with the knowledge and intention that Agent and Lenders are relying and will rely thereon. All such representations and warranties will survive the execution and delivery of this Agreement, and the making of the Advances.

      5.22 Performance and Payment Bonds for Government Contracts

          Borrower has posted all bonds required by each Government Contract to which it is a party, except as set forth on Schedule 5.22 .

      5.23 OFAC and Anti-Terrorism Regulations

          (a) Neither Borrower nor any of its Subsidiaries (i) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner violative of Section 2 of such executive order, or (iii) is a Person on the list of Specially Designated Nationals and Blocked Persons or is in violation of the limitations or prohibitions under any other OFAC regulation or executive order.

          (b) No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

          (c) Borrower acknowledges by executing this Agreement that Agent has notified Borrower that, pursuant to the requirements of the Patriot Act, Agent is required to obtain, verify and record such information as may be necessary to identify Borrower (including, without limitation) the name and address of each Borrower) in accordance with the Patriot Act.

VI. AFFIRMATIVE COVENANTS

     Borrower covenants and agrees that, until full performance and satisfaction, and indefeasible payment in full in cash, of all the Obligations and termination of this Agreement:

      6.1 Financial Statements, Reports and Other Information

          (a)  Financial Reports . ASG shall furnish to Agent and each Lender (i) as soon as they are prepared and in any event within ninety (90) calendar days after the end of each fiscal year of ASG, audited annual consolidated financial statements of ASG including the notes thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and the related consolidated statements of income, stockholders’ equity and cash flows for such completed fiscal year, which financial statements shall be prepared by ASG and certified without qualification by an independent certified public accounting firm reasonably satisfactory to Agent (which shall include Deloitte) and accompanied by related management letters, if available, (ii) as soon as available and in any event within forty-five (45) days after the end of the first three fiscal quarters of the fiscal year of ASG, unaudited consolidated financial statements of ASG consisting of a balance sheet and statements of income, stockholders’ equity and cash flows as of the end of the immediately preceding fiscal quarter, and (iii) as soon as available and in any event within thirty (30) calendar days after the end of each calendar month, unaudited consolidated financial statements of ASG consisting of a balance sheet and a statement of income, and cash flows as of the end of the immediately preceding calendar month. All such financial statements shall be prepared in accordance with GAAP consistently applied with prior periods (except that certain of the financial statements do not have footnotes, are subject to year end adjustments in the case of monthly and quarterly financial statements, including, without limitation, reserves for incurred but not reported items and claims payable consistent with past practices). With each quarterly and annual financial statement, ASG shall also deliver a certificate of its chief financial officer stating that (A) such person has reviewed the relevant terms of the Loan Documents and the condition of Borrower, (B) no Default or Event of Default has occurred or is continuing, or, if any of the foregoing has occurred or is continuing, specifying the nature and status and period of existence thereof and the steps taken or proposed to be taken with respect thereto, and (C) ASG (on a consolidated basis) is in compliance with all financial covenants attached as Annex I hereto. Such certificate shall be accompanied by the calculations necessary to show compliance with the financial covenants in a form reasonably satisfactory to the Agent.

          (b)  Other Materials . ASG shall furnish to Agent and each Lender as soon as available, and in any event within ten (10) calendar days after the preparation or issuance thereof or at such other time as set forth below: (i) copies of any pro forma financial statements and any other notes, reports and other materials related thereto, (ii) any reports, returns, information, notices and other materials that ASG shall send to its stockholders at any time, (iii) within thirty (30) calendar days after the end of each calendar month for such month, an accounts payable detailed aging and reconciliation of the accounts receivable and accounts payable to the general ledger and financial statements, (iv) promptly upon receipt thereof, copies of any reports submitted to ASG by its independent accountants in connection with any interim audit of the books of ASG or any future Guarantor and copies of each management control letter provided by such independent accountants, (v) within forty-five (45) days after the end each calendar month, a report detailing any outstanding surety bonds and any letters of credit collateralizing such surety bonds, and (vi) such additional information, documents, statements, reports and other materials as Agent may reasonably request from a credit or security perspective from time to time.

