-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RxjD1Z43JN3vTkPMH3HaS2t6N3CvzksW2q/tt6gcQAMqiztq2IVnmNaf/DHM+AWX rHf4NtgiDdaLPy9Kha3p4g== 0000950144-98-006504.txt : 19980518 0000950144-98-006504.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950144-98-006504 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROVINCE HEALTHCARE CO CENTRAL INDEX KEY: 0001044942 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 621710772 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23639 FILM NUMBER: 98625614 BUSINESS ADDRESS: STREET 1: 105 WESTPARK DR STREET 2: STE 400 CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6153701377 MAIL ADDRESS: STREET 1: 109 WESTPARK DR SUITE 180 STREET 2: 109 WESTPARK DR SUITE 180 CITY: BRENTWOOD STATE: TN ZIP: 37207 10-Q 1 PROVINCE HEALTHCARE COMPANY FORM 10-Q 1 ============================================================================= SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------- FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended March 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From _____________ To ____________ --------------------------- PROVINCE HEALTHCARE COMPANY (Exact name of registrant as specified in its charter) DELAWARE 0-23639 62-1710772 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 105 WESTWOOD PLACE SUITE 400 BRENTWOOD, TENNESSEE 37027 (Address of principal executive offices) (zip code) (615) 370-1377 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT APRIL 17, 1998 COMMON STOCK, $.01 PAR VALUE 13,009,768 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS)
March 31, December 31, 1998 1997 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 6,675 $ 4,186 Accounts receivable, less allowance for doubtful accounts of $5,562 at March 31, 1998 and $4,749 at December 31, 1997 35,705 30,902 Inventories 3,848 3,655 Prepaid expenses and other 6,028 8,334 --------- --------- Total current assets 52,256 47,077 Property, plant and equipment, net 66,804 65,974 Other assets: Unallocated purchase price 760 760 Cost in excess of net assets acquired, net 53,146 53,624 Other assets 8,256 9,026 --------- --------- Total assets $ 181,222 $ 176,461 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,029 $ 6,524 Accrued salaries and benefits 6,968 8,720 Accrued expenses 2,311 4,422 Current maturities of long-term obligations 2,255 6,053 --------- --------- Total current liabilities 16,563 25,719 Long-term obligations, less current maturities 52,166 83,043 Third-party settlements 7,255 4,680 Other liabilities 8,506 13,088 Minority interest 888 825 Mandatory redeemable preferred stock -- 50,162 Common stockholders' equity (deficit): Common stock--no par value at December 31, 1997; $0.01 par value at March 31, 1998; authorized 20,000,000 shares; issued and outstanding 13,009,768 shares and 6,330,614 shares at March 31, 1998 and December 31, 1997, respectively 130 2,116 Additional paid-in-capital 97,338 -- Retained deficit (1,624) (3,172) --------- --------- Total common stockholders' equity (deficit) 95,844 (1,056) --------- --------- Total liabilities, redeemable preferred stock and common stockholders' equity $ 181,222 $ 176,461 ========= =========
See accompanying notes. 1 3 PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31, ------------------------------------------- Actual Pro Forma -------------------------- (Note 9) 1998 1997 1998 -------- -------- ------- Revenue: Net patient service revenue $ 42,750 $ 34,504 $42,750 Management and professional services 2,930 3,253 2,930 Reimbursable expenses 1,562 1,707 1,562 Other 609 995 609 -------- -------- ------- Net operating revenue 47,851 40,459 47,851 Expenses: Salaries, wages and benefits 18,606 15,400 18,606 Reimbursable expenses 1,562 1,707 1,562 Purchased services 6,035 5,045 6,035 Supplies 4,627 3,817 4,627 Provision for doubtful accounts 3,082 2,410 3,082 Other operating expenses 4,257 4,353 4,257 Rentals and leases 1,474 1,323 1,474 Depreciation and amortization 2,205 1,770 2,205 Interest expense 1,855 1,761 1,381 Minority interest 68 68 68 Loss on sale of assets 33 87 33 -------- -------- ------- Total expenses 43,804 37,741 43,330 Income before provision for income taxes 4,047 2,718 4,521 Provision for income taxes 1,772 1,211 1,961 -------- -------- ------- Net income 2,275 1,507 2,560 Preferred stock dividends and accretion (696) (1,115) -- -------- -------- ------- Net income to common shareholders $ 1,579 $ 392 $ 2,560 ======== ======== ======= Basic earnings per common share: Net income $ 0.24 $ 0.28 $ 0.20 Preferred stock dividends and accretion (0.07) (0.21) -- -------- -------- ------- Net income per common share $ 0.17 $ 0.07 $ 0.20 ======== ======== ======= Diluted earnings per common share: Net income $ 0.23 $ 0.24 $ 0.19 Preferred stock dividends and accretion (0.07) (0.18) -- -------- -------- ------- Net income per common share $ 0.16 $ 0.06 $ 0.19 ======== ======== =======
See accompanying notes. 2 4 PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
Three Months Ended March 31, 1998 1997 -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: $ 233 ($ 1,264) INVESTING ACTIVITIES Purchase of property, plant and equipment (2,524) (2,420) Net capital contributions and withdrawals-investments (15) (61) -------- -------- Net cash used in investing activities (2,539) (2,481) FINANCING ACTIVITIES Proceeds from long-term debt 61,000 -- Repayments of debt (95,649) (431) Net proceeds from issuance of common stock 77,067 -- Exchange of Junior Preferred Stock (14,884) -- Redemption of Senior Preferred Stock (22,739) -- -------- -------- Net cash provided by (used in) financing activities 4,795 (431) -------- -------- Net increase (decrease) in cash and cash equivalents 2,489 (4,176) Cash and cash equivalents at beginning of period 4,186 11,256 -------- -------- Cash and cash equivalents at end of period $ 6,675 $ 7,080 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid during the period $ 1,966 $ 1,433 ======== ======== Income taxes paid during the period $ 166 $ 41 ======== ======== NONCASH TRANSACTIONS Dividends and accretion on preferred stock $ 696 $ 1,115 Conversion and redemption of preferred stock 33,138 -- Property and equipment acquired through capital leases -- 706
See accompanying notes. 3 5 PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1998 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Interim results are not necessarily indicative of results that may be expected for the full year. In the opinion of management, the accompanying interim financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows of Province Healthcare Company (the "Company"). For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 2. LONG-TERM DEBT On March 30, 1998, the Company amended and restated its Credit Agreement and increased its credit facilities to $260 million, including a five-year $35 million End-Loaded Lease Facility ("ELLF"). At March 31, 1998, the Company had $48 million outstanding under its revolving line of credit and no amounts outstanding under the ELLF. The Amended and Restated Credit Agreement contains limitations on the Company's ability to incur additional indebtedness (including contingent obligations), sell material assets, retire, redeem or otherwise reacquire its capital stock, acquire the capital stock or assets of another business, and pay dividends. The Amended and Restated Credit Agreement also requires the Company to maintain a specified net worth and meet or exceed certain coverage, leverage, and indebtedness ratios. Indebtedness under the Amended and Restated Credit Agreement is secured by substantially all assets of the Company. 4 6 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share date):
Three Months Ended March 31, ------------------------------------------- Actual Pro Forma -------------------------- (Note 9) 1998 1997 1998 -------- -------- ------- Numerator: Net income $ 2,275 $ 1,507 $ 2,560 Preferred stock dividends and accretion (696) (1,115) -- ------- -------- ------- Net income to common shareholders $ 1,579 $ 392 $ 2,560 ======= ======== ======= Denominator: Denominator for basic earnings per share to common shareholders - weighted-average shares 9,343 5,371 13,010 Effect of dilutive securities - Incentive stock options 272 311 272 July stock issuance -- 672 -- ------- -------- ------- Denominator for diluted earnings per share 9,615 6,354 13,282 Basic earnings per common share: Net income $ 0.24 $ 0.28 $ 0.20 Preferred stock dividends and accretion (0.07) (0.21) -- ------- -------- ------- Net income per common share $ 0.17 $ 0.07 $ 0.20 ======= ======== ======= Diluted earnings per common share: Net income $ 0.23 $ 0.24 $ 0.19 Preferred stock dividends and accretion (0.07) (0.18) -- ------- -------- ------- Net income per common share $ 0.16 $ 0.06 $ 0.19 ======= ======== =======
4. INCOME TAXES The income tax provision recorded for the three months ended March 31, 1998 and 1997 differs from the expected income tax provision due to permanent differences and the provision for state income taxes. 5. ACQUISITIONS In August 1997, the Company acquired Colorado River Medical Center ("CRMC") (formerly Needles Desert Communities Hospital) in Needles, California by paying cash of $3,191,000 and assuming liabilities totaling $518,000. The operating results of CRMC are included in the Company's results of operations from the date of purchase; therefore, the results of operations for the first quarter of 1998 include CRMC. 6. CONTINGENCIES Management continually evaluates contingencies based on the best available evidence and believes that adequate provision for losses has been provided to the extent necessary. In the opinion of management, the ultimate resolution of the following contingencies will not have a material effect on the Company's results of operations or financial position. 5 7 GENERAL AND PROFESSIONAL LIABILITY RISKS The reserve for the self-insured portion of general and professional liability risks is included in "Other liabilities" and is based on actuarially determined estimates. LITIGATION The Company currently, and from time to time, is expected to be subject to claims and suits arising in the ordinary course of business. NET PATIENT SERVICE REVENUE Final determination of amounts earned under the Medicare and Medicaid programs often occurs in subsequent periods because of audits by the programs, rights of appeal and the application of numerous technical provisions. FINANCIAL INSTRUMENTS Interest rate swap agreements are used on a limited basis to manage the Company's interest rate exposure. The agreements are contracts to periodically exchange fixed and floating interest rate payments over the life of the agreements. On March 10, 1997, as required by the Credit Agreement, the Company entered into an interest rate swap agreement, which effectively converted for a five-year period $35 million of floating-rate borrowings to fixed-rate borrowings. The floating-rate payments are based on LIBOR, and fixed-rate payments are dependent upon market levels at the time the swap agreement was consummated. For the three months ended March 31, 1998 and 1997, the Company received a weighted average rate of 5.88% and 5.72% and paid a weighted average rate of 6.27% and 6.27%, respectively. 7. STOCKHOLDERS' EQUITY REINCORPORATION On February 4, 1998, the Company merged with a wholly-owned subsidiary in order to change its jurisdiction of incorporation to Delaware and change its name to Province Healthcare Company. In the Merger, the Company exchanged 1.83 shares of its no par common stock for each share of the subsidiary's $0.01 par value common stock. All common share and per share data included in the condensed consolidated financial statements and footnotes thereto have been restated to reflect this reincorporation. As a result of the reincorporation, $2,053,000 was reclassified from common stock to additional paid-in-capital upon conversion from no par to $0.01 par value Common Stock. PUBLIC OFFERING OF COMMON STOCK On February 17, 1998, the Company closed its initial public offering of common stock. In connection with the offering, the Series B redeemable junior preferred stock was converted into common stock at the public offering price of the common stock. The net proceeds from the offering were used to redeem the outstanding balance of the Series A redeemable senior preferred stock plus accrued dividends, reduce the balance of the outstanding term and revolving credit loans, and repurchase a portion of the common stock which was issued upon conversion of the Series B redeemable junior preferred stock. 6 8 The following table sets forth the changes in the stockholders' equity accounts as a result of the reincorporation and the initial public offering of common stock (in thousands):
No Par Value Common Stock -------------------------- Additional Retained Shares Amount Paid-in-Capital Deficit Total ---------- ------ --------------- --------- -------- Balance at December 31, 1997 6,330,614 $2,116 $ -- ($3,172) $ (1,056) Reincorporation -- (2,053) 2,053 -- -- Conversion of the junior preferred stock and initial public offering of common stock 6,679,154 67 95,285 (31) 95,321 Preferred stock dividends and accretion -- -- -- (696) (696) Net income -- -- -- 2,275 2,275 ---------- ------ ------- ------- -------- Balance at March 31, 1998 13,009,768 $ 130 $97,338 ($1,624) $ 95,844 ========== ====== ======= ======= ========
8. SUBSEQUENT EVENT On May 1, 1998, the Company acquired the assets and business of Havasu Samaritan Regional Hospital ("Havasu") in Lake Havasu City, Arizona for approximately $105.5 million. To finance the acquisition, the Company borrowed $106 million under its revolving credit facility. The acquisition will be accounted for as a purchase business combination, and the results of operations of Havasu will be included in the results of operations of the Company from the purchase date forward. 9. PRO FORMA FINANCIAL INFORMATION The condensed consolidated pro forma statement of income for the three months ended March 31, 1998, gives effect to (i) the conversion of junior preferred stock into common stock and (ii) the sale of common stock in the offering and the application of net proceeds thereof to the repurchase of certain shares of common stock, the redemption of senior preferred stock and the repayment of debt, as if all such transactions had been completed as of January 1, 1998, at the initial public offering price of $16.00 per share, as follows: - The elimination of interest expense associated with the $39.5 million of long-term obligations repaid with the net proceeds of the offering, and the elimination of the related income tax benefit based on the combined federal and state statutory rate of 39%. - The elimination of the dividends and the accretion of issuance costs on the senior preferred stock redeemed with a portion of the net proceeds of the offering, and the junior preferred stock converted into common stock in connection with the offering. The pro forma condensed consolidated financial information does not purport to represent what the Company's results of operations would have been had such transactions in fact occurred as of January 1, 1998, or to project the Company's results of operations in any future period. 7 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION IMPACT OF ACQUISITIONS An integral part of the Company's strategy is to acquire non-urban acute-care hospitals. In August 1997, the Company acquired Colorado River Medical Center ("CRMC") (formerly Needles Desert Communities Hospital) in Needles, California (the "CRMC acquisition"). The operating results of CRMC are included in the Company's results of operations from the date of purchase; therefore, the results of operations for the first quarter 1998 include CRMC. On May 1, 1998, the Company acquired the assets and business of Havasu Samaritan Regional Hospital ("Havasu"), a 119-bed general acute-care hospital in Lake Havasu City, Arizona, for approximately $105.5 million. To finance the acquisition, the Company borrowed $106 million under its revolving credit facility. The acquisition has been accounted for as a purchase business combination, and the results of operations of Havasu will be included in the results of operations of the Company from the purchase date forward. Due to the relatively small number of owned and leased hospitals, each hospital acquisition can materially affect the overall operating margin of the Company. Upon the acquisition of a hospital, the Company typically takes a number of steps to lower operating costs. The impact of such actions may be offset by other cost increases to expand services, strengthen medical staff and improve market position. The benefits of these investments and of other activities to improve operating margins generally do not occur immediately. Consequently, the financial performance of a newly acquired hospital may adversely affect overall operating margins in the short term. As the Company makes additional hospital acquisitions, the Company expects that this effect will be mitigated by the expanded financial base of existing hospitals and the allocation of corporate overhead among a larger number of hospitals. RESULTS OF OPERATIONS The following table presents, for the periods indicated, information expressed as a percentage of net operating revenue. Such information has been derived from the Condensed Consolidated Statements of Income of the Company included elsewhere in this report. The results of operations for the periods presented include hospitals from their acquisition dates, as discussed above.
THREE MONTHS PERCENTAGE ENDED INCREASE (DECREASE) MARCH 31, AMOUNTS ------------------- ------------------- 1998 1997 Net operating revenue 100.0% 100.0% 18.3% Operating expenses (1) 82.8 84.2 16.4 ----- ---- EBITDA (2) 17.2 15.8 28.2 Depreciation and amortization 4.6 4.4 24.6 Interest 3.9 4.4 5.3 Minority interest 0.1 0.1 -- Loss on sale of assets 0.1 0.2 62.1 ----- ---- Income before income taxes 8.5 6.7 48.9 Provision for income taxes 3.7 3.0 46.3 ----- ---- Net income 4.8% 3.7% 51.0% ===== ====
(1) Operating expenses represent expenses before interest, minority interest, loss on sale of assets, income taxes, depreciation and amortization expense. (2) EBITDA represents the sum of income before income tax expense, interest, minority interest, depreciation and amortization, and loss on sale of assets. Management 8 10 understands that industry analysts generally consider EBITDA to be one measure of the financial performance of a company that is presented to assist investors in analyzing the operating performance of the Company and its ability to service debt. Management believes that an increase in EBITDA level is an indicator of the Company's improved ability to service existing debt, to sustain potential future increases in debt and to satisfy capital requirements. However, EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered an alternative (i) to net income as a measure of operating performance or (ii) to cash flows from operating, investing, or financing activities as a measure of liquidity. Given that EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. SELECTED OPERATING STATISTICS - OWNED HOSPITALS The following table sets forth certain operating statistics for the Company's owned hospitals for each of the periods presented. The results of the owned hospitals for the three months ended March 31, 1998 and 1997 include three months of operations for eight hospitals and seven hospitals, respectively.
Three Months Ended March 31, ------------------------------- 1998 1997 ----------- ----------- CONSOLIDATED HOSPITALS: Number of hospitals end of period 8 7 Licensed beds end of period 570 517 Beds in service end of period 463 405 Inpatient admissions 4,575 3,910 Patient days 25,570 20,904 Adjusted patient days 42,295 36,437 Average length of stay (days) 5.6 5.3 Occupancy rates (licensed beds) 49.8% 44.9% Occupancy rates (beds in service) 61.4% 57.4% Gross inpatient revenue $45,052,328 $35,187,373 Gross outpatient revenue $30,010,142 $25,860,236
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 Net operating revenue was $47.9 million for the three months ended March 31, 1998, compared to $40.5 million for the comparable period of 1997, an increase of $7.4 million or 18.3%. Revenue generated by hospitals owned during both periods ("same store hospitals") increased $3.3 million, or 9.4%, resulting from inpatient and outpatient volume increases, as well as price increases. The remaining increase of $4.1 million was primarily attributable to the CRMC acquisition, offset by decreases in revenue in the management company of $0.5 million, resulting primarily from a decrease in the number of management contracts, and a decrease in various other revenue. Operating expenses were $39.6 million, or 82.8% of net operating revenue, for the three months ended March 31, 1998, compared to $34.1 million, or 84.2% of net operating revenue, for the comparable period of 1997. Operating expenses of same store hospitals increased $2.4 million, primarily as a result of volume increases, change in case mix and an increase in bad debt expense. The remaining $3.1 million increase was primarily attributable to the CRMC acquisition. EBITDA was $8.2 million or 17.2% of net operating revenue for the three months ended March 31, 1998, compared to $6.4 million, or 15.8% of net operating revenue, for the comparable period of 1997. EBITDA for the Company's hospitals owned during both 9 11 periods increased 11.7%, and as a percent of net operating revenue was 22.2% for the three months ended March 31, 1998, compared to 21.8% for the comparable period of 1997. Depreciation and amortization expense was $2.2 million, or 4.6% of net operating revenue, for the three months ended March 31, 1998, compared to $1.8 million, or 4.4% of net operating revenue for the comparable period of 1997. The increase in depreciation and amortization resulted from increased capital expenditures. Interest expense as a percent of net operating revenue decreased to 3.9% for the three months ended March 31, 1998, compared to 4.4% for the comparable period of 1997. Net income was $2.3 million, or 4.8% of net operating revenue, for the three months ended March 31, 1998, compared to $1.5 million, or 3.7% of net operating revenue for the comparable period of 1997. The unaudited pro forma condensed consolidated statement of income for the three months ended March 31, 1998, gives effect to (i) the conversion of junior preferred stock into common stock and (ii) the sale of common stock in the offering and the application of net proceeds thereof to the repurchase of certain shares of common stock, the redemption of senior preferred stock and the repayment of debt, as if all such transactions had been completed as of January 1, 1998, at the initial public offering price of $16.00 per share, as follows: - - The elimination of interest expense associated with the $39.5 million of long-term obligations repaid with the net proceeds of the offering, and the elimination of the related income tax benefit based on the combined federal and state statutory rate of 39%. - - The elimination of the dividends and the accretion of issuance costs on the senior preferred stock redeemed with a portion of the net proceeds of the offering and the junior preferred stock converted into common stock in connection with the offering. The pro forma condensed consolidated income statement does not purport to represent what the Company's results of operations would have been had such transactions in fact occurred as of January 1, 1998, or to project the Company's results of operations in any future period. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the Company had working capital of $35.7 million, including cash and cash equivalents of $6.7 million. The ratio of current assets to current liabilities was 3.2 to 1.0 and 1.8 to 1.0 at March 31, 1998 and 1997, respectively. In February 1998, the Company completed its initial public offering ("IPO") of common stock. In connection with the offering, the Series B redeemable junior preferred stock was converted into common stock at the public offering price of the common stock. The net proceeds from the offering were used to reduce the balance of the outstanding term and revolving credit loans ($39.5 million), redeem the outstanding balance of the Series A redeemable senior preferred stock plus accrued dividends ($22.7 million) and repurchase a portion of the common stock which was issued upon conversion of the Series B junior preferred stock ($14.9 million). In the first quarter of 1998, total long-term obligations declined to $52.2 million from $83.0 million at year end. In March 1998, the Company amended and restated its Credit Agreement and increased its credit facilities to $260 million, including a five-year $35 million End-Loaded Lease Facility ("ELLF"). Cash provided by operations was $0.2 million for the three months ended March 31, 1998. 10 12 Cash used in operations was $1.3 million for the three months ended March 31, 1997. Cash used in investing activities was $2.5 million for the three months ended March 31, 1998 and 1997, primarily related to capital expenditures. Net cash provided by financing activities was $4.8 million for the three months ended March 31, 1998, primarily as a result of the IPO. Cash used in financing activities was $0.4 million in 1997, as a result of the repayment of debt. The Company intends to acquire additional acute care facilities, and is actively seeking out such acquisitions. There can be no assurance that the Company will not require additional debt or equity financing for any particular acquisition. Also, the Company continually reviews its capital needs and financing opportunities and may seek additional equity or debt financing for its acquisition program or other needs. At March 31, 1998, the Company had $48 million outstanding under its revolving line of credit and no amounts outstanding under the ELLF. Capital expenditures, excluding acquisitions for the three months ended March 31, 1998 and 1997 were $2.5 million and $2.4 million, respectively. Capital expenditures for the owned hospitals may vary from year to year depending on facility improvements and service enhancements undertaken by the hospitals. The management services business does not require significant capital expenditures. The Company expects to make capital expenditures in 1998 of approximately $10 million, exclusive of any acquisitions of businesses. Planned capital expenditures for 1998 consist principally of capital improvements to owned and leased hospitals. The Company expects to fund these expenditures through cash provided by operating activities and borrowings under its revolving credit agreement. GENERAL The federal Medicare program and state Medicaid programs accounted for approximately 71.4% and 73.4% of patient days for the three months ended March 31, 1998 and 1997, respectively. The payment rates under the Medicare program for inpatients are prospective, based upon the diagnosis of a patient. The payment rate increases have historically been less than actual inflation. Both federal and state legislators are continuing to scrutinize the health care industry for the purpose of reducing health care costs. While the Company is unable to predict what, if any, future health reform legislation may be enacted at the federal or state level, the Company expects continuing pressure to limit expenditures by governmental health care programs. Under the Balanced Budget Act of 1997 (the "1997 Act"), there are no increases in the rates paid to acute care hospitals for inpatient care through September 30, 1998. Payments for Medicare outpatient services provided at acute care hospitals and home health services historically have been paid based on costs, subject to certain limits. The 1997 Act requires that the payment for those services be converted to a prospective payment system, which will be phased in over time. The 1997 Act also includes a managed care option which could direct Medicare patients to only managed care providers exclusively. Further changes in the Medicare or Medicaid programs and other proposals to limit health care spending could have a material adverse impact upon the health care industry and the Company. The Company's acute care hospitals, like most acute care hospitals in the United States, have significant unused capacity. The result is substantial competition for patients and physicians. Inpatient utilization continues to be negatively affected by payor-required pre-admission authorization and by payor pressure to maximize outpatient and alternative health care delivery services for less acutely ill patients. The Company expects increased competition and admission constraints to continue in the future. The ability to respond successfully to these trends, as well as spending reductions in governmental health care programs, will play a significant role in determining hospitals' ability to maintain their current rate of net revenue growth and operating margins. The Company expects the industry trend from inpatient to outpatient services to continue due to the increased focus on managed care and advances in technology. Outpatient revenue of the Company's owned hospitals was approximately 40.0% and 42.4% 11 13 of gross patient service revenue for the three months ended March 31, 1998 and 1997, respectively. The complexity of the Medicare and Medicaid regulations, increases in managed care, hospital personnel turnover, the dependence of hospitals on physician documentation of medical records and the subjective judgment involved complicates the billing and collections of accounts receivable by hospitals. There can be no assurance that this complexity will not negatively impact the Company's future cash flow or results of operations. The Company's historical financial trend has been favorably impacted by the Company's ability to successfully acquire acute care hospitals. While the Company believes that trends in the health care industry described above may create possible future acquisition opportunities, there can be no assurances that it can continue to maintain its current growth rate through hospital acquisitions and successfully integrate the hospitals into its system. The Company's owned hospitals accounted for 90.6% of the Company's net operating revenue for the six months ended March 31, 1998 compared to 87.7% for the three months ended March 31, 1997. The federal government and a number of states are rapidly increasing the resources devoted to investigating allegations of fraud and abuse in the Medicare and Medicaid programs. At the same time, regulatory and law enforcement authorities are taking an increasingly strict view of the requirements imposed on providers by the Social Security Act and Medicare and Medicaid regulations. Although the Company believes that it is in material compliance with such laws, a determination that the Company has violated such laws, or even the public announcement that the Company was being investigated concerning possible violations, could have a material adverse effect on the Company. INFLATION The health care industry is labor intensive. Wages and other expenses increase, especially during periods of inflation and labor shortages. In addition, suppliers pass along rising costs to the Company in the form of higher prices. The Company has generally been able to offset increases in operating costs by increasing charges for services and expanding services. The Company has also implemented cost control measures to curb increases in operating costs and expenses. In light of cost containment measures imposed by government agencies and private insurance companies, the Company is unable to predict its ability to offset or control future cost increases, or its ability to pass on the increased costs associates with providing health care services to patients with government or managed care payors, unless such payors correspondingly increase reimbursement rates. FORWARD-LOOKING STATEMENTS Certain statements contained in this discussion, including without limitation, statements containing the words "believes," "anticipates," "intends," "expects," and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in regions where the Company operates; demographic changes; the effect of existing or future governmental regulation and federal and state legislative and enforcement initiatives on the Company's business, including the recently-enacted Balanced Budget Act of 1997; changes in Medicare and Medicaid reimbursement levels; the Company's ability to implement successfully its acquisition and development strategy and changes in such strategy; the availability and terms of financing to fund the expansion of the Company's business, including the acquisition of additional hospitals; the Company's ability to attract and retain qualified management personnel and to recruit and retain physicians and other health care personnel to the non-urban markets it serves; the effect of managed care initiatives on the non-urban markets served by the Company's 12 14 hospitals and the Company's ability to enter into managed care provider arrangements on acceptable terms; the effect of liability and other claims asserted against the Company; the effect of competition in the markets served by the Company's hospitals; and other factors referenced in this report. Certain of these factors are discussed in more detail elsewhere in this report. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. 13 15 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On January 14, 1998, in anticipation of its initial public offering, the shareholders of Province Healthcare Company took action by unanimous written consent without a meeting and approved the proposed merger with Principal Hospital Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits
Exhibit Number Description of Exhibits - ------ ----------------------- 2.1 Amended and Restated Agreement and Plan of Merger, dated as of January 15, 1998, between Principal Hospital Company and Province Healthcare Company ("Province")* 3.1 Amended and Restated Certificate of Incorporation of Province* 3.2 Amended and Restated By-laws of Province* 4.5 Amended and Restated Credit Agreement, dated as of March 30, 1998, among Province, First Union National Bank, as Agent and Issuing Bank, and various lenders thereto 4.6 Participation Agreement, dated as of March 30, 1998, among Province, as Construction Agent and Lessee, various parties as Guarantors, First Security Bank, National Association, as Owner Trustee, various banks party thereto, as Holders, various banks party thereto, as Lenders, and First Union National Bank, as Agent.
16
10.1 Lease Agreement, dated as of March 30, 1998, between First Security Bank, National Association, as Owner Trustee, and Province, as Lessee 27.1 Financial Data Schedule (for SEC use only)
- ------------------------ (*) Incorporated by reference to the exhibits filed with the registrant's Registration Statement on Form S-1, Registration No. 333-34421. (b) Reports on Form 8-K. The Company has filed no reports on Form 8-K for the quarterly period ending March 31, 1998. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on behalf by the undersigned thereunto duly authorized. PROVINCE HEALTHCARE COMPANY By: /s/ BRENDA B. RECTOR --------------------------------------- Brenda B. Rector Vice President and Controller Date: May 15, 1998 EX-4.5 2 AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 4.5 AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the 30th day of March, 1998 (the "Credit Agreement" or "Agreement"), is made among PROVINCE HEALTHCARE COMPANY, a Delaware corporation (formerly known as Principal Hospital Company) with its principal offices in Brentwood, Tennessee (the "Borrower"); the banks and other financial institutions from time to time parties hereto (each, a "Lender," and collectively, the "Lenders"); and FIRST UNION NATIONAL BANK (formerly known as First Union National Bank of North Carolina), as Agent (the "Agent") and as Issuing Bank. RECITALS A. The Borrower, certain banks and other financial institutions, and the Agent are parties to a Credit Agreement, dated as of December 17, 1996 (as amended prior to the date hereof, the "Original Credit Agreement"), providing for the availability to the Borrower of a revolving credit facility in the aggregate principal amount of $65,000,000 and a term loan facility in the aggregate principal amount of $35,000,000, on the terms and subject to the conditions set forth therein. B. The Borrower has requested certain amendments to the Original Credit Agreement, including that the Lenders make available to the Borrower, in lieu of the revolving credit facility and the term loan facility made available under the Original Credit Agreement, a revolving credit facility in the aggregate principal amount of up to $225,000,000. The Lenders have agreed to such amendments and to make a $225,000,000 revolving credit facility available to the Borrower by amending and restating the Original Credit Agreement in its entirety on the terms and subject to the conditions hereinafter set forth. AGREEMENT NOW THEREFORE, in consideration of the mutual provisions, covenants and agreements herein contained, the parties hereto hereby agree that, as of the Amendment Effective Date, the Original Credit Agreement shall be amended and restated in its entirety as follows: ARTICLE I DEFINITIONS 1.1. Defined Terms. For purposes of this Credit Agreement, in addition to the terms defined elsewhere in this Credit Agreement, the following terms shall have the meanings set forth below: "ABR Loan" shall mean, at any time, any Loan that bears interest at such time at the Alternate Base Rate. "Account Designation Letter" shall mean a letter from the Borrower to the Agent, duly completed and signed by an Authorized Officer of the Borrower, listing any one or more accounts to which the Borrower may from time to time request the Agent to forward the proceeds of any Loans made hereunder. 2 "Accounts" shall mean all "accounts," within the meaning of the Uniform Commercial Code, of the Borrower and each of its Subsidiaries, including, without limitation, (to the extent permitted by law) any existing and future Medicare, Medicaid, MediCal and other similar accounts receivable. "Acquisition" shall mean any acquisition consummated on or after the date hereof, whether in a single transaction or series of related transactions, by the Borrower or any one or more of its Subsidiaries, or any combination thereof, of (i) all or a substantial part of the assets, equity or a going business or division, of any Person, whether through purchase of assets or securities, by merger or otherwise (including, without limitation, the acquisition of a Facility or an operating lease for a Facility), (ii) control of at least a majority of the outstanding securities of an existing corporation ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors or (iii) control of a greater than 50% ownership interest in any existing partnership, joint venture or other Person. "Acquisition Amount" shall mean, with respect to any Permitted Acquisition, the sum (without duplication) of (i) the amount of cash paid by the Borrower and its Subsidiaries in connection with such Permitted Acquisition, (ii) the Fair Market Value of all capital stock or other ownership interests of the Borrower or any of its Subsidiaries issued or given in connection with such Permitted Acquisition, (iii) the amount (determined by using the face amount or the amount payable at maturity, whichever is greater) of all Debt incurred, assumed or acquired in connection with such Permitted Acquisition, (iv) all additional purchase price amounts in the form of earnouts and other contingent obligations, (v) all amounts paid in respect of covenants not to compete, consulting agreements and other affiliated contracts in connection with such Permitted Acquisition other than bona fide employment and similar agreements not a part of the allocation of the purchase price, and (vi) the aggregate Fair Market Value of all other consideration given by the Borrower and its Subsidiaries in connection with such Permitted Acquisition. All Capital Expenditures made or projected to be incurred by the Borrower or its Subsidiaries within ninety (90) days and in connection with any Permitted Acquisition shall be included in the Acquisition Amount attributable to such Permitted Acquisition and shall not be included in the calculation of Capital Expenditures for purposes of SECTION 6.14. "Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR Loan, a rate per annum equal to the LIBOR Rate plus the Applicable Margin for LIBOR Loans, each as in effect at such time. "Affiliate" shall mean, as to any Person, each of the Persons that directly, or indirectly through one or more intermediaries, owns or controls, or is controlled by or under common control with, such Person. For the purpose of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall mean First Union, in its capacity as agent as appointed in ARTICLE IX hereof, and its permitted successors and assigns. "Agreement" or "this Agreement" or "Credit Agreement" shall mean this Amended and Restated Credit Agreement and any further amendments, modifications and supplements hereto, any replacements, renewals, extensions and restatements hereof, and any substitutes herefor, in whole or in part, and all schedules and exhibits hereto, and shall refer to this Agreement as the same may be in effect at the time such reference becomes operative. "Alternate Base Rate" shall mean, at any time with respect to any ABR Loan, a rate per 3 annum equal to the Base Rate plus the Applicable Margin for ABR Loans, each as in effect at such time. "Amendment Effective Date" shall mean the date on which all conditions precedent set forth in SECTION 3.2 have been satisfied or waived in accordance with the terms of this Agreement. "Annualized Cash Taxes" shall mean, as of the last day of any fiscal quarter, Cash Taxes for the four (4) consecutive fiscal quarters ending on such date. "Annualized Consolidated EBITDAR" shall mean, as of the last day of any fiscal quarter, Consolidated EBITDAR for the two (2) consecutive fiscal quarters ending on such date, multiplied by two (2); provided, that for purposes of this calculation, losses of an extraordinary nature included in Consolidated Net Income shall not be multiplied by two. "Annualized Facility Rent Expense" shall mean, as of the last day of any fiscal quarter, Facility Rent Expense for the two (2) consecutive fiscal quarters ending on such date, multiplied by two (2). "Annualized Interest Expense" shall mean, as of the last day of any fiscal quarter, Interest Expense for the two (2) consecutive fiscal quarters ending on such date, multiplied by two (2). "Annualized Joint Venture EBITDAR" shall mean, as of the last day of any fiscal quarter, Joint Venture EBITDAR for the two (2) consecutive fiscal quarters ending on such date, multiplied by two (2); provided, that for purposes of this calculation, losses of an extraordinary nature included in Consolidated Net Income shall not be multiplied by two. "Annualized Non-Landlord Consent EBITDAR" shall mean, as of the last day of any fiscal quarter, Non-Landlord Consent EBITDAR for the two (2) consecutive fiscal quarters ending on such date, multiplied by two (2); provided, that for purposes of this calculation, losses of an extraordinary nature included in Consolidated Net Income shall not be multiplied by two. "Applicable Margin" shall mean, at any time with respect to any Loan, the applicable percentage points as determined under the following matrix with reference to the ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDAR calculated as provided below:
Ratio of Consolidated Adjusted Debt to Annualized Applicable Margin Applicable Margin Consolidated EBITDAR (ABR Rate) (LIBOR Rate) - -------------------- ------------------ ------------------ Greater than or equal to 4.0 to 1.0 0.75% 2.00% Less than 4.0 to 1.0 but greater than or equal to 3.5 to 1.0 0.50% 1.75% Less than 3.5 to 1.0 but greater than or equal to 3.0 to 1.0 0.25% 1.50%
4 Less than 3.0 to 1.0 but greater than or equal to 2.5 to 1.0 0.00% 1.25% Less than 2.5 to 1.0 but greater than or equal to 2.0 to 1.0 0.00% 1.00% Less than 2.0 to 1.0 0.00% 0.75%
From the Amendment Effective Date until the fifth (5th) Business Day after receipt by the Agent of the financial statements for the fiscal quarter ended March 31, 1998 pursuant to SECTION 5.1(B) below, the Applicable Margin shall be 1.25% for LIBOR Loans and 0% for ABR Loans. The Applicable Margins shall be reset from time to time in accordance with the above matrix on the fifth (5th) Business Day after receipt by the Agent in accordance with SECTIONS 5.1(A) or (B) of financial statements together with a Compliance Certificate attaching an Interest Rate Calculation Worksheet (reflecting the computation of the ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDAR as of the last day of the preceding fiscal quarter or fiscal year, as appropriate) that provides for different Applicable Margins than those then in effect. "Assigned Rights" shall have the meaning assigned to such term in SECTION 2.17. "Assignment and Acceptance" shall mean an Assignment and Acceptance Agreement entered into between a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of EXHIBIT D. "Assignment Restrictions" shall mean (i) with respect to any contracts or agreements assigned to the Agent, on behalf of the Lenders, as Collateral by the Borrower or any of its Subsidiaries, any restriction or prohibition on assignment that has not been waived or consented to by the Person for whose benefit such restriction or prohibition exists; provided that such restriction or prohibition will not be permitted if the Agent has required such waiver or consent, such requirement of waiver or consent not to unreasonably interfere with the ordinary course of business of the Borrower and its Subsidiaries and may only be required with respect to a material contract, and (ii) with respect to Medicare, Medicaid and MediCal accounts receivable, assignment restrictions as provided in the Medicare Regulations, the Medicaid Regulations and the MediCal Regulations. "Authorized Officer" shall mean any of (i) the Chief Executive Officer, Chief Financial Officer, Vice President-Finance or Vice President-Controller, and (ii) any other officer of the Borrower authorized by resolution of the board of directors of the Borrower to take the action specified herein with respect to such officer and whose signature and incumbency shall have been certified to the Agent by the secretary or an assistant secretary of the Borrower. "Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et seq., as amended, and any successor statute or statute having substantially the same function. "Base Rate" shall mean the higher of (i) the Prime Rate, or (ii) one-half percentage point (0.5%) in excess of the Federal Funds Rate, as adjusted to conform to changes as of the opening of business on the date of any such change in the Federal Funds Rate. "Bloodborne Pathogens Standard" shall mean the Final Standard for Occupational Exposure to Bloodborne Pathogens promulgated by OSHA at 56 Federal Register 64004 et 5 seq. (December 6, 1991) and codified at 29 C.F.R. ss. 1910.1030, or any similar regulation promulgated by any Governmental Authority. "Borrower" shall mean Province Healthcare Company, a Delaware corporation (formerly known as Principal Hospital Company), and its successors and assigns. "Borrowing" shall mean the incurrence by the Borrower on a given date (including as a result of conversions of outstanding Loans pursuant to SECTION 2.9) of one Type of Loan (or a Swingline Loan made by the Swingline Lender) having in the case of LIBOR Loans the same Interest Period, provided that ABR Loans incurred pursuant to SECTION 2.11(C) shall be considered part of the related Borrowing of LIBOR Loans. "Borrowing Date" shall have the meaning assigned to such term in SECTION 2.2(B). "Business Day" shall mean (i) any day other than a Saturday or Sunday, a legal holiday or a day on which commercial banks in Charlotte, North Carolina are required by law to be closed and (ii) in respect of any determination relevant to a LIBOR Loan or any Swap Agreement, any such day that is also a day on which tradings are conducted in the London interbank Eurodollar market. "Capital Asset" shall mean any asset that would, in accordance with Generally Accepted Accounting Principles, be required to be classified and accounted for as a capital asset. "Capital Expenditures" shall mean the aggregate amount of all expenditures and liabilities (including, without limitation, Capital Lease Obligations) made and incurred in respect of the acquisition by the Borrower or any of its Subsidiaries of Capital Assets, but excluding Capital Assets acquired in the form of a Permitted Acquisition and excluding expenditures and liabilities not to exceed $25,000,000 in the aggregate made and incurred by the Borrower or any of its Subsidiaries prior to May 31, 2001 in respect of the acquisition of Capital Assets at Havasu Samaritan Regional Hospital. "Capital Lease" shall mean any lease of any property that would, in accordance with Generally Accepted Accounting Principles, be required to be classified and accounted for as a capital lease on the balance sheet of the lessee. "Capital Lease Obligation" shall mean, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder that would, in accordance with Generally Accepted Accounting Principles, appear on a balance sheet as a liability of such lessee in respect of such Capital Lease. "Cash Collateral Account" shall have the meaning assigned to such term in SECTION 2.18(I). "Cash Investments" shall mean (i) marketable direct obligations (x) issued or unconditionally guaranteed by the United States of America or (y) issued by any agency thereof having a rating of A or higher by Standard & Poor's or A-2 or higher by Moody's Investors Service, Inc., in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Rating Services or Moody's Investors Service, Inc.; (iii) marketable commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 or the equivalent 6 thereof by Standard & Poor's Rating Services or at least P-1 or the equivalent thereof by Moody's Investors Service, Inc.; (iv) demand deposits, time deposits and certificates of deposit maturing within one (1) year from the date of issuance thereof and issued by a Lender or a bank or trust company organized under the laws of the United States of America or any state thereof and having a long term debt rating by Standard & Poor's Rating Services of A or higher; (v) repurchase agreements with a term not exceeding seven days with respect to underlying securities of the types described in clause (I) above entered into with a bank or trust company meeting the qualifications specified in clause (IV) above; and (vi) mutual funds that invest solely in any of the items described above. "Cash Management Line of Credit" shall mean a cash management line of credit between the Borrower and First Union in an aggregate principal amount not in excess of $5,000,000. "Cash Taxes" shall mean, for any fiscal quarter, the aggregate amount of cash payments made by or on behalf of the Borrower or any Subsidiaries to Governmental Authorities for taxes, levies, charges or withholdings during such fiscal quarter. "Change of Control" shall mean (i) any Person or "group" (within the meaning of Section 13(d)(3) under the Exchange Act), shall, directly or indirectly, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become, after the Amendment Effective Date, the "beneficial owner" (within the meanings of Rules 13d-3 and 13d-5 under the Exchange Act) of securities of the Borrower representing 30% or more of the combined voting power of the then outstanding securities of the Borrower ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors, assuming the conversion, exchange or exercise into or for voting stock of all outstanding shares so convertible (other than GTCR Fund IV, Bruce V. Rauner or Joseph P. Nolan, which are currently the beneficial owners of 36.6% of the voting securities of the Borrower and may increase such holdings without causing a Change of Control), or (ii) the members of the Board of Directors of the Borrower shall cease to consist of a majority of the individuals (y) who constituted the Board of Directors as of the date hereof or (z) who shall have become members thereof subsequent to the date hereof after having been nominated, or otherwise approved in writing, by at least a majority of individuals who constituted the Board of Directors of the Borrower as of the date hereof. For purposes of this definition, "voting power" shall be determined with reference to the then outstanding securities of the Borrower ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors, assuming the conversion, exchange or exercise into or for voting stock of all outstanding securities of the Borrower other than voting stock. "Collateral" shall mean all assets, property and interests in property of the Borrower and its Subsidiaries, whether now owned or hereafter acquired, that shall, from time to time, directly or indirectly secure the Credit Obligations or the Guaranty Obligations, including, without limitation, the assets, property or interests in property described in the Security and Pledge Agreement; provided, that with respect to Subsidiaries acquired or created after the Amendment Effective Date in accordance with SECTION 5.11, "Collateral" shall mean all Stock, Interests and promissory notes owned by such Subsidiaries or by the Borrower with respect to such Subsidiaries; and provided, further that "Collateral" shall not include Realty acquired after the Amendment Effective Date by the Borrower or any of its Subsidiaries. "Commitment" shall mean, for any Lender, such Lender's Revolving Credit Commitment including its Swingline Commitment. "Commitment Letter" shall mean the commitment letter to the Borrower from First Union 7 National Bank dated March 11, 1998, confirming its commitment to provide a portion of the Revolving Credit Facility pursuant to this Agreement. "Compliance Certificate" shall mean a fully completed certificate in the form of EXHIBIT C. "Consolidated Adjusted Debt" shall mean the sum of (a) Consolidated Debt, and (b) the product of (i) Annualized Facility Rent Expense, multiplied by (ii) eight (8). "Consolidated Adjusted Senior Debt" shall mean, at any time, Consolidated Adjusted Debt less Subordinated Debt. "Consolidated Debt" shall mean, at any date, the aggregate (without duplication) of all Debt of the Borrower and its Subsidiaries as of such date, determined on a consolidated basis. "Consolidated EBITDAR" shall mean, with respect to the Borrower and its Subsidiaries on a consolidated basis as of the last day of any period, EBITDAR for the period ending on such date determined in accordance with Generally Accepted Accounting Principles. Consolidated EBITDAR shall be deemed to include, without duplication, historical Consolidated EBITDAR, of any business acquired and operated by the Borrower or any Subsidiary after the commencement of the relevant measurement period, as if such business had been acquired by the Borrower or such Subsidiary as of the first day of such measurement period, subject to pro forma expense adjustments as set forth below; provided that such Consolidated EBITDAR is supported by financial statements, tax returns or other financial data acceptable to the Agent in its sole discretion. Calculations of Consolidated EBITDAR shall exclude the results of operations of any entity disposed of by the Borrower or any Subsidiary at any time after the first day of the relevant measurement period. Consolidated EBITDAR shall be adjusted for pro forma expense adjustments in connection with newly acquired entities, if and only to the extent approved in writing by the Required Lenders. "Consolidated Net Income" shall mean, for any fiscal quarter, the net income (or loss) of the Borrower and its Subsidiaries, on a consolidated basis and excluding intercompany items, for such quarter, determined in accordance with Generally Accepted Accounting Principles, but excluding the effect of: (a) gains on the sale, conversion or other disposition of Capital Assets, (b) gains on the acquisition, retirement, sale or other disposition of stock of the Borrower or any of its Subsidiaries, (c) gains on the collection of life insurance proceeds, (d) any write-up of any asset, (e) any other gain or credit of an extraordinary nature, and (f) noncash losses approved in writing by the Agent. "Consolidated Net Revenues" shall mean, for any fiscal quarter, the net revenues of the Borrower and its Subsidiaries, on a consolidated basis and excluding intercompany items, for such quarter, determined in accordance with Generally Accepted Accounting Principles. "Consolidated Net Worth" shall mean, as of the last day of any fiscal year, the net worth of the Borrower and its Subsidiaries as of such date, determined on a consolidated basis in accordance with Generally Accepted Accounting Principles. "Contingent Obligation" shall mean, with respect to any Person, any direct or indirect liability of such Person with respect to any Debt, lease, dividend, guaranty, letter of credit (other than a standby letter of credit with no reasonable likelihood of draw, in the reasonable opinion of the Agent) or other obligation (the "primary obligation") of another Person (the "primary obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such 8 primary obligations, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor in respect thereof to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability of the primary obligor to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. "Covenant Compliance Worksheet" shall mean a fully completed certificate in the form of Attachment A to EXHIBIT C. "Credit Obligations" shall mean and include (i) the Loans, any Reimbursement Obligations and all other loans, advances, indebtedness, liabilities and obligations owing, arising, due or payable from the Borrower to the Agent, the Issuing Bank or any Lender of any kind or nature, present or future, howsoever evidenced, created, incurred, acquired or owing, that arise under this Agreement, the Notes or the other Loan Documents, whether direct or indirect (including those acquired by assignment), absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising and however acquired, and (ii) all interest (including, to the extent permitted by law, all post-petition interest), charges, expenses, fees, attorneys' fees and any other sums payable by the Borrower to the Agent, the Issuing Bank or any Lender under this Agreement, or any of the other Loan Documents (other than any interest payments or lease payments made in connection with the End Loaded Lease Facility). "Debt" shall mean, with respect to any Person or group of Persons, without duplication, (i) all indebtedness of such Person for money borrowed, (ii) all reimbursement obligations of such Person with respect to surety bonds, letters of credit and bankers' acceptances (in each case, whether or not matured), (iii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (iv) all obligations of such Person to pay the deferred purchase price of property or services (including earnouts and other similar contingent obligations, calculated in accordance with Generally Accepted Accounting Principles), other than trade payables, (v) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (vi) all Capital Lease Obligations of such Person, (vii) all monetary obligations and amounts owing of such Person under the End Loaded Lease Facility or any other synthetic or end loaded lease facility of such Person, (viii) the net termination obligations of such Person under any Swap Agreement or other interest rate protection or hedging arrangement, calculated as of any date as if such agreement or arrangement were terminated as of such date, (ix) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock or other equity securities that, by their stated terms (or by the terms of any equity securities issuable upon conversion thereof or in exchange therefor), or upon the occurrence of any event, mature or are mandatorily redeemable, or are redeemable at the option of the holder thereof, in whole or in part, (x) all indebtedness referred to in clauses (I) through (IX) above secured by any lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person, and (xi) any Contingent Obligation of such Person to the extent that such Contingent Obligation in accordance with Generally Accepted Accounting Principles would be 9 set forth in a specific Dollar amount on the liability side of a balance sheet, and excluding any guaranty of Debt related to an operating lease, provided that such guaranty will be included as a Contingent Obligation if the guaranty is called and there is not a corresponding forgiveness of lease payments in like amounts commencing in the order due, and provided, further, that Contingent Obligations of such Person under the End Loaded Lease Facility shall constitute "Debt" of such Person. "Default" shall mean any event that, with the passage of time or giving of notice, or both, would constitute an Event of Default. "Dollars" or "$" shall mean dollars of the United States of America. "EBITDAR" shall mean, for any Person for any fiscal quarter, (i) Consolidated Net Income, plus (ii) the sum of Interest Expense, taxes, depreciation, amortization, and Facility Rent Expense. "Eligible Assignee" shall mean (i) a commercial bank organized under the laws of the United States or any state thereof and having total assets in excess of $1,000,000,000, (ii) a commercial bank organized under the laws of any other country that is a member of the OECD or a political subdivision of any such country and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the United States, in the country under the laws of which it is organized or in another country that is also a member of the OECD, (iii) the central bank of any country that is a member of the OECD, (iv) a finance company, mutual fund, insurance company or other financial institution that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $250,000,000, (v) any Affiliate of an existing Lender or (vi) any other Person (other than an Affiliate of any Borrower) approved by the Agent and the Borrower, which approval shall not be unreasonably withheld. "Employee Plan" shall mean any "employee benefit plan" within the meaning of Section 3(3) of ERISA maintained by the Borrower or any of its Subsidiaries. "End Loaded Lease Commitments" shall mean, with respect to any Lender at any time, the amount set forth under such Lender's name on Schedule 1.1 to the End Loaded Lease Credit Agreement or, if such Lender has entered into one or more Assignment and Acceptances, the amount set forth for such Lender at such time in the Register maintained by the Agent pursuant to Section 9.9(a) of the End Loaded Lease Credit Agreement as such Lender's aggregate "End Loaded Lease Commitment", as such amount may be reduced at or prior to such time pursuant to the terms of the End Loaded Lease Credit Agreement. "End Loaded Lease Credit Agreement" shall mean the credit agreement, dated the Amendment Effective Date, among the Owner Trustee, the lenders party thereto and First Union, as agent, together with any amendments, modifications, and supplements thereto, any replacements, renewals, extensions, restatements and confirmations thereof, and any substitutes therefor, in whole or in part. "End Loaded Lease Facility" shall mean a $35,000,000 end loaded lease financing facility arranged by First Union Capital Markets for the Company, as embodied in the Participation Agreement and the other Operative Agreements (as defined in the Participation Agreement). "End Loaded Lease Loans" shall mean loans made by the lenders party thereto pursuant to the End Loaded Lease Credit Agreement. 