          (c)  Notices . Borrower shall promptly, and in any event within five (5) Business Days after Borrower or any authorized officer of Borrower obtains knowledge thereof, notify Agent in writing of (i) any pending or threatened litigation, suit, investigation, arbitration, dispute resolution proceeding or administrative proceeding brought or initiated by Borrower or otherwise affecting or involving or relating to Borrower or any of its property or assets to the extent (A) the amount in controversy exceeds $2,000,000 (other than in lawsuits brought by or on behalf of inmates or employees of Borrower that Borrower reasonably believes will not go to trial), (B) any of the foregoing seeks injunctive relief (excluding such relief sought in law suits brought by or on behalf of inmates), or (C) if against Borrower and not covered by insurance, (ii) any Default or Event of Default, which notice shall specify the nature and status thereof, the period of existence thereof and what action is proposed to be

taken with respect thereto, (iii) any other development, event, fact, circumstance or condition that could reasonably be expected to have a Material Adverse Effect, in each case describing the nature and status thereof and the action proposed to be taken with respect thereto, (iv) any notice received by Borrower from any payor of a claim, suit or other action such payor has, claims or has filed against Borrower in an amount of $100,000 or more, (v) any matter(s) affecting the value, enforceability or collectability of any of the Collateral, including, without limitation, claims or disputes in the amount of $100,000 or more in existence at any one time, (vi) any notice given by Borrower to any other lender of Borrower and shall furnish to Agent a copy of such notice, (vii) receipt of any notice or request from any Governmental Authority regarding any liability or claim of liability in an amount of $100,000 or more, (viii) receipt of any notice by Borrower regarding termination of any real estate lease, and/or (ix) if any Account over $100,000 becomes evidenced or secured by an instrument or chattel paper.

          (d)  Consents . Borrower shall obtain and deliver from time to time all consents, approvals and agreements from such third parties as Agent shall determine are necessary or desirable in its Permitted Discretion for the protection of its Collateral and that are reasonably satisfactory to Agent with respect to the Loan Documents and the transactions contemplated thereby, or the Collateral, including, without limitation, Landlord Waivers and Consents for each location set forth on Schedule 5.18B , as amended from time to time.

          (e)  Operating Budget . ASG shall furnish to Agent and each Lender on or prior to the Closing Date and for each fiscal year of ASG thereafter on the date on which such operating budgets are approved by ASG’s Board of Directors, and in any case no later than January 1 of each fiscal year, consolidated month by month projected operating budgets, which shall include projected profit and loss statements, balance sheets and cash flow reports of and for Borrower for such upcoming fiscal year in each case prepared in accordance with GAAP consistently applied with prior periods (except that such projections will not have footnotes and will be subject to year-end adjustments in the case of monthly and quarterly projections, including, without limitation, reserves for incurred but not reported items and claims payable consistent with past practices).

      6.2 Payment of Obligations

          Borrower shall make full and timely indefeasible payment in cash of the principal of and interest on the Loans, Advances and all other Obligations.

      6.3 Conduct of Business and Maintenance of Existence and Assets

          Borrower shall (a) conduct its business in accordance with good business practices customary to the industry, (b) engage principally in the same or similar lines of business substantially as heretofore conducted, (c) collect its Accounts in the ordinary course of business, (d) maintain all of its material properties, assets and equipment used or useful in its business in good repair, working order and condition (normal wear and tear excepted and except as may be disposed of in the ordinary course of business and in accordance with the terms of the Loan Documents), (e) from time to time to make all necessary repairs, renewals and replacements of its material properties, assets and equipment, and (f) maintain and keep in full force and effect its existence and all material Permits and qualifications to do business and good standing in each jurisdiction in which the ownership or lease of property or the nature of its business makes such Permits or qualification necessary and in which failure to maintain such Permits or qualification could reasonably be likely to have a Material Adverse Effect; and (g) remain in good standing and maintain operations in all jurisdictions reasonably necessary to conduct its business.