10 "End Loaded Lease Notes" shall mean the promissory notes of the Borrower executed and delivered to the lenders party thereto with End Loaded Lease Commitments pursuant to the End Loaded Lease Credit Agreement. "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by the Borrower or any of its Subsidiaries solely in the ordinary course of its business and not in response to any third party action or request of any kind) or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereinafter, "Claims"), including, without limitation, (i) any and all Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Substances or arising from alleged injury or threat of injury to human safety, health or the environment, (iii) any violation or alleged violation of any Environmental Law or other legal requirement by Borrower or its Subsidiaries with respect to any property owned, leased or operated by Borrower or its Subsidiaries (in the past, currently or in the future) and/or (iv) any Claim arising out of any presence, suspected presence, generation, treatment, storage, disposal, transport, movement, release, suspected release or threatened release of any Hazardous Material in, on, to or from any property (or any part thereof including without limitation the soil and groundwater thereon and thereunder) owned, leased or operated by Borrower or its Subsidiaries (in the past, currently or in the future). "Environmental Laws" shall mean any and all applicable laws, as in effect from time to time at the effective time of any applicable representation, warranty, covenant or indemnity, including, without limitation, federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Substances. Environmental Laws include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f, et seq.), the Environmental Protection Agency's regulations relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), to the extent that it regulates exposure to Hazardous Substances, ("OSHA"), as such laws have been amended or supplemented, and any analogous federal, state or local statutes, as in effect from time to time at the effective time of any applicable representation, warranty, covenant or indemnity, and the rules and regulations promulgated thereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. "ERISA Event" means (a) a Reportable Event with respect to a Qualified Plan (as defined in SECTION 4.16); (b) a withdrawal by the Borrower or any of its Subsidiaries from a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial 11 employer (as defined in Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by the Borrower or any of its Subsidiaries from a Multiemployer Plan; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure to make required contributions to a Qualified Plan or Multiemployer Plan; (f) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Qualified Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV of ERISA, other than Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any of its Subsidiaries; (h) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Internal Revenue Code with respect to any Qualified Plan; (i) the Borrower or any of its Subsidiaries engages in or otherwise becomes liable for a nonexempt Prohibited Transaction; or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Internal Revenue Code by any fiduciary with respect to any Qualified Plan for which the Borrower or any of its Subsidiaries may be directly or indirectly liable. "Event of Default" shall have the meaning specified in ARTICLE VII hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. "Existing Loans" shall have the meaning assigned to such term in SECTION 2.1(A). "Facility" shall mean a hospital or other health care facility, together with other ancillary businesses, all buildings and improvements associated therewith, that are owned or leased in whole or in part, by the Borrower or any of its Subsidiaries. "Facility Rent Expense" shall mean, for any fiscal quarter, all amounts paid, payable or accrued during such fiscal quarter by the Borrower and its Subsidiaries on a consolidated basis with respect to all operating leases of hospitals and the operating lease of any other Facility with a Lease Expense in excess of $200,000 annually; provided that Facility Rent Expense shall exclude any amounts that constitute Debt pursuant to clause (vii) of the Debt definition. "Fair Market Value" shall mean, with respect to any capital stock or other ownership interests issued or given by the Borrower or any of its Subsidiaries in connection with a Permitted Acquisition, (i) in the case of common stock of the Borrower that is then designated as a national market system security by the National Association of Securities Dealers, Inc. ("NASDAQ") or is listed on a national securities exchange, the average of the last reported bid and ask quotations or prices reported thereon for such common stock or (ii) in all other cases, the determination of the fair market value thereof in good faith by a majority of members of the board of directors of the Borrower or such Subsidiary with no direct or indirect (other than by virtue of being a director) economic interest in such Permitted Acquisition, in each case effective as of the close of business on the Business Day immediately preceding the closing date of such Permitted Acquisition. "Federal Funds Rate" shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Richmond, or if such rate is not so published on the relevant Business Day, the 12 average of the quotations for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by the Agent. "Fee Letter" shall mean the letter, dated March 11, 1998, as amended, from First Union and First Union Capital Markets to the Borrower, relating to the fees payable to First Union Capital Markets as of the Amendment Effective Date for its own account and the administrative fee payable to the Agent from time to time for its own account, the obligations under which have been assumed by the Borrower. "Financial Condition Certificate" shall mean a fully completed certificate, with the attachments required thereby, in the form of EXHIBIT E. "Financials" or "Financial Statements" shall mean the audited consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1996, 1995 and 1994, and related statements of operations, stockholders' equity and cash flows for the fiscal years then ended, together with the opinion of Ernst & Young LLP thereon; and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1997 and the related statements of operations, stockholders' equity and cash flows for the six-month period then ended. "Financing Statements" shall mean financing statements approved for filing in accordance with the applicable adopted version of the Uniform Commercial Code and all other titles, documents and certificates that the Agent has required or may reasonably require from the Borrower or any Guarantor to describe and perfect the security interests created hereunder or under the other Loan Documents, and all assignments thereof and amendments thereto, in form and substance satisfactory to the Agent. "First Union" shall mean First Union National Bank, a national banking association, and its successors and assigns. "First Union Capital Markets" shall mean First Union Capital Markets, a division of Wheat First Securities, Inc. "Fixed Charges" shall mean, as of the last day of any fiscal quarter, (a) Scheduled Principal Payments, plus (b) the sum of the following as of the fiscal quarter then ending: (i) Annualized Interest Expense payable in cash, (ii) Annualized Facility Rent Expense, (iii) actual Capital Expenditures (excluding, for measurement dates ending on or prior to September 30, 1998, aggregate acquisition expenditures and current building programs incurred on or prior to December 31, 1997 at Parkview Regional Hospital, Mexia, Texas and Colorado Plains Medical Center, Fort Morgan, Colorado, not to exceed $3,200,000) for the four fiscal quarters then ending and (iv) Annualized Cash Taxes. "Generally Accepted Accounting Principles" shall mean generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries on a consolidated basis throughout the period indicated and consistent with the financial practice of the Borrower and its Subsidiaries after the date hereof. "GTCR Fund IV" shall mean the Golder, Thoma, Cressy, Rauner Fund IV, L.P. "Governmental Authority" means the federal government, any state or other political subdivision thereof and any central bank thereof, any municipal, local, city or county government, and any entity exercising executive, legislative, judicial, regulatory or 13 administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guarantors" shall mean any Subsidiary of the Borrower that jointly and severally guarantees the Credit Obligations of the Borrower. As of the Amendment Effective Date, the Guarantors shall include, without limitation, Blythe-Province, Inc., Brim Equipment Services, Inc., Brim Fifth Avenue, Inc., Brim Healthcare, Inc., Brim Hospitals, Inc., Brim Outpatient Services, Inc., Brim Pavilion, Inc., Brim Services Group, Inc., Care Health Company, Inc., Integrated Health Management, LLC, Mexia Principal Healthcare Limited Partnership, Mexia-Principal, Inc., Palestine Limited Partnership, Palestine-Principal G.P., Inc., Palestine-Principal, Inc., Principal Hospital Company of Nevada, Inc., Principal Knox Company, PHC-Eunice, Inc., PHC-Lake Havasu, Inc., PHC of Delaware, Inc. and Principal-Needles, Inc. "Guaranty Agreement" shall mean the Amended and Restated Guaranty Agreement dated as of the date hereof, executed by each Guarantor in favor of the Agent, whereby each Guarantor guarantees to the Lenders the payment and performance of the Credit Obligations, together with any amendments, accessions, modifications and supplements thereto, any replacements, renewals, extensions, restatements and confirmations thereof, and any substitutes therefor, in whole or in part. "Guaranty Documents" shall mean the Guaranty Agreement and the security agreements, pledge agreements, collateral assignments of agreements and any other documents or agreements between the Agent and any of the Guarantors, whereby the Guarantors have pledged Collateral to the Agent as security for the obligations of the Guarantors under the Guaranty Agreement, including, without limitation, the Security and Pledge Agreement and the Mortgages, together with any amendments, modifications, accessions and supplements thereto, any replacements, renewals, extensions, restatements and confirmations thereof, and any substitutes therefor, in whole or in part. "Guaranty Obligations" shall mean the obligations of the Guarantors pursuant to the Guaranty Agreement and the Guaranty Documents. "HCFA" shall mean the United States Health Care Financing Administration and any successor agency. "Hazardous Substances" means any substances or materials (i) that are, at any time of determination, defined as hazardous wastes, hazardous substances, pollutants, contaminants or toxic substances under any Environmental Law; (ii) that are toxic, explosive, corrosive, flammable, infectious, radioactive, mutagenic or otherwise hazardous and are, at any time of determination, regulated by any Governmental Authority; (iii) the presence of which requires investigation or remediation under any Environmental Law or common law; or (iv) that contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas. "IRS" shall mean the Internal Revenue Service and any successor thereto. "Indemnified Costs" shall have the meaning assigned to such term in SECTION 10.7. "Indemnified Person" shall have the meaning assigned to such term in SECTION 10.7. "Intercompany Management Agreements" shall mean and include any and all management agreement now or hereafter existing between the Borrower and any of its 14 Subsidiaries or between such Subsidiaries under which the Borrower or a Subsidiary receives management, consulting or other similar fees for services rendered thereunder, and includes without limitation those management agreements described on SCHEDULE 6.20 attached hereto, together with all amendments, supplements and restatements thereof. "Interest Expense" shall mean, for any fiscal quarter, total interest expense of the Borrower and its Subsidiaries on a consolidated basis for such fiscal quarter (including, without limitation, interest expense attributable to Capital Lease Obligations), determined in accordance with Generally Accepted Accounting Principles, and all lease payments made by the Borrower and its Subsidiaries in connection with the End Loaded Lease Facility. "Interest Period" shall have the meaning assigned to such term in SECTION 2.8. "Interest Rate Calculation Worksheet" shall mean a fully completed worksheet in the form of Attachment B to EXHIBIT C. "Interests" shall mean all ownership or profit-sharing interests (howsoever designated) in any general or limited partnership, limited liability company or joint venture, and all agreements, instruments and documents convertible, in whole or in part, into any one or more or all of the foregoing. "Internal Revenue Code" or "IRC" shall mean the Internal Revenue Code of 1986, as amended from time to time, applicable United States Treasury Department regulations promulgated under the IRC, published administrative positions of the Internal Revenue Service and any judicial decisions related thereto. "Issuing Bank" shall mean First Union, in its capacity as issuer of the Letters of Credit, and its successors and assigns in such capacity. "Joint Venture EBITDAR" shall mean, for any fiscal quarter, Consolidated EBITDAR attributable to any Non-Wholly Owned Consolidated Subsidiary of the Borrower or any other of its Subsidiaries for such fiscal quarter, but excluding EBITDAR attributable to the Palestine Limited Partnership. "L/C Participant" shall have the meaning assigned to such term in SECTION 2.18(C). "LIBOR Loan" shall mean, at any time, any Loan that bears interest at such time at the Adjusted LIBOR Rate. "LIBOR Rate" shall mean, for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next higher 1/100 of one percentage point) obtained by dividing (a) the rate of interest determined by Agent to be the rate for deposits in U.S. Dollars for the applicable Interest Period which appears on the Telerate Page 3750 or successor page or successor service at approximately 11:00 a.m. London time, two (2) Business Days prior to the first date of the applicable Interest Period, or if such rate is not available, the rate per annum at which, in the reasonable opinion of Agent, U.S. Dollars substantially in the amount of the corresponding Borrowing are being offered to leading reference banks in the London interbank market for settlement at approximately 11:00 a.m. London time, two (2) Business Days prior to the first date of the applicable Interest Period, by (b) the percentage equal to one hundred percent (expressed as a decimal fraction) minus the Reserve Requirement for such Interest Period. Each calculation by the Agent of the applicable LIBOR Rate shall be conclusive and binding for all purposes, absent bad faith or manifest error. 15 "Landlord Consents" shall mean (i) a waiver and consent from each landlord with respect to all Facility Leased Properties of the Borrower and its Subsidiaries and (ii) all other landlord consents that the Agent or the Required Lenders may reasonably require of the Borrower or any of its Subsidiaries from time to time in respect of amendments, modifications or renewals of the leases referred to in clause (i) above or in respect of any other leases to which the Borrower or any of its Subsidiaries is now or hereafter a party, in each case in form and substance reasonably satisfactory to the Agent, together with any amendments, modifications and supplements thereto and restatements thereof, in whole or in part. "Lease Expense" shall mean, for any fiscal quarter, all amounts paid, payable or accrued during such fiscal quarter by the Borrower and its Subsidiaries on a consolidated basis with respect to all leases and rental agreements, including, without limitation, all amounts paid as Facility Rent Expense, of the Borrower and its Subsidiaries, other than Capital Leases, determined in accordance with Generally Accepted Accounting Principles; provided that Lease Expense shall exclude any amounts that constitute Debt pursuant to clause (vii) of the Debt definition. "Leased Properties" shall mean the real properties leased and occupied by the Borrower and its Subsidiaries, as of the date hereof and at any time hereafter and consisting, as of the date hereof, of the properties set forth in SCHEDULE 4.8 hereof. "Lender" shall mean each financial institution signatory hereto and each other financial institution that becomes a "Lender" hereto pursuant to SECTION 10.5, and their permitted successors and assigns. "Lending Office" shall mean, with respect to any Lender, the branch or branches (or Affiliates) from which any of such Lender's Loans are made or maintained. "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit at such time and (ii) the aggregate amount of all Reimbursement Obligations at such time. "Letter of Credit Request" shall have the meaning assigned to such term in SECTION 2.18(B). "Letters of Credit" shall have the meaning assigned to such term in SECTION 2.18(A). "Line of Business" shall mean the business of owning or operating nonurban hospitals and managing hospitals and engaging in businesses ancillary to the aforesaid line of business that enhance or support it and that are not materially different from the foregoing. "Loan Documents" shall mean and collectively refer to this Agreement, the Notes, the Security and Pledge Agreement, the Guaranty Documents, the Financing Statements, the Mortgages, the Landlord Consents, the Letters of Credit, the Fee Letter, Swap Agreements (if any) between the Borrower and any Lender, and any and all other material agreements and instruments, including, without limitation, notes, guaranties, mortgages, deeds to secure debt, deeds of trust, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, security agreements, trust account agreements heretofore, now or hereafter executed by or on behalf of the Borrower or any of its Subsidiaries and heretofore, now or hereafter delivered to the Agent or any Lender with respect to this Agreement, and in each case, together with any amendments, modifications and supplements thereto, any replacements, renewals, extensions and restatements thereof, and any substitutes therefor, in whole or in part. 16 "Loans" shall mean and collectively refer to the Revolving Credit Loans and the Swingline Loans. "Material Adverse Effect" or "Material Adverse Change" shall mean, subject to any applicable cure or grace periods, a material adverse effect upon, or a material adverse change in, any of (a) the financial condition, operations, business, properties or prospects of the Borrower and its Subsidiaries, taken as a whole; (b) the ability of the Borrower or any of its Subsidiaries to perform its material obligations under any Material Loan Document; (c) the legality, validity or enforceability of any Material Loan Document; (d) the perfection or priority of the liens of the Agent granted under the Material Loan Documents or the rights and remedies of the Agent or the Lenders under the Material Loan Documents; or (e) the condition or value of any portion of the Collateral, which compared to the total Collateral, is material (other than market fluctuations in the values of such Collateral); provided, that a material adverse effect or a material adverse change caused solely by the Agent's or the Lenders' failure to file continuation statements shall not be a Material Adverse Effect or a Material Adverse Change for purposes of this Agreement. "Material Loan Documents" shall mean and collectively refer to this Agreement, the Notes, the Security and Pledge Agreement, the Guaranty Documents, the Financing Statements, the Mortgages, the Landlord Consents, the Letters of Credit, the Fee Letter, Swap Agreements (if any) between the Borrower and any Lender, and in each case, together with any amendments, modifications and supplements thereto, any replacements, renewals, extensions and restatements thereof, and any substitute therefor, in whole or in part. "Medicaid Regulations" shall mean, collectively, (i) all federal statutes (whether set forth in Title XIX of the Social Security Act, 42 USC ss.ss. 1396 et seq., or elsewhere) affecting the medical assistance program established by Title XIX of the Social Security Act, and any statutes succeeding thereto; (ii) all applicable provisions of all federal rules, regulations, manuals and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (i) above and all federal administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (i) above; (iii) all state statutes and plans for medical assistance enacted in connection with the statutes and provisions described in clauses (i) and (ii) above; and (iv) all applicable provisions of all rules, regulations, manuals and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (iii) above and all state administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (iii) above, in each case as may be amended, supplemented or otherwise modified from time to time. "MediCal Regulations" shall mean collectively, all California state statutes (whether set forth in Cal. Welf. & Inst. Code ss.ss. 14000 et seq., or elsewhere) affecting the health insurance program for the aged and disabled established in connection with Title XIX of the Social Security Act, and any statutes succeeding thereto; together with all applicable provisions of all rules, regulations, manuals and orders and administrative, reimbursement and other guidelines having the force of law of all Governmental Authorities (including without limitation, the California Department of Health Services) promulgated pursuant to or in connection with any of the foregoing having the force of law, in each case as may be amended, supplemented or otherwise modified from time to time. "Medicare Regulations" shall mean, collectively, all federal statutes (whether set forth in Title XVIII of the Social Security Act, 42 USC ss.ss. 1396 et seq., or elsewhere) affecting the health 17 insurance program for the aged and disabled established by Title XVIII of the Social Security Act and any statutes succeeding thereto; together with all applicable provisions of all rules, regulations, manuals and orders and administrative, reimbursement and other guidelines having the force of law of all Governmental Authorities (including without limitation, Health and Human Services ("HHS"), HCFA, the Office of the Inspector General for HHS, or any Person succeeding to the functions of any of the foregoing) promulgated pursuant to or in connection with any of the foregoing having the force of law, in each case as may be amended, supplemented or otherwise modified from time to time. "Mortgages" shall mean all fee and leasehold mortgages, deeds of trust and similar instruments pursuant to which the Borrower or any Guarantor grants to the Agent, for the benefit of the Lenders, a mortgage lien, or an assignment of any mortgage lien obtain by such Person from another Person, to secure any or all of the Credit Obligations or the Guaranty Obligations, and shall include, without limitation, the deeds of trust and security agreements dated as of December 17, 1996, July 31, 1997 or August 11, 1997, executed by the Borrower and/or certain of its Subsidiaries with respect to the parcels of Realty located at (i) General Hospital, Eureka, Humboldt County, California; (ii) Palo Verde Community Hospital, Blythe, Riverside County, California; (iii) Parkview Regional Hospital, Mexia, Limestone County, Texas; (iv) Colorado Plains Medical Center, Fort Morgan, Morgan County, Colorado; (v) Memorial Hospital, Palestine, Anderson, Leon and Houston Counties, Texas; (vi) Starke Memorial Hospital, Knox, Starke County, Indiana, (vii) Brim headquarters building, Portland, Multnomah County, Oregon, (viii) Colorado River Medical Center, Needles, San Bernardino County, California (formerly known as Needles Desert Community Hospital) and (ix) Ojai Valley Community Hospital, Ojai, Ventura County, California, in all cases together with any amendments, modifications and supplements thereto, any replacements, renewals, extensions and restatements thereof, and any substitutes therefor, in whole or in part. "Multiemployer Plan" shall mean any "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA to which the Borrower or any of its Subsidiaries is required to make contributions. "Non-Landlord Consent EBITDAR" shall mean, for any fiscal quarter, Consolidated EBITDAR attributable to all Facility Leased Properties of the Borrower for which a Landlord Consent has not been delivered to the Agent pursuant to Section 5.13. "Non-Wholly Owned Subsidiary" shall mean any Subsidiary of which less than one- hundred percent (100%) of the outstanding equity is, directly or indirectly, owned by the Borrower. "Notes" shall mean the Revolving Credit Notes and the Swingline Note. "Notice of Borrowing" shall have the meaning assigned to such term in SECTION 2.2(B). "Notice of Conversion/Continuation" shall have the meaning assigned to such term in SECTION 2.9(B). "Notice of Swingline Borrowing" shall have the meaning given to such term in SECTION 2.2(F). "Original Credit Agreement" shall have the meaning given to such term in the recitals hereof. "Original Credit Agreement Date" shall mean December 17, 1996. 18 "Original Lenders" shall mean the banks and other financial institutions that are "Lenders" (within the meaning of the Original Credit Agreement) under the Original Credit Agreement as of the Amendment Effective Date. "OSHA" shall mean the Occupational Safety and Health Act, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. "Owner Trustee" shall mean First Security Bank, National Association, in its capacity as owner trustee under the End Loaded Lease Facility. "Palestine Limited Partnership" shall mean Palestine Principal Healthcare Limited Partnership, a Texas limited partnership and a Subsidiary of the Borrower. "Palestine Limited Partnership Agreement" shall mean the Amended and Restated Agreement of Limited Partnership of the Palestine Principal Healthcare Limited Partnership dated as of June 30, 1997 between PHC of Delaware, Inc., as original general partner, Palestine-Principal G.P., Inc., as successor general partner, and Palestine-Principal, Inc., a Tennessee corporation and a Subsidiary of the Borrower, and Mother Frances Hospital Regional Health Care Center, as limited partners. "Palestine Limited Partnership Note" shall mean the promissory note of the Palestine Limited Partnership dated July 26, 1996, in the principal amount of $13,700,000, payable to the Borrower, together with any supplements, amendments, restatements or modifications thereof to the extent approved in writing by the Required Lenders. "Participant" shall mean any Person, now or at any time hereafter, participating with any Lender in the Loans pursuant to this Agreement, and its permitted successors and assigns. "Participation Agreement" shall mean the Participation Agreement, dated the Amendment Effective Date, among the Borrower, as construction agent and lessee, the various parties from time to time party thereto as guarantors, the Owner Trustee, the various banks and other lending institutions from time to time party thereto as lenders, the various banks and other lending institutions party thereto as holders, and First Union, as agent. "Pension Plan" shall mean any "employee pension benefit plan" within the meaning of Section 3(2) of ERISA maintained by the Borrower or any of its Subsidiaries (other than any Multiemployer Plan that is subject to the provisions of Title IV of ERISA). "Permitted Acquisition" shall mean (a) the acquisition of Havasu Samaritan Regional Hospital on or before May 31, 1998 for an Acquisition Amount not to exceed $110,000,000 or (b) an Acquisition approved in writing by the Required Lenders pursuant to SECTIONS 5.12 and 6.7; provided however, that the approval of the Required Lenders shall not be required for (i) any Acquisition of a Facility for which the Acquisition Amount is $25,000,000 or less, or (ii) any lease of a Facility with a present value (calculated using a reasonable discount rate determined in good faith by the Borrower and consistent with the projections provided pursuant to SECTION 5.12(C)(III)) of aggregate lease payments and related asset acquisition costs of $15,000,000 or less, in each case subject to an aggregate Acquisition Amount of $40,000,000 for all Acquisitions consummated during any four consecutive fiscal quarters. Notwithstanding anything to the contrary contained in the immediately preceding sentence, an Acquisition shall be a Permitted Acquisition only if all requirements of SECTIONS 5.11 (if any new Subsidiaries are acquired or created in connection with such Acquisition), 5.12, 6.2 (if any Debt is assumed in connection with such Acquisition) and 6.3 (if any Liens are incurred in connection with such 19 Acquisition) are met with respect thereto. "Permitted Liens" shall mean any of the following liens, restrictions or encumbrances securing any liability or indebtedness of the Borrower or any of its Subsidiaries on, or otherwise affecting, any of the Borrower's or such Subsidiary's property, real or personal, whether now owned or hereafter acquired: (a) Liens granted to the Agent, for the benefit of the Lenders; (b) Liens granted for the benefit of the lenders to the End Loaded Lease Facility pursuant to such facility; (c) Liens for taxes, assessments or other governmental charges that are not delinquent or remain payable without any penalty or that are being contested in good faith and with due diligence by appropriate proceedings, provided that if reasonably requested by the Agent, the Borrower or such Subsidiary has established reserves with respect thereto in accordance with Generally Accepted Accounting Principles; (d) Liens upon property leased under a Capital Lease (including sale/leaseback transactions permitted by SECTION 6.17) and placed upon such property at the time of, or within sixty (60) days after, the commencement of the lease thereof to secure the lease payments under such Capital Lease, provided that any such lien (i) shall not encumber any other property of the Borrower or any of its Subsidiaries, and (ii) shall not exceed the total of such lease payments; (e) Liens set forth on SCHEDULE 1.1(A) attached hereto (as modified from time to time in accordance with SECTION 5.17 in connection with Acquisitions or otherwise), provided that the Debt related to such liens is not increased above the amount then outstanding; (f) Purchase money liens incurred or assumed in the purchase of equipment permitted under SECTION 6.14 hereof, provided that any such lien (i) attaches to such asset concurrently with or within ten (10) days after the acquisition thereof, (ii) shall not encumber any other property of the Borrower or any of its Subsidiaries and (iii) shall not exceed the purchase price of such asset; (g) Assignment Restrictions; (h) Easements, rights of way, restrictive covenants, conditions, zoning restrictions and other similar title, survey or other encumbrances on real estate that do not materially impair the current use and value of the property to which they relate; (i) Carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlord's or other like non-consensual liens arising in the ordinary course of business that are not overdue for a period of more than thirty (30) days, or, if overdue for more than thirty (30) days, (i) which are being contested in good faith and by appropriate proceedings; and (ii) for which adequate reserves in accordance with Generally Accepted Accounting Principles have been established on the books of the Borrower or appropriate Subsidiary; provided however, that any such landlord liens shall be subject to the Landlord Consents to the extent applicable; (j) Pledges or deposits in connection with workers' compensation insurance, unemployment insurance and like matters; (k) Deposits to secure the performance of bids, trade contracts (other than for 20 borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (l) Liens in respect of any writ of execution, attachment, garnishment, judgment or award in an amount less than $500,000, the time for appeal or petition for rehearing of which shall not have expired, or in respect of which an appeal or appropriate proceeding for review is being prosecuted in good faith and a stay of execution pending such appeal or proceeding for review has been secured; (m) Liens of a lessor with respect to an operating lease of equipment or machinery; and (n) Any other liens or encumbrances as the Required Lenders may approve in writing from time to time. "Person" shall mean a corporation, an association, a joint venture, a partnership, limited liability company, an organization, a business, an individual, a trust or a government or political subdivision thereof or any government agency or any other legal entity. "Prime Rate" shall mean the per annum interest rate publicly announced from time to time by First Union from its principal office in Charlotte, North Carolina, to be its Prime Rate, which may not necessarily be its best lending rate, as adjusted to conform to changes as of the opening of business on the date of any such change in the Prime Rate. In the event First Union shall abolish or abandon the practice of announcing its Prime Rate or should the same be unascertainable, the Agent shall designate a comparable reference rate that, upon the Borrower's consent (which shall not be unreasonably withheld), shall be deemed to be the Prime Rate under this Credit Agreement and the other Loan Documents. "Pro Rata Share" of any amount shall mean, with respect to any Lender at any time, the product of (i) such amount, multiplied by (ii) such Lender's Revolving Credit Percentage. "Prohibited Transaction" shall mean any transaction described in (i) Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or (ii) Section 4975(c) of the Internal Revenue Code that is not exempt by reason of Section 4975(c) or 4975(d). "Projections" shall mean the financial projections delivered to the Agent by the Borrower pursuant to SECTION 4.5(B) hereof. "Purchasing Lender" shall have the meaning assigned to such term in SECTION 2.17. "Realty" shall mean all of the right, title and interest of the Borrower or any of its Subsidiaries in and to land, improvements and fixtures, including any leasehold interests (whether as lessor or lessee). "Refunded Swingline Loans" shall have the meaning given to such term in SECTION 2.2(G). "Register" shall have the meaning given to such term in SECTION 10.5(C). "Regulation G" shall mean Regulation G of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 207, or any successor or other regulation hereafter promulgated by said Board to replace the prior Regulation G and having substantially the same function. 21 "Regulation T" shall mean Regulation T promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 220, or any successor or other regulation hereafter promulgated by said Board to replace the prior Regulation T and having substantially the same function. "Regulation U" shall mean Regulation U promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any successor or other regulation hereafter promulgated by said Board to replace the prior Regulation U and having substantially the same function. "Regulation X" shall mean Regulation X promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any successor or other regulation hereafter promulgated by said Board to replace the prior Regulation X and having substantially the same function. "Reimbursement Obligation" shall have the meaning assigned to such term in SECTION 2.18(D). "Replaced Lender" shall have the meaning assigned to such term in SECTION 2.19. "Replacement Effective Date" shall have the meaning assigned to such term in SECTION 2.19. "Replacement Lender" shall have the meaning assigned to such term in SECTION 2.19. "Reportable Event" shall mean a reportable event as defined in Section 4043(b) of ERISA (other than an event for which notice is waived under the ERISA regulations). "Required Lenders" shall mean, at any time, the Lenders owning or holding 51% or more of the sum of the then aggregate principal amount of the Revolving Credit Commitments then outstanding (or after the termination of the Commitments, the aggregate at such time of all outstanding Loans and Letter of Credit Outstandings). For purposes of this definition, the Letter of Credit Outstandings shall be considered to be owed to the Lenders according to their Revolving Credit Percentages. "Requirement of Law" means, as to any Person, the charter, articles or certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any statute, law, treaty, rule, regulation, order, decree, writ, injunction or determination of any arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reserve Requirement" shall mean, with respect to any Interest Period, the reserve percentage (expressed as a decimal) applicable two (2) Business Days before the first day of such Interest Period determined by the Agent to be in effect on such day, as provided by the Board of Governors of the Federal Reserve System (or any successor governmental body), applied for determining the maximum reserve requirements (including, without limitation, basic, supplemental, marginal and emergency reserves) applicable to the Lenders under Regulation D with respect to "Eurocurrency liabilities" within the meaning of Regulation D, or under any similar or successor regulation with respect to Eurocurrency liabilities or Eurocurrency funding. "Revolving Credit Commitment" shall mean, with respect to any Lender at any time, the amount set forth under such Lender's name on its signature page hereto under the caption 22 "Revolving Credit Commitment" or, if the Borrower has converted End Loaded Lease Commitments into Revolving Credit Commitments pursuant to SECTION 2.9(D) or, if such Lender has entered into one or more Assignment and Acceptances, the amount set forth for such Lender at such time in the Register maintained by the Agent pursuant to SECTION 10.5(C) as such Lender's "Revolving Credit Commitment," as such amount may be reduced at or prior to such time pursuant to the terms hereof. "Revolving Credit Facility" shall mean the revolving line of credit established by the Lenders under SECTION 2.1(B). "Revolving Credit Facility Maturity Date" shall mean March 31, 2003. "Revolving Credit Facility Termination Date" shall mean such earlier date of March 31, 2003, or termination of the Total Revolving Credit Commitment in accordance with SECTION 2.4(D) or SECTION 8.1. "Revolving Credit Loans" shall have the meaning assigned to such term in SECTION 2.1(B). "Revolving Credit Notes" shall mean the promissory notes of the Borrower in substantially the form of EXHIBIT A-1, executed and delivered to the Lenders with Revolving Credit Commitments pursuant to SECTION 2.3(B) or, in connection with conversions of End Loaded Lease Commitments into Revolving Credit Commitments, pursuant to SECTION 2.9(D) or, in connection with an Assignment and Acceptance, pursuant to SECTION 10.5(D), together with any amendments, modifications and supplements thereto and restatements thereof, in whole or in part. "Revolving Credit Percentage" shall mean, with respect to any Lender at any time, a fraction (expressed as a percentage) the numerator of which is the Revolving Credit Commitment of such Lender at such time and the denominator of which is the Total Revolving Credit Commitment at such time; provided that if the Revolving Credit Percentage of any Lender is to be determined after the Revolving Credit Commitments have been terminated, then such Revolving Credit Percentage shall be determined immediately prior (and without giving effect) to such termination. "Scheduled Principal Payments" shall mean all scheduled principal payments on long-term Debt due and payable in the subsequent four consecutive fiscal quarters, including, without limitation, the aggregate principal amount of the Loans due during such period under SECTION 2.5(C) (as such amounts may have been previously adjusted in accordance with the terms of this Agreement as a result of prior prepayments on the Loans, including adjustments made pursuant to SECTION 2.5(A)). "Security and Pledge Agreement" shall mean the Amended and Restated Security and Pledge Agreement, dated as of the date hereof, between the Borrower, the Guarantors and the Agent, whereby the Borrower and the Guarantors have granted to the Agent a security interest in certain Collateral described therein as security for the Credit Obligations of the Borrower and the Guaranty Obligations of the Guarantors, together with any amendments, accessions, modifications and supplements thereto, any replacements, renewals, extensions, restatements and confirmations thereof, and any substitutes therefor, in whole or in part. "Selling Lender" shall have the meaning assigned to such term in SECTION 2.17. "Senior Officer" shall mean any officer or director of the Borrower (including, without 23 limitation, the Chief Executive Officer, Chief Financial Officer, Vice President-Controller, Vice President-Finance and in-house General Counsel) or any Subsidiary, or the Chief Executive Officer, Chief Financial Officer or the Chief Nursing Officer of any Facility. "Solvent" shall mean, as to any Person on any particular date, that such Person (i) has capital reasonably sufficient to carry on its business as presently conducted and all business in which it is about to engage, (ii) is able to pay its debts as they mature, (iii) owns property having a fair saleable value on a going concern basis that is greater than the amount required to pay its probable liability on existing debts as they mature (including known reasonable contingencies and contingencies that should be included in notes of the financial statements of such Person pursuant to Generally Accepted Accounting Principles considering all financing alternatives and potential asset sales reasonably available to such Person), and (iv) does not intend to, and does not believe that it will, incur debts or probable liabilities beyond its ability to pay such debts or liabilities as they mature. "Stated Amount" shall mean, with respect to any Letter of Credit at any time, the maximum amount available to be drawn thereunder at such time (regardless of whether any conditions for drawing could then be met). "Stock" shall mean all shares, options, interests or other equivalents (howsoever designated) of or in a corporation, whether voting or nonvoting, including, without limitation, common stock, warrants, preferred stock, convertible debentures and all agreements, instruments and documents convertible, in whole or in part, into any one or more or all of the foregoing. "Subordinated Debt" shall mean unsecured Debt of the Borrower or any of its Subsidiaries that is expressly subordinated and made junior to the payment and performance of the Credit Obligations and the Guaranty Obligations on terms (including, without limitation, covenants, terms of subordination and payment terms) approved in writing by the Required Lenders, including without limitation the Intercompany Management Agreements. "Subsidiary" shall mean any corporation of which more than fifty percent (50%) of the outstanding Stock having ordinary voting power to elect a majority of the board of directors, or other entity of which more than 50% of the Interests or voting power, is at the time, directly or indirectly, owned by any Person or one or more of its Subsidiaries (irrespective of whether, at the time, the ownership interests or Stock of any other class or classes of such entity or corporation shall have or might have voting power by reason of the happening of any contingency). When used without reference to a parent, the term "Subsidiary" shall be deemed to refer to a Subsidiary of the Borrower. "Swap Agreement" shall mean any and all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance or other hedging arrangements and all other similar agreements or arrangements between the Borrower and any Lender designed to protect against fluctuations in interest rates. "Swingline Commitment" shall mean $5,000,000 or, if less, the aggregate Revolving Credit Commitments at the time of determination, as such amount may be reduced at or prior to such time pursuant to the terms hereof. "Swingline Lender" shall mean First Union in its capacity as maker of Swingline Loans, and its successors in such capacity. "Swingline Loans" shall have the meaning given to such term in SECTION 2.1(C). 24 "Swingline Maturity Date" shall mean the date that is five (5) Business Days prior to the Revolving Credit Facility Maturity Date. "Swingline Note" shall mean the promissory note of the Borrower in substantially the form of EXHIBIT A-2, together with any amendments, modifications and supplements thereto, substitutions therefor and restatements thereof. "Target" shall have the meaning assigned to such term in SECTION 5.12(C)(I). "Taxes" shall have the meaning assigned to such term in SECTION 2.12(A). "Total Commitment" shall mean, at any time, the sum of all Commitments at such time. "Total Revolving Credit Commitment" shall mean, at any time, the sum of the Revolving Credit Commitments of all Lenders at such time. "Total Unutilized Revolving Credit Commitment" shall mean, at any time, the sum of the Unutilized Revolving Credit Commitments of all Lenders at such time. "Trust" shall mean PHC Real Estate Trust 1998-1, a single purpose grantor trust organized under the laws of the State of Utah to consummate the transactions contemplated by the End Loaded Lease Facility, including, without limitation, transactions to purchase, own and improve realty pursuant to the End Loaded Lease Facility. "Type" shall have the meaning assigned to such term in SECTION 2.2(A). "Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of North Carolina; provided, however, in the event that, by reason of the mandatory provisions of law, any or all of the attachment, perfection or priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than North Carolina, the term "Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. "Unutilized End Loaded Lease Commitment" shall mean, with respect to any Lender at any time, the End Loaded Lease Commitment of such Lender less the aggregate principal amount of all End Loaded Lease Loans made by such Lender under the End Loaded Lease Credit Agreement that are outstanding at such time. "Unutilized Revolving Credit Commitment" shall mean, with respect to any Lender at any time, such Lender's Revolving Credit Commitment at such time less the sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender that are outstanding at such time and (ii) such Lender's Pro Rata Share (calculated based on its Revolving Credit Percentage) of all Letter of Credit Outstandings at such time. The Unutilized Revolving Credit Commitment of the Swingline Lender shall not be reduced by the amount of any Swingline Loans outstanding at any time. "Unutilized Swingline Commitment" shall mean, with respect to the Swingline Lender at any time, the Swingline Commitment at such time less the aggregate principal amount of all Swingline Loans that are outstanding at such time. 25 1.2. Accounting Terms. Any accounting terms used in this Agreement that are not specifically defined shall have the meanings customarily given them in accordance with Generally Accepted Accounting Principles; provided, however, that, in the event that changes in Generally Accepted Accounting Principles shall be mandated by the Financial Accounting Standards Board, or any similar accounting body of comparable standing, or shall be recommended by the Borrower's certified public accountants, to the extent that such changes would modify or could modify such accounting terms or the interpretation or computation thereof, such changes shall be followed in defining such accounting terms only from and after the date this Agreement shall have been amended to the extent necessary to reflect any such changes in the financial covenants and other terms and conditions of this Agreement. In the event of any such changes, the Borrower, the Agent and the Required Lenders shall endeavor in good faith to promptly agree to appropriate amendments hereto. 1.3. Singular/Plural. Unless the context otherwise requires, words in the singular include the plural and words in the plural include the singular. 1.4. Other Terms. All other terms contained in this Agreement shall, when the context so indicates, have the meanings provided for by the Uniform Commercial Code of the State of North Carolina to the extent the same are used or defined therein. ARTICLE II AMOUNT AND TERMS OF THE LOANS; LETTERS OF CREDIT 2.1. The Loans. (a) The aggregate principal amount of all Loans (as defined in the Original Credit Agreement) made pursuant to the Original Credit Agreement and outstanding on the Amendment Effective Date (collectively, the "Existing Loans") is $45,000,000. On the Amendment Effective Date, and after giving effect to the concurrent assignment and purchase of a portion of the Existing Loans among the Lenders in accordance with SECTION 2.17, the aggregate outstanding principal amount of all Existing Loans shall automatically be converted to an equivalent principal amount of Revolving Credit Loans hereunder, made by the Lenders ratably in accordance with their respective Commitments, and for all purposes of this Agreement shall be deemed to be Loans hereunder and entitled to the benefits of (and subject to the terms of) this Agreement and the other Loan Documents. All such Loans hereunder shall be of the same Type, and shall have the same Interest Period, as the corresponding Existing Loans. (b) Each Lender having a Revolving Credit Commitment severally agrees, subject to and on the terms and conditions of this Agreement, to make loans (each, a "Revolving Credit Loan" and collectively, the "Revolving Credit Loans") to the Borrower, from time to time on any Business Day during the period from the date hereof to the Revolving Credit Facility Termination Date, provided that (i) the aggregate principal amount of Revolving Credit Loans at any time outstanding for any Lender shall not exceed the difference between (1) such Lender's Revolving Credit Commitment at such time less (2) such Lender's Pro Rata Share (calculated based on its Revolving Credit Percentage) of the aggregate Letter of Credit Outstandings at such time (exclusive of 26 Reimbursement Obligations that are repaid with the proceeds of, and simultaneously with the incurrence of, Revolving Credit Loans) and (ii) no Borrowing of Revolving Credit Loans shall be made if, immediately after giving effect thereto, the aggregate principal amount of Revolving Credit Loans, Letter of Credit Outstandings (exclusive of Reimbursement Obligations that are repaid with the proceeds of, and simultaneously with, the incurrence of Revolving Credit Loans) and Swingline Loans (excluding the aggregate amount of any Swingline Loans to be repaid with proceeds of Revolving Credit Loans made pursuant to such Borrowing) outstanding at such time would exceed the Total Revolving Credit Commitment, and (iii) no advance of any Borrowing of Revolving Credit Loans shall be required if, immediately after giving effect thereto, a Default or Event of Default exists. Subject to and on the terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans until the Revolving Credit Facility Termination Date. (c) The Swingline Lender agrees, subject to and on the terms and conditions of this Agreement, to make loans (each, a "Swingline Loan," and collectively, the "Swingline Loans") to the Borrower, from time to time on any Business Day during the period from the Amendment Effective Date to but not including the Swingline Maturity Date (or, if earlier, the Revolving Credit Facility Termination Date), in an aggregate principal amount not exceeding the Swingline Commitment, notwithstanding that the aggregate principal amount of Swingline Loans outstanding at any time, when added to the aggregate principal amount of the Revolving Credit Loans made by the Swingline Lender in its capacity as a Lender outstanding at such time and its Letter of Credit Outstandings at such time, may exceed its Revolving Credit Commitment at such time; provided, however, that no Borrowing of Swingline Loans shall be made if, immediately after giving effect thereto, the sum of the aggregate principal amount of Revolving Credit Loans, Letter of Credit Outstandings (exclusive of Reimbursement Obligations that are repaid with the proceeds of, and simultaneously with, the incurrence of Revolving Credit Loans), and Swingline Loans (excluding the aggregate amount of any Swingline Loans to be repaid with proceeds of Revolving Credit Loans made pursuant to such Borrowing) outstanding at such time would exceed the Total Revolving Credit Commitment. Subject to and on the terms and conditions of this Agreement, the Borrower may borrow, repay (including by means of a Borrowing of Revolving Credit Loans pursuant to SECTION 2.2(B)) and reborrow Swingline Loans. 2.2. Borrowings. (a) The Loans (other than the Swingline Loans) shall, at the option of the Borrower and subject to the terms and conditions of this Agreement, be either ABR Loans or LIBOR Loans (each such type of Loan, a "Type"), provided that (i) all Loans comprising the same Borrowing shall, unless otherwise specifically provided herein, be of the same Type and (ii) the Swingline Loans shall be made and maintained as ABR Loans at all times. (b) In order to make a Borrowing (other than continuations of outstanding Loans which shall be made pursuant to SECTION 2.9, mandatory Borrowings of Revolving Credit Loans pursuant to SECTION 2.18(E), Borrowings of Swingline Loans pursuant to SECTION 2.2(F), and Borrowings for the purpose of repaying Refunded Swingline Loans, which shall be made pursuant to SECTION 2.2(G)), the Borrower will give the Agent written notice (by telecopier or otherwise), not later than 12:00 noon, Charlotte, North Carolina local time, at least three (3) Business Days prior to each Borrowing to be comprised of LIBOR Loans and at least one (1) Business Day prior to each Borrowing to be comprised of ABR Loans; provided, however, that requests for the Borrowing of any Revolving Credit Loans to be made on the Amendment Effective Date may, at the discretion of the Agent, be given later than the times specified hereinabove. Each such notice (each, a "Notice of Borrowing") shall be irrevocable, shall be given in the form of EXHIBIT B-1 and shall be appropriately completed to specify (i) the aggregate principal amount and Type of the Loans to be made pursuant to such Borrowing (and, in the case of a Borrowing of LIBOR Loans, the initial Interest Period to be applicable thereto), (ii) the purpose and proposed use of the proceeds of the Borrowing, and (iii) the requested date of the Borrowing (the "Borrowing Date"), which shall be a Business Day. 27 Notwithstanding anything to the contrary contained herein: (i) the aggregate principal amount of each Borrowing hereunder (x) in the case of Borrowings of Revolving Credit Loans comprised of ABR Loans (excluding Borrowings for the purpose of repaying Refunded Swingline Loans, and mandatory Borrowings of Revolving Credit Loans pursuant to SECTION 2.18(E)), shall not be less than $1,000,000 and, if greater, shall be in an integral multiple of $500,000 in excess thereof, (y) in the case of Borrowings of Swingline Loans, shall not be less than $250,000 and, if greater, shall be in an integral multiple of $100,000 in excess thereof, and (z) in the case of Borrowings comprised of LIBOR Loans, shall not be less than $3,000,000 and, if greater, shall be in an integral multiple of $1,000,000 in excess thereof (or, in all cases of a Borrowing of Revolving Credit Loans, if less, in the amount of the Total Unutilized Revolving Credit Commitment); (ii) if the Borrower shall have failed to designate the Type of Loans comprising a Borrowing, the Borrower shall be deemed to have requested a Borrowing comprised of ABR Loans; (iii) if the Borrower shall have failed to select the duration of the Interest Period to be applicable to any Borrowing of LIBOR Loans, then the Borrower shall be deemed to have selected an Interest Period with a duration of one month; and (iv) LIBOR Loans under the Revolving Credit Facility may not be outstanding under more than five (5) separate Interest Periods at any one time. (c) Upon its receipt of a Notice of Borrowing, the Agent will promptly notify each Lender of the proposed Borrowing. Not later than 2:00 p.m., Charlotte time, on the requested Borrowing Date, each such Lender will make available to the Agent at its office referred to in SECTION 10.4 (or at such other location as the Agent may designate) an amount, in Dollars and in immediately available funds, equal to the amount of the Loan to be made by such Lender. To the extent the relevant Lenders have made such amounts available to the Agent as provided hereinabove, the Agent will make the aggregate of such amounts available to the Borrower in accordance with subsection (D) below and in like funds as received by the Agent. Each Lender may, at its option, make and maintain any LIBOR Loan by causing any domestic or foreign branch or Affiliate of such Lender to make or maintain such LIBOR Loan, provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement; provided, further, that the Borrower shall not be responsible for costs arising under SECTIONS 2.11, 2.12, 2.13 or otherwise payable hereunder resulting from any such transfer of its Loans to the extent such costs would not otherwise be applicable to such Lender in the absence of such transfer. (d) The Borrower hereby authorizes the Agent to disburse the proceeds of each Borrowing in accordance with the terms of any written instructions from any of the Authorized Officers, provided that the Agent shall not be obligated under any circumstances to forward amounts to any account not listed in an Account Designation Letter. The Borrower may at any time deliver to the Agent an Account Designation Letter listing any additional accounts or deleting any accounts listed in a previous Account Designation Letter. (e) Unless the Agent has received, prior to 12:00 noon, Charlotte time, on the relevant Borrowing Date, written notice from a Lender that such Lender will not make available to the Agent such Lender's ratable portion, if any, of the relevant Borrowing, the Agent may assume that such Lender has made such portion available to the Agent in immediately 28 available funds on such Borrowing Date in accordance with subsection (C) above, and the Agent may, in reliance upon such assumption, make a corresponding amount available to the Borrower on such Borrowing Date. If and to the extent that such Lender shall not have made such portion available to the Agent, and the Agent shall have made such corresponding amount available to the Borrower, such Lender, on the one hand, and the Borrower, on the other, severally (but without duplication of payments made by the applicable Lender) agree to pay to the Agent forthwith on demand such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, (i) in the case of such Lender, at the Federal Funds Rate, and (ii) in the case of the Borrower, at the rate of interest applicable at such time to Loans comprising such Borrowing, as determined under the provisions of SECTION 2.6. If such Lender shall repay to the Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement and the Borrower shall have no further obligation to make any repayment of such Borrowing pursuant to this SECTION 2.2(E). The failure of any Lender to make any Loan required to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan as part of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender as part of any Borrowing. (f) In order to make a Borrowing of a Swingline Loan, the Borrower will give the Agent and the Swingline Lender written notice not later than 12:00 noon, Charlotte time, on the Business Day of such Borrowing. Each such notice (each, a "Notice of Swingline Borrowing") shall be irrevocable, shall be given in the form of EXHIBIT B-4 and shall specify (i) the principal amount of the Swingline Loan to be made pursuant to such Borrowing (which shall not be less than $250,000 and, if greater, shall be in an integral multiple of $100,000 in excess thereof (or, if less, in the amount of the Unutilized Swingline Commitment)) and (ii) the requested Borrowing Date, which shall be a Business Day. Not later than 2:00 p.m., Charlotte time, on the requested Borrowing Date, the Swingline Lender will make available to the Agent at its office referred to in SECTION 10.4 (or at such other location as the Agent may designate) an amount, in Dollars and in immediately available funds, equal to the amount of the requested Swingline Loan. The Agent will make such amount available to the Borrower in accordance with SECTION 2.2(C). Subject to the terms and conditions of this Agreement, the Swingline Lender may at any time (whether or not an Event of Default has occurred and is continuing) in its sole and absolute discretion, and is hereby authorized and empowered by the Borrower to, cause a Borrowing of Swingline Loans not in excess of the Swingline Commitment to be made for the purpose of repaying any outstanding principal and interest amounts under the Cash Management Line of Credit by delivering to the Borrower, not later than 12:00 noon, Charlotte time, on the Business Day of such Borrowing, a notice (which shall be deemed to be a Notice of Swingline Borrowing given by the Borrower but not a new representation) requesting that the Swingline Lender make Swingline Loans on such Borrowing Date in an aggregate amount not to exceed the outstanding principal and interest amounts under the Cash Management Line of Credit; provided, that it shall be a condition precedent to any borrowing under the Cash Management Line that no Default or Event of Default shall have occurred and be continuing under this Agreement (which condition shall be deemed waived upon and subject to the conditions of a waiver of such Default or Event of Default pursuant to the terms of this Agreement). (g) With respect to any outstanding Swingline Loans, the Swingline Lender may at any time (whether or not an Event of Default has occurred and is continuing) in its sole and absolute discretion, and is hereby authorized and empowered by the Borrower to, cause a Borrowing of Revolving Credit Loans to be made for the purpose of repaying such Swingline Loans by delivering to each other Lender (on behalf of, and with a copy to, the Borrower), not later than 12:00 noon, Charlotte time, one (1) Business Day prior to the proposed Borrowing Date therefor, a notice (which shall be deemed to be a Notice of Borrowing given by the 29 Borrower but not a new representation) requesting the Lenders to make Revolving Credit Loans (which shall be made initially as ABR Loans) on such Borrowing Date in an aggregate amount equal to the amount of such Swingline Loans (the "Refunded Swingline Loans") outstanding on the date such notice is given that the Swingline Lender requests to be repaid. Not later than 2:00 p.m., Charlotte time, on the requested Borrowing Date, each Lender (other than the Swingline Lender) will make available to the Agent at its office referred to in SECTION 10.4 (or at such other location as the Agent may designate) an amount, in Dollars and in immediately available funds, equal to the amount of the Revolving Loan to be made by such Lender. To the extent the Lenders have made such amounts available to the Agent as provided hereinabove, the Agent will make the aggregate of such amounts available to the Swingline Lender in like funds as received by the Agent, which shall apply such amounts in repayment of the Refunded Swingline Loans. Notwithstanding any provision of this Agreement to the contrary, on the relevant Borrowing Date, the Refunded Swingline Loans (including the Swingline Lender's ratable share thereof, in its capacity as a Lender) shall be deemed to be repaid with the proceeds of the Revolving Credit Loans made as provided above (including a Revolving Loan deemed to have been made by the Swingline Lender), and such Refunded Swingline Loans deemed to be so repaid shall no longer be outstanding as Swingline Loans but shall be outstanding as Revolving Credit Loans. If any portion of any such amount repaid (or deemed to be repaid) to the Swingline Lender shall be recovered by or on behalf of the Borrower from the Swingline Lender in any bankruptcy, insolvency or similar proceeding or otherwise, the loss of the amount so recovered shall be shared ratably among all the Lenders in the manner contemplated by SECTION 2.2(H). (h) If, as a result of any bankruptcy, insolvency or similar proceeding with respect to the Borrower, Revolving Credit Loans are not made pursuant to subsection (G) above in an amount sufficient to repay any amounts owed to the Swingline Lender in respect of any outstanding Swingline Loans, or if the Swingline Lender is otherwise precluded for any reason from giving a notice on behalf of the Borrower as provided for hereinabove, the Swingline Lender shall be deemed to have sold without recourse, representation or warranty, and each Lender shall be deemed to have purchased and hereby agrees to purchase, a participation in such outstanding Swingline Loans in an amount equal to its ratable share (based on the proportion that its Revolving Credit Commitment bears to the Total Revolving Credit Commitments at such time) of the unpaid amount thereof together with accrued interest thereon. Upon one (1) Business Day's prior notice from the Swingline Lender, each Lender (other than the Swingline Lender) will make available to the Agent at its office referred to in SECTION 10.4 (or at such other location as the Agent may designate) an amount, in Dollars and in immediately available funds, equal to its participation. To the extent the Lenders have made such amounts available to the Agent as provided hereinabove, the Agent will make the aggregate of such amounts available to the Swingline Lender in like funds as received by the Agent. In the event any such Lender fails to make available to the Agent the amount of such Lender's participation as provided in this subsection (H), the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with interest thereon for each day from the date such amount is required to be made available for the account of the Swingline Lender until the date such amount is made available to the Swingline Lender at the Federal Funds Rate. Promptly following its receipt of any payment by or on behalf of the Borrower in respect of a Swingline Loan, the Swingline Lender will pay to each Lender that has acquired a participation therein such Lender's ratable share of such payment. (i) Notwithstanding any provision of this Agreement to the contrary, the obligation of each Lender (other than the Swingline Lender) to make Revolving Credit Loans for the purpose of repaying any Refunded Swingline Loans pursuant to subsection (G) above and each such Lender's obligation to purchase a participation in any unpaid Swingline Loans pursuant to subsection (H) above shall be absolute and unconditional and shall not be affected 30 by any circumstance or event whatsoever, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right that such Lender may have against the Swingline Lender, the Agent, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of any Default or Event of Default, (iii) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Borrower or any of its Subsidiaries, or (iv) any breach of this Agreement by any party hereto. 2.3. Notes. (a) The Loans made by each Lender shall be evidenced (i) if Revolving Credit Loans, by a Revolving Credit Note appropriately completed in substantially the form of EXHIBIT A-1, and (ii) if Swingline Loans, by a Swingline Note appropriately completed in substantially the form of EXHIBIT A-2. (b) The Revolving Credit Note issued to each Lender with a Revolving Credit Commitment shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender, (iii) be dated as of the Amendment Effective Date (or, in the case of Revolving Credit Notes issued pursuant to an Assignment and Acceptance, as of the date thereof), (iv) be in a stated principal amount equal to such Lender's Revolving Credit Commitment, (v) bear interest in accordance with the provisions of SECTION 2.6, as the same may be applicable to the Revolving Credit Loans made by such Lender from time to time, and (vi) be entitled to all of the benefits of this Agreement and the other Loan Documents and subject to the provisions hereof and thereof. (c) The Swingline Note issued to the Swingline Lender shall (i) be executed by the Borrower, (ii) be payable to the order of the Swingline Lender, (iii) be dated as of the Amendment Effective Date, (iv) be in a stated principal amount equal to the Swingline Commitment, (v) bear interest in accordance with the provisions of SECTION 2.6, as the same may be applicable to the Swingline Loans made by the Swingline Lender from time to time, and (vi) be entitled to all of the benefits of this Agreement and the other Loan Documents and subject to the provisions hereof and thereof. (d) Each Lender will record on its internal records the amount of each Loan made by it and each payment received by it in respect thereof and will, in the event of any transfer of any of its Notes, either endorse on the reverse side thereof or on a schedule attached thereto (or any continuation thereof) the outstanding principal amount of the Loans evidenced thereby as of the date of transfer or provide such information on Annex I to the Assignment and Acceptance relating to such transfer; provided, however, that the failure of any Lender to make any such recordation or provide any such information, or any error in such recordation or information, shall not affect the Borrower's obligations in respect of such Loans. The register maintained by the Agent shall be deemed correct absent manifest error. (e) The Notes shall be issued in renewal, amendment, rearrangement and restatement of, and not in novation, discharge or satisfaction of, the Notes (as defined in the Original Credit Agreement) evidencing the Existing Loans. 2.4. Termination and Reduction of Commitments and Swingline Commitment. (a) The Revolving Credit Commitment of each Lender shall be automatically and permanently terminated on the Revolving Credit Facility Termination Date unless sooner terminated pursuant to subsection 2.4(d) below or SECTION 10.5. 31 (b) The Swingline Commitment shall be automatically and permanently terminated on the Swingline Maturity Date unless sooner terminated pursuant to subsection 2.4(d) below or SECTION 10.5. (c) On each date set forth below, the Total Revolving Credit Commitments shall automatically be permanently reduced by the amount set forth below opposite such date (such amounts being subject to reduction as set forth in subsection (e) below):
Amount of Reduction in Date Aggregate Commitments ---- ---------------------- March 31, 2001 $25,000,000 June 30, 2001 $25,000,000 September 30, 2001 $25,000,000 December 31, 2001 $25,000,000 March 31, 2002 $25,000,000 June 30, 2002 $25,000,000 September 30, 2002 $25,000,000 December 31, 2002 $25,000,000 March 31, 2003 All Remaining Total Revolving Credit Commitments