      6.4 Compliance with Legal and Other Obligations

          Borrower shall (a) comply with all laws, statutes, rules, regulations, ordinances and tariffs of all Governmental Authorities applicable to it or its business, assets or operations, (b) pay all taxes, assessments, fees, governmental charges, claims for labor, supplies, rent and all other obligations or liabilities of any kind, except liabilities being contested in good faith and against which adequate reserves have been established, (c) perform in accordance with its terms each contract, agreement or other arrangement to which it is a party or by which it or any of the Collateral is bound, including, but not limited to, any accreditation and survey requirements, and (d) maintain and comply with all Permits necessary to conduct its business and comply with any new or additional requirements that may be imposed on it or its business, except where failure to comply, pay, maintain or perform would not reasonably be likely to have a Material Adverse Effect. Borrower shall give Agent prompt notice and a copy of (a) any new material Government Contract, and (b) any communication from a Governmental Authority concerning nonperformance (including nonperformance in connection with Hazardous Substances), default, set-off or bonding issues under any Governmental Contract.

      6.5 Insurance

          Borrower shall (a) keep all of its insurable properties and assets adequately insured in all material respects against losses, damages and hazards as are customarily insured against by businesses engaging in similar activities or owning similar assets or properties in at least the minimum amount required by applicable law and any agreement to which Borrower is a party, including, without limitation, property insurance, automobile insurance and professional liability insurance, as applicable, (b) maintain (i) general public liability insurance at all times against liability on account of damage to persons and property having such limits, deductibles, exclusions and co-insurance and other provisions as are customary for a business engaged in activities similar to those of Borrower, and (ii) stop loss insurance with coverage in reasonable amounts as are customary for a business engaged in activities similar to those of Borrower or as required by any agreement to which Borrower is a party (i.e., at Closing, Borrower has coverage of 100% of exposure for amounts in excess of $300,000 per patient with a per patient cap of $1,000,000); (c) maintain insurance under all applicable workers’ compensation laws, and (d) require all of its healthcare professional employees and independent contractors to maintain on behalf of or acquire professional liability insurance; all of the foregoing insurance policies to be satisfactory in form and substance to Agent in its Permitted Discretion.

      6.6 True Books

          Borrower shall (a) keep true, complete and accurate books of record and account in accordance with commercially reasonable business practices in which true and correct entries are made of all of its and their dealings and transactions in all material respects; and (b) set up and maintain on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business, and include such reserves in its quarterly as well as year end financial statements.

      6.7 Inspection; Periodic Audits

          Borrower shall permit the representatives of Agent and Lenders from time to time during normal business hours, upon reasonable notice and at the expense of Borrower, to (a) (once each quarter at Borrower’s expense if no Default or Event of Default shall have occurred and be continuing, and more often, at Agent’s Permitted Discretion, after the occurrence and during the continuance of any Default or Event of Default) visit and inspect any of its offices or properties or any other place where Collateral is located to inspect the Collateral and/or to examine or audit all of its books of account, records, reports and other papers, and make copies and extracts therefrom, and (b) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts with its officers and independent public

accountants (and by this provision such officers and accountants are authorized to discuss the foregoing). Notwithstanding the foregoing, Borrower shall not be required to provide information to Agent if doing so would require Borrower to waive any applicable attorney/client privilege or accountant/client privilege existent in connection with any pending or threatened litigation. Agent shall endeavor to minimize the expenses of any quarterly audits.

      6.8 Further Assurances; Post Closing

          At Borrower’s cost and expense, Borrower shall (a) within five (5) Business Days after Agent’s demand, take such further actions, obtain such consents and approvals and duly execute and deliver such further agreements, assignments, instructions or documents as Agent reasonably may request with respect to the purposes, terms and conditions of the Loan Documents and the consummation of the transactions contemplated thereby, whether before, at or after the performance and/or consummation of the transactions contemplated hereby or the occurrence of a Default or Event of Default, (b) without limiting and notwithstanding any other provision of any Loan Document, execute