(d) At any time and from time to time, upon at least five (5) Business Days' prior written notice to the Agent (and, in the case of a termination or reduction of the Unutilized Swingline Commitment, the Swingline Lender), the Borrower may, without premium or penalty, terminate in whole or reduce in part the Total Unutilized Revolving Credit Commitment or the Unutilized Swingline Commitment, provided that any such partial reduction shall be in an aggregate amount of not less than $5,000,000 ($1,000,000 in the case of the Unutilized Swingline Commitment) or, if greater, in multiples of $1,000,000 in excess thereof. The amount of any termination or reduction made under this subsection (D) may not thereafter be reinstated. (e) Each reduction of the Total Revolving Credit Commitment under this SECTION 2.4 shall be applied ratably among the Lenders according to their respective Revolving Credit Commitments and shall be applied to reduce the scheduled reduction amounts set forth in the table in subsection (c) above ratably in accordance with their respective Dollar amounts. After any such reduction, the fee provided in SECTIONS 2.7(B) shall be calculated with respect to the reduced Commitments. Notwithstanding any provision of this Agreement to the contrary, any reduction of the Total Revolving Credit Commitments pursuant to this SECTION 2.4 that has the effect of reducing the Total Revolving Credit Commitments to an amount less than the amount of the Swingline Commitment at such time shall result in an automatic corresponding reduction of the Swingline Commitment to the amount of the Total Revolving Credit Commitments (as so reduced), without any further action on the part of the Borrower or the Swingline Lender. 2.5. Payments; Voluntary, Mandatory. (a) At any time and from time to time, the Borrower shall have the right to voluntarily prepay the Loans, in whole or in part, without premium or penalty (except as provided in clause (III) below), upon written notice to the Agent given not later than 12:00 noon, Charlotte time, (x) at least three (3) Business Days prior to each intended prepayment of any Loans that are LIBOR Loans and (y) at least one (1) Business Day prior to each intended prepayment of any Loans that are ABR Loans; provided that Swingline Loans may be prepaid on a same day basis; provided further that (i) each partial voluntary prepayment of Revolving Credit Loans shall be in an aggregate principal amount of not less than $1,000,000 or, if 32 greater, an integral multiple of $1,000,000 in excess thereof, and each partial voluntary prepayment of Swingline Loans shall be in an aggregate principal amount of not less than $100,000, or if greater, an integral multiple thereof, (ii) no partial voluntary prepayment of LIBOR Loans made pursuant to any single Borrowing shall reduce the aggregate outstanding principal amount of the remaining LIBOR Loans under such Borrowing to less than $3,000,000 or to any greater amount not an integral multiple of $1,000,000 in excess thereof, and (iii) unless made together with all amounts required under SECTION 2.13 to be paid as a consequence of such prepayment, a prepayment of a LIBOR Loan may be made only on the last day of the Interest Period applicable thereto. Each such notice shall specify the proposed date of such prepayment and the aggregate principal amount and the Types of the Loans to be prepaid (and, in the case of LIBOR Loans, the Interest Period of the Borrowing pursuant to which made), and shall be irrevocable and shall bind the Borrower to make such prepayment on the terms specified therein. During the continuance of any Event of Default, all prepayments pursuant to this subsection (A) shall be applied, first, to the Swingline Loans, and second, after payment in full of the Swingline Loans, to the Revolving Credit Loans as determined by the Agent. Each prepayment of the Revolving Credit Loans made pursuant to this subsection (A) shall be applied to reduce the aggregate outstanding principal amount of the Revolving Credit Loans ratably among the Lenders holding Revolving Credit Loans in proportion to the principal amount held by each. In the absence of an Event of Default, voluntary prepayments pursuant to this subsection (A) shall be applied as specified by the Borrower in the applicable prepayment notice. Loans prepaid pursuant to this subsection (A) may be reborrowed, subject to the terms and conditions of this Agreement. (b) Except to the extent due or made sooner pursuant to the provisions of this Agreement, the Borrower will repay the aggregate outstanding principal amount of the Revolving Credit Loans in full on the Revolving Credit Facility Maturity Date. Except to the extent due or made sooner pursuant to the provisions of this Agreement, the Borrower will repay the aggregate outstanding principal amount of the Swingline Loans in full on the Swingline Maturity Date. (c) In the event that, at any time (including on any date set forth in the table in SECTION 2.4(C)), the sum of (i) the aggregate principal amount of the Revolving Credit Loans outstanding on any date (after giving effect to all repayments thereof on such date), (ii) the aggregate Letter of Credit Outstandings at such time (after giving effect to all repayments thereof on such date), and (iii) the aggregate Swingline Loans outstanding at such time (excluding the aggregate amount of any Swingline Loans to be repaid with proceeds of Revolving Credit Loans made on the date of determination after giving effect to all repayments on such date) at such time exceeds the lesser of the Total Revolving Credit Commitment at such time (after giving effect to any termination or reduction thereof as of such date), the Borrower will immediately repay the principal amount of the Swingline Loans in the amount of such excess and, to the extent of any excess remaining after prepayment in full of outstanding Swingline Loans, the Borrower will immediately prepay the outstanding principal amount of the Revolving Credit Loans in the amount of such excess; provided, however, such payment shall be accompanied by all amounts required under SECTION 2.13 if applied to a LIBOR Loan and such payment is not made on the last day of the Interest Period applicable thereto, and (B) to the extent such excess amount required to be repaid is greater than the aggregate principal amount of the Swingline Loans and Revolving Credit Loans outstanding immediately prior to the application of such repayment, the amount so repaid shall be retained by the Agent and held in the Cash Collateral Account as security for the Borrower's Credit Obligations, as more particularly described in SECTION 2.18(I), and thereupon such cash shall be deemed to reduce the aggregate Reimbursement Obligations by an equivalent amount. 33 (d) On the date of receipt by the Borrower or any of its Subsidiaries of any net cash proceeds from any issuance of equity securities (other than an immaterial amount of equity securities issued pursuant to employee benefit and deferred compensation plans of the Borrower or any of its Subsidiaries) or debt securities (other than Debt expressly permitted by SECTION 6.2 hereof or for which consent of the Required Lenders was obtained), the Borrower shall make a mandatory repayment of principal of the Revolving Credit Loans (as set forth in subsection (G) below) in an amount equal to seventy-five percent (75%) of net proceeds from the issuance of equity securities and one hundred percent (100%) of net cash proceeds from the issuance of debt securities (in each case, net of any underwriting discounts and commissions and other reasonable costs associated with such issuance). (e) On the date of receipt by the Borrower or any of its Subsidiaries of any net cash proceeds from any sale or disposition of assets in any transaction or series of related transactions causing receipt of net cash proceeds in excess of $250,000 per sale or disposition or $2,000,000 in the aggregate, other than sales or dispositions permitted under clauses (i), (ii), (iv) (subject to the above-mentioned $250,000 per sale limitation) and (v) of Section 6.5 or the sale of permitted temporary overnight investments or any other investment products sold to the Borrower by any Lender or any Affiliate thereof, the Borrower shall make a mandatory repayment of principal of the Revolving Credit Loans (as set forth in subsection (G) below) in an amount equal to one-hundred percent (100%) of such net cash proceeds. (f) On the date of receipt by the Borrower or any of its Subsidiaries of any cash prepayment received in reduction of the principal balance of the Palestine Limited Partnership Note, the Borrower shall make a mandatory repayment of principal of the Revolving Credit Loans (as set forth in subsection (g) below) in an amount equal to one hundred percent (100%) of such payment. (g) Each prepayment of the Loans made pursuant to subsections (D), (E) and (F) above shall be applied to reduce the aggregate outstanding principal amount of the Revolving Credit Loans, ratably among the Lenders holding Revolving Credit Loans in proportion to the principal amount held by each. Each payment or prepayment of a LIBOR Loan made pursuant to the provisions of this SECTION 2.5 on a day other than the last day of the Interest Period applicable thereto shall be made together with all amounts required under SECTION 2.13 to be paid as a consequence thereof. 2.6. Interest. (a) The Borrower will pay interest in respect of the unpaid principal amount of each Loan, from the date of Borrowing thereof until such principal amount shall be paid in full, (i) at the Alternate Base Rate, as in effect from time to time, during such periods as such Loan is an ABR Loan, or (ii) at the Adjusted LIBOR Rate, as in effect from time to time, during such periods as such Loan is a LIBOR Loan. (b) Any principal amounts of the Loans not paid when due and, to the greatest extent permitted by law, all interest accrued on the Loans and all other fees and amounts hereunder not paid when due (whether at maturity, pursuant to acceleration or otherwise), shall bear interest at a rate per annum equal to the rate otherwise applicable to such Loan plus two percentage points (2.0%), and such default interest shall be payable on demand; provided, however, that if the Required Lenders waive such Default, the Loans will continue to bear interest at a rate per annum equal to the rate applicable to such Loan. Further, but without duplication of the foregoing, during the existence of any Event of Default in response to which the Lenders do not grant a waiver but do not elect to declare the outstanding principal amounts of the Loans immediately due and payable, if required by the Required Lenders, the Borrower will pay interest on the dates provided pursuant to subsection (c), below, in respect of the 34 unpaid principal amount of each Loan, from the date the Event of Default first exists until it is cured or waived, at a rate per annum equal to the rate otherwise applicable to such Loan plus two percentage points (2.0%) and such interest shall be payable on demand. To the greatest extent permitted by law, interest shall continue to accrue after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign. (c) Accrued (and theretofore unpaid) interest shall be payable as follows: (i) in respect of each ABR Loan (including any ABR Loan or portion thereof paid or prepaid pursuant to the provisions of SECTION 2.5, except as provided hereinbelow), in arrears on the first Business Day of each successive January, April, July and October, beginning with the first such day to occur after the Amendment Effective Date; provided, that in the event the Loans are repaid or prepaid in full and the Total Commitment has been terminated, then accrued interest in respect of all ABR Loans shall be payable together with such repayment or prepayment on the date thereof; (ii) in respect of each LIBOR Loan (including any LIBOR Loan or portion thereof paid or prepaid pursuant to the provisions of SECTION 2.5, except as provided hereinbelow), in arrears, on the last Business Day of the Interest Period applicable thereto (subject to the provisions of clause (IV) in SECTION 2.8); provided, that in the event all LIBOR Loans made pursuant to a single Borrowing are repaid or prepaid in full, then accrued interest in respect of such LIBOR Loans shall be payable together with such repayment or prepayment on the date thereof; and (iii) in respect of any Loan, at maturity (whether pursuant to acceleration or otherwise) and, after maturity, on demand. (d) Nothing contained in this Agreement or in any other Loan Document shall be deemed to establish or require the payment of interest to any Lender in an amount in excess of the maximum amount permitted by applicable law. If the amount of interest or other charges payable for the account of any Lender on any payment date would exceed the maximum amounts permitted by applicable law to be charged by such Lender, the amount of interest payable for its account on such payment date shall be automatically reduced to such maximum permissible amounts. In the event of any such reduction affecting any Lender, if from time to time thereafter the amount of interest payable for the account of such Lender on any interest payment date would be less than the maximum amounts permitted by applicable law to be charged by such Lender, then the amount of interest payable for its account on such subsequent payment date shall be automatically increased to such maximum permissible amount, provided that at no time shall the aggregate amount by which interest paid for the account of any Lender has been increased pursuant to this sentence exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to the previous sentence. The parties hereto understand and believe that if Tennessee or Delaware law were to apply, this lending transaction complies with the usury laws of the State of Tennessee or Delaware. If at any time, any amount of interest or other charges actually paid by the Borrower on or with respect to any Loan is determined to be in excess of the maximum amount permitted by applicable law, such excess amount shall be credited as a prepayment of the outstanding principal balance of the applicable Loan as of the date paid or, if such Loan has been paid in full, refunded to the Borrower. (e) The Agent shall promptly notify the Borrower and the Lenders upon determining the interest rate for each Borrowing of LIBOR Loans after its receipt of the relevant 35 Notice of Borrowing or Notice of Conversion/Continuation; provided, however, that the failure of the Agent to provide the Borrower or the Lenders with any such notice shall neither affect any obligations of the Borrower or the Lenders hereunder nor result in any liability on the part of the Agent to the Borrower or any Lender. Each such determination (including each determination of the Reserve Requirement in connection with a Borrowing of LIBOR Loans) shall, absent manifest error, be final, conclusive and binding on all parties hereto. 2.7. Fees. The Borrower agrees to pay: (a) To First Union Capital Markets, for its own account, on the date of this Agreement, the fees described in the Fee Letter, in the amounts set forth therein as due and payable on the date of this Agreement and to the extent not theretofore paid to First Union Capital Markets; (b) To the Agent, for the account of each Lender with a Revolving Credit Commitment, a commitment fee per annum for the period from the date of this Agreement to the Revolving Credit Facility Termination Date at the rate per annum as determined under the following matrix with reference to the ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDAR, applied to the average daily Unutilized Revolving Credit Commitment of such Lender, payable in arrears (i) on the first Business Day of each successive January, April, July and October, beginning with July 1, 1998, and (ii) on the Revolving Credit Facility Termination Date:
Ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDAR Fee Percentage - --------------------------------------- -------------- Greater than or equal to 4.0 to 1.0 0.500% Less than 4.0 to 1.0 but greater than or equal to 3.5 to 1.0 0.375% Less than 3.5 to 1.0 but greater than or equal to 2.5 to 1.0 0.3125% Less than 2.5 to 1.0 0.250%
From the Amendment Effective Date until the fifth (5) Business Day after receipt by the Agent of the financial statement for the fiscal quarter ended March 31, 1998 pursuant to SECTION 5.1(A) below (together with a Compliance Certificate), the fee percentage shall be 0.250%. The fee percentage shall be reset from time to time as the calculation of Applicable Margin changes as set forth herein. (c) To the Agent, for the account of each L/C Participant, a letter of credit fee in respect of each Letter of Credit for the period from the date of its issuance to the date of its termination, at a rate per annum equal to the Applicable Margin for LIBOR Loans in effect from time to time during such period, on the daily average Stated Amount thereof, payable in arrears (i) on the first Business Day of each successive January, April, July and October, beginning with the first such day to occur after the Amendment Effective Date, and (ii) on the later of the Revolving Credit Facility Termination Date or the date of termination of the last outstanding Letter of Credit; 36 (d) To the Issuing Bank, for its own account, a facing fee in respect of each Letter of Credit for the period from the date of its issuance to the date of its termination, at a rate per annum equal to 0.125%, on the face amount thereof, payable in arrears (i) on the first Business Day of each successive January, April, July and October, beginning with the first such day to occur after the Amendment Effective Date, and (ii) on the later of the Revolving Credit Facility Termination Date or the date of termination of the last outstanding Letter of Credit; (e) To the Issuing Bank, for its own account, such commissions, issuance fees, transfer fees and other fees and charges incurred in connection with the issuance and administration of each Letter of Credit as are customarily charged from time to time by the Issuing Bank for the performance of such services in connection with similar letters of credit, or as may be otherwise agreed to by the Borrower; and (f) To the Agent, for its own account, the annual administrative fees provided in the Fee Letter, on the terms, in the amounts and at the times set forth therein. 2.8. Interest Periods. Concurrently with the giving of any Notice of Borrowing or Notice of Conversion/Continuation in respect of any Borrowing comprised of LIBOR Loans, the Borrower shall have the right to elect, pursuant to such notice, the interest period (each, an "Interest Period") to be applicable to such LIBOR Loans, which Interest Period shall, at the option of the Borrower, be a one, two, or three month period (subject to SECTION 2.11); provided, however, that: (i) all LIBOR Loans comprising a single Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any LIBOR Loan shall commence on the date of the Borrowing of such Loan (including the date of any continuation of, or conversion into, such LIBOR Loan), and each successive Interest Period applicable to such LIBOR Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires; (iii) the Borrower may not select any Interest Period that expires after the Revolving Credit Facility Maturity Date; (iv) if any Interest Period otherwise would expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless such next succeeding Business Day falls in another calendar month, in which case such Interest Period shall expire on the next preceding Business Day; (v) no Interest Period with respect to Revolving Credit Loans that are to be maintained as LIBOR Loans may be selected that would end after a scheduled date for repayment of principal of the Revolving Credit Loans (including any date of a scheduled mandatory reduction of the aggregate Commitments) occurring on or after the first day of such Interest Period unless, immediately after giving effect to such selection, the sum of (y) the aggregate principal amount of Revolving Credit Loans that are ABR Loans or that have Interest Periods expiring on or before such principal repayment date, plus (z) the Total Unutilized Revolving Credit Commitment as of such date, equals or exceeds the principal amount required to be paid on such principal repayment date; 37 (vi) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period would otherwise expire, such Interest Period shall expire on the last Business Day of such calendar month; and (vii) if, upon the expiration of any Interest Period applicable to a Borrowing of LIBOR Loans, the Borrower shall have failed to elect a new Interest Period to be applicable to such LIBOR Loans, then the Borrower shall be deemed to have elected to convert such LIBOR Loans into ABR Loans as of the expiration of the then current Interest Period applicable thereto. 2.9. Conversions and Continuations. (a) The Borrower shall have the right, on any Business Day to elect (i) to convert all or a portion of the outstanding principal amount of any ABR Loans into LIBOR Loans, or to convert any LIBOR Loans the Interest Periods for which end on the same day into ABR Loans, or (ii) to continue all or a portion of the outstanding principal amount of any LIBOR Loans the Interest Periods for which end on the same day for an additional Interest Period, provided that (i) any such conversion of LIBOR Loans into ABR Loans shall involve an aggregate principal amount of not less than $1,000,000 or, if greater, an integral multiple of $500,000 in excess thereof; (ii) any such conversion of ABR Loans into, or continuation of, LIBOR Loans shall involve an aggregate principal amount of not less than $3,000,000 or, if greater, an integral multiple of $1,000,000 in excess thereof; (iii) no partial conversion of LIBOR Loans made pursuant to a single Borrowing shall reduce the outstanding principal amount of such LIBOR Loans to less than $3,000,000 or to any greater amount not an integral multiple of $1,000,000 in excess thereof, (iv) no such conversion or continuation shall be permitted with regard to any ABR Loans that are Swingline Loans, and (v) no conversion of ABR Loans into LIBOR Loans or continuation of LIBOR Loans into a new Interest Period shall be permitted during the continuance of a Default or Event of Default. If a LIBOR Loan is converted into a ABR Loan on any day other than the last day of the Interest Period applicable thereto, the Borrower will pay, upon such conversion, all amounts required under SECTION 2.13 to be paid as a consequence thereof. (b) The Borrower shall make each such election by giving the Agent written notice not later than 12:00 noon, Charlotte time, three (3) Business Days prior to the effective date of any conversion of ABR Loans into, or continuation of, LIBOR Loans and one (1) Business Day prior to the effective date of any conversion of LIBOR Loans into ABR Loans. Each such notice (each, a "Notice of Conversion/Continuation") shall be irrevocable, shall be given in the form of EXHIBIT B-2 and shall specify (x) the date of such conversion or continuation (which shall be a Business Day), (y) in the case of a conversion into, or a continuation of, LIBOR Loans, the Interest Period to be applicable thereto, and (z) the aggregate amount and Type of the Loans being converted or continued. Upon the receipt of a Notice of Conversion/Continuation, the Agent will promptly notify each Lender of the proposed conversion or continuation. In the event that the Borrower shall fail to deliver a Notice of Conversion/ Continuation as provided herein with respect to any outstanding LIBOR Loans, such LIBOR Loans shall automatically be converted to ABR Loans upon the expiration of the then current Interest Period applicable thereto (unless repaid pursuant to the terms hereof). (c) The Borrower shall have a one-time option, exercisable on any Business Day, to convert Unutilized End Loaded Lease Commitments under the End Loaded Lease Credit Agreement to Revolving Credit Commitments under this Agreement on a pro rata basis among the Lenders; provided, that (i) any such conversion shall involve aggregate Unutilized End Loaded Lease Commitments of not less than $5,000,000 or, if greater, an integral multiple of $5,000,000 in excess thereof and (ii) no such conversion shall be permitted during the 38 continuance of a Default or an Event of Default. The Borrower shall exercise such option by giving the Agent written notice not later than 12:00 noon, Charlotte time, fifteen (15) Business Days prior to the effective date of any conversion of Unutilized End Loaded Lease Commitments to Revolving Credit Commitments. Such notice (the "Notice of Commitment Conversion") shall be irrevocable, shall be given in the form of EXHIBIT B-3 and shall specify (x) the date of such conversion (which will be a Business Day) and (y) the amount of Unutilized End Loaded Lease Commitments being converted. (d) The Notice of Commitment Conversion shall be accompanied by new Revolving Credit Notes and End Loaded Lease Notes executed by the Borrower at its own expense, dated the date of conversion and reflecting the changes in the End Loaded Lease Commitments and Revolving Credit Commitments of the Lenders. Upon receipt of the Notice of Commitment Conversion and the new Revolving Credit Notes and End Loaded Lease Notes from the Borrower, the Agent will (i) accept such Notice of Commitment Conversion, (ii) record the information contained therein in the Register and in the register maintained by the Agent pursuant to Section 9.9(a) of the End Loaded Lease Credit Agreement, and (iii) promptly notify each Lender of the proposed conversion and request that the Revolving Credit Notes and the End Loaded Lease Notes then held by the Lenders be returned to the Agent. Upon receipt by the Agent of the Revolving Credit Notes and the End Loaded Lease Notes provided by any Lender pursuant to clause (iii) above, the Agent shall deliver the new Revolving Credit Notes and End Loaded Lease Notes to such Lender in exchange for the surrendered notes and shall forward the surrendered notes to the Borrower for cancellation. 2.10. Method of Payments; Computations. (a) All payments by the Borrower hereunder shall be made without setoff, counterclaim or other defense, in Dollars and in immediately available funds to the Agent, for the account of the Lenders or the Swingline Lender, as the case may be (except as otherwise expressly provided herein as to payments required to be made directly to the Issuing Bank and the Lenders) at its office referred to in SECTION 10.4, prior to 12:00 noon, Charlotte time, on the date payment is due. Any payment made as required hereinabove, but after 12:00 noon, Charlotte time, shall be deemed to have been made on the next succeeding Business Day. If any payment falls due on a day that is not a Business Day, then such due date shall be extended to the next succeeding Business Day (except that in the case of LIBOR Loans to which the provisions of clause (IV) in SECTION 2.8 are applicable, such due date shall be the next preceding Business Day), and such extension of time shall then be included in the computation of payment of interest, fees or other applicable amounts at the applicable rate in effect immediately prior to such extension. (b) The Agent will distribute to the Lenders like amounts relating to payments made to the Agent for the account of the Lenders as follows: (i) if the payment is received by 12:00 noon, Charlotte time, in immediately available funds, the Agent will make available to each relevant Lender on the same date, by wire transfer of immediately available funds, such Lender's ratable share of such payment (based on the percentage that the amount of the relevant payment owing to such Lender bears to the total amount of such payment owing to all of the relevant Lenders), and (ii) if such payment is received after 12:00 noon, Charlotte time, or in other than immediately available funds, the Agent will make available to each such Lender its ratable share of such payment by wire transfer of immediately available funds on the next succeeding Business Day (or in the case of uncollected funds, as soon as practicable after collected). If the Agent shall not have made a required distribution to the appropriate Lenders as required hereinabove after receiving a payment for the account of such Lenders, the Agent will pay to each such Lender, on demand, its ratable share of such payment with interest thereon at the Federal Funds Rate for each day from the date such amount was required to be 39 disbursed by the Agent until the date repaid to such Lender. The Agent will distribute to the Issuing Bank like amounts relating to payments made to the Agent for the account of the Issuing Bank in the same manner, and subject to the same terms and conditions, as set forth hereinabove with respect to distributions of amounts to the Lenders. (c) Unless the Agent shall have received written notice from the Borrower prior to the date on which any payment of principal, interest or fees under SECTION 2.7 is due to any Lender hereunder that such payment will not be made in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date, and the Agent may, in reliance on such assumption, but shall not be obligated to, cause to be distributed to such Lender on such due date an amount equal to the amount then due to such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, and without limiting the obligation of the Borrower to make such payment in accordance with the terms hereof, such Lender shall repay to the Agent forthwith on demand such amount so distributed to such Lender, together with interest thereon for each day from the date such amount is so distributed to such Lender until the date repaid to the Agent, at the Federal Funds Rate. (d) With respect to each payment hereunder, except as specifically provided otherwise herein or in any of the other Loan Documents, the Borrower may designate by written notice to the Agent prior to or concurrently with such payment the Types of Loans that are to be paid, repaid or prepaid, provided that (i) unless made together with all amounts required under SECTION 2.13 to be paid as a consequence thereof, a prepayment of a LIBOR Loan may be made only on the last day of the Interest Period applicable thereto, and (ii) each payment on account of any Credit Obligations to or for the account of any one or more Lenders shall be apportioned ratably among such Lenders in proportion to the amounts of such Credit Obligations owed to them. In the absence of any such designation by the Borrower, or if an Event of Default has occurred and is continuing, the Agent shall make such designation as the Required Lenders may direct, subject to the foregoing and to the other provisions of this Agreement. (e) All computations of interest and fees hereunder (including computations of the Reserve Requirement) shall be made on the basis of a year consisting of 360 days and the actual number of days (including the first day, but excluding the last day) elapsed; provided, however, that interest calculated with respect to the Base Rate shall be computed on the basis of a 365/366-day year and the actual days elapsed. 2.11. Increased Costs, Change in Circumstances, Etc. (a) If, at any time after the Amendment Effective Date and from time to time, the adoption or modification of any applicable law, rule or regulation, or any interpretation or administration thereof by any Governmental Authority or central bank (whether or not having the force of law) charged with the interpretation, administration or compliance of the Lenders with any of such requirements, shall, subject to the provisions of SECTION 2.12 which shall be controlling as to the matters covered thereby: (i) subject any Lender to, or increase the net amount of, any tax, impost, duty, charge or withholding with respect to any amount received or to be received hereunder in connection with LIBOR Loans (other than taxes imposed on net income or profits of, or any branch or franchise tax applicable to, such Lender or a Lending Office of such Lender); 40 (ii) change the basis of taxation of payments to any Lender in connection with LIBOR Loans (other than changes in taxes on the net income or profits of, or any branch or franchise tax applicable to, such Lender or a Lending Office of such Lender); (iii) impose, increase or render applicable any reserve (other than the Reserve Requirement), capital adequacy, special deposit or similar requirement against assets of, deposits with or for the account of, or loans, credit or commitments extended by, any Lender or a Lending Office of such Lender; or (iv) impose on any Lender or in the London interbank Eurodollar market any other condition or requirement (other than taxes imposed on net income or profits of, or any branch or franchise tax applicable to, such Lender or a Lending Office of such Lender, and other than the Reserve Requirement to the extent otherwise taken into account in the determination of LIBOR Rates) affecting this Agreement or LIBOR Loans; and the result of any of the foregoing is to increase the costs to any Lender of agreeing to make, making, funding or maintaining any LIBOR Loans or to reduce the yield or rate of return of such Lender on any LIBOR Loans to a level below that which such Lender could have achieved but for the adoption or modification of any such requirements, the Borrower will, within fifteen (15) days after delivery to the Borrower by such Lender of written demand therefor (with a copy thereof to the Agent), pay to such Lender such additional amounts relating or directly corresponding to the Loans as shall compensate such Lender for such increase in costs or reduction in return. (b) If, at any time after the Amendment Effective Date and from time to time, the adoption or modification of any applicable federal, state or local law, rule or regulation regarding any Lender's required level of capital (including any allocation of capital requirements or conditions, but excluding federal, state or local income tax liability), or the implementation of any such requirements previously adopted but not implemented prior to the Amendment Effective Date, or any interpretation or administration thereof by any Governmental Authority (whether or not having the force of law) charged with the interpretation, administration or compliance of such Lender with any of such requirements, has or would have the effect of reducing the rate of return on such Lender's capital as a consequence of its Commitments, Loans or participations in Letters of Credit hereunder to a level below that which such Lender could have achieved but for such adoption, modification, implementation or interpretation (taking into account such Lender's policies with respect to capital adequacy), the Borrower will, within fifteen (15) days after delivery to the Borrower by such Lender of written demand therefor (with a copy thereof to the Agent), pay to such Lender such additional amounts as will compensate such Lender for such reduction in return. (c) If, on or prior to the first day of any Interest Period, by reason of changes arising after the date of this Agreement generally affecting the London interbank Eurodollar market, (i) the Agent shall have determined that Dollar deposits in the amount of any Lender's required LIBOR Loan pursuant to such Borrowing are not generally available in the London interbank Eurodollar market or that the rate at which such Dollar deposits are being offered will not adequately and fairly reflect the cost to such Lender of making or maintaining its LIBOR Loan during such Interest Period or (ii) the Agent shall have determined that adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate for such Interest Period, the Agent will forthwith so notify the Borrower and the Lenders, whereupon the obligation of (y) in the case of clause (I) above, each such affected Lender, and (z) in the case of clause (II) above, all Lenders, in each case to make, to convert ABR Loans into, or to continue, LIBOR Loans shall be suspended (including pursuant to the Borrowing to which such Interest Period applies), and any Notice of Borrowing or Notice of Conversion/Continuation 41 given at any time thereafter with respect to LIBOR Loans shall be deemed to be a request for ABR Loans (but in the case of clause (I) above, only to the extent of such affected Lender's Pro Rata Share thereof) until the Agent or the affected Lender, as the case may be, shall have determined that the circumstances giving rise to such suspension no longer exist (and the affected Lender, if making such determination, shall have so notified the Agent), and the Agent shall have so notified the Borrower and the Lenders. (d) Notwithstanding any other provision in this Agreement, if, at any time after the Amendment Effective Date and from time to time, the adoption or modification of any applicable law, rule or regulation, or any interpretation or administration thereof by any Governmental Authority or central bank (whether or not having the force of law) charged with the interpretation, administration or compliance of any Lender with any of such requirements, has or would have the effect of making it unlawful for such Lender to honor its obligation to make LIBOR Loans or to continue to make or maintain LIBOR Loans, such Lender will forthwith so notify the Agent and the Borrower, whereupon (i) each of such Lender's outstanding LIBOR Loans shall automatically, on the expiration date of the Interest Period applicable thereto or, to the extent any such LIBOR Loan may not lawfully be maintained as a LIBOR Loan until such expiration date (subject to payment as may be required by SECTION 2.13), upon such notice, be converted into a ABR Loan and (ii) the obligation of such Lender to make, to convert ABR Loans into, or to continue, LIBOR Loans shall be suspended, and any Notice of Borrowing or Notice of Conversion/Continuation given at any time thereafter with respect to LIBOR Loans shall, as to such Lender, be deemed to be a request for ABR Loans, until such Lender shall have determined that the circumstances giving rise to such suspension no longer exist and shall have so notified the Agent, and the Agent shall have so notified the Borrower. (e) Determinations by the Agent or any Lender for purposes of this Section of any increased costs, reduction in return, market contingencies, illegality or any other matter shall, absent manifest error, be conclusive, provided that such determinations are made in good faith. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of this Section with respect to such Lender, it will, if requested by the Borrower and to the extent permitted by law, endeavor in good faith to designate another Lending Office for its LIBOR Loans, but only if such designation would make it lawful for such Lender to continue to make or maintain LIBOR Loans hereunder; provided that such designation is made on such terms that such Lender, in its good faith determination, suffers no increased cost or economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of this Section. (f) Each demand for payment under this Section shall be preceded by a notice to the Borrower of such anticipated demand, which notice shall specify in reasonable detail the basis for such demand, but the failure to provide such advance notice shall not relieve the Borrower of any of its obligations hereunder. Nothing in this Section shall be construed or so operate as to require the Borrower to pay any interest, fees, costs or charges in excess of that permitted by applicable law. Notwithstanding the foregoing, all demands for payment under this SECTION 2.11 must be made on the Borrower within one hundred twenty (120) days after the relevant Lender obtains actual knowledge that such Lender is entitled to such payment. 2.12. Taxes. (a) So long as the applicable Lender shall have complied with the provisions of SECTION 2.12(C) hereof, any and all payments by the Borrower hereunder or under any Note shall be made, in accordance with the terms hereof and thereof, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (other than taxes imposed on net income or 42 profits of, or any branch or franchise taxes applicable to, the Agent, the Issuing Bank or any Lender) (y) by the jurisdiction under the laws of which the Agent, the Issuing Bank or such Lender, as the case may be, is organized or any political subdivision thereof and (z) in the case of each Lender, by the jurisdiction in which any Lending Office of such Lender is located or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to the Agent, the Issuing Bank or any Lender, so long as the applicable Lender shall have complied with the provisions of SECTION 2.12(C) hereof, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Agent, the Issuing Bank or such Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower will make such deductions, and (iii) the Borrower will pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. If and to the extent that any Lender subsequently shall be refunded or otherwise recover all or any part of such deduction, it shall refund to the Borrower the amount so recovered. (b) So long as the applicable Lender shall have complied with the provisions of SECTION 2.12(C), the Borrower will indemnify the Agent, the Issuing Bank and each Lender for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Agent, the Issuing Bank or such Lender, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date the Agent, the Issuing Bank or any Lender, as the case may be, makes written demand therefor and delivers to the Borrower the original receipt of Taxes paid by it or an invoice from the relevant taxing authority regarding such Taxes. Within thirty (30) days after the date of any payment of Taxes pursuant to this Section, the Borrower will furnish to the Agent, the Issuing Bank or the relevant Lender, as the case may be, the original or a certified copy of a receipt or other relevant documentation evidencing payment thereof; provided that demand therefor must be made on the Borrower within one hundred twenty (120) days after the Issuing Bank's or relevant Lender's actual knowledge that such Lender is entitled to such payment. If and to the extent that any Lender subsequently shall be refunded or otherwise recover all or any part of such payment of taxes, it shall refund to the Borrower the amount so recovered. (c) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the Internal Revenue Code, and such Lender is entitled to an exemption (or is exempt) from United States withholding tax under Section 1441 or 1442 of the Internal Revenue Code, such Lender will deliver to the Agent and the Borrower: (i) if such Lender is entitled to claim an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 before the payment of any interest in the first calendar year, and before the payment of any interest in each third succeeding calendar year, during which interest may be paid to such Lender under this Agreement; (ii) if such Lender is entitled to claim that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form 4224 before the payment of any interest is due in the first taxable year of such Lender, and in each succeeding taxable year of such Lender, during which interest may be paid to such Lender under this Agreement, and IRS Form W-9; and 43 (iii) such other form or forms as may be required under the Internal Revenue Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Each Lender as of the Amendment Effective Date, and each assignee under any Assignment and Acceptance (as of the date thereof), that is a "foreign corporation, partnership or trust" as described herein must be eligible to claim a complete exemption and must provide applicable forms to the Borrower as required by this SECTION 2.12. Each such Lender will promptly notify the Agent and the Borrower of any changes in circumstances that would modify or render invalid any claimed exemption or reduction. (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required under subsection (C) above are not executed, completed and/or delivered to the Agent, then the Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. For purposes of this Section, a distribution hereunder by the Agent to or for the account of any Lender shall be deemed a payment by the Borrower. (e) If the IRS or any other Governmental Authority, domestic or foreign, asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (whether because the appropriate form was not delivered or was not properly executed, completed and/or delivered, because such Lender failed to notify the Agent of a change in circumstances that rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this subsection (E), together with all costs, expenses and reasonable attorneys' fees incurred or paid in connection therewith. (f) If at any time the Borrower requests any Lender to deliver any forms other than documentation pursuant to subsection (C) above, then the Borrower shall, upon demand of such Lender, reimburse such Lender for any reasonable costs or expenses incurred by such Lender in the preparation or delivery of such forms or other documentation. (g) Each Lender agrees that, if the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to subsection (A) or (B) above, then such Lender will, to the extent permitted by law, endeavor in good faith to designate another Lending Office for its LIBOR Loans, but only if such designation would make it lawful for such Lender to continue to make or maintain LIBOR Loans hereunder; provided that such designation is made on such terms that such Lender, in its good faith determination, suffers no increased cost or economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of this Section. 2.13. Compensation. The Borrower will compensate each Lender upon demand for all losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund or maintain LIBOR Loans, but excluding loss of anticipated profit with respect to any Loans) that such Lender may sustain (i) if for any reason (other than a default by Agent or such Lender) a Borrowing of, or conversion of or into, LIBOR Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation, (ii) if 44 any repayment, prepayment or conversion of any LIBOR Loan occurs on a date other than the last day of an Interest Period applicable thereto (including as a consequence of conversion of LIBOR Loans pursuant to SECTION 2.11(D) or acceleration of the maturity of such Loans pursuant to SECTION 8.1), (iii) if any prepayment of any of its LIBOR Loans is not made on any date specified in a notice of prepayment given by the Borrower, or (iv) as a consequence of any other failure by the Borrower to make any payments with respect to LIBOR Loans when due hereunder; provided, however, such Lender must make such demand for payment on the Borrower within one hundred twenty (120) days after such Lender obtains actual knowledge that such Lender is entitled to such payment. Calculation of all amounts payable to a Lender under this Section shall be made as though such Lender had actually funded its relevant LIBOR Loan through the purchase of a Eurodollar deposit bearing interest at the LIBOR Rate in an amount equal to the amount of such LIBOR Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore Lending Office of such Lender to a Lending Office of such Lender in the United States; provided, however, that each Lender may fund each of its LIBOR Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section. Determinations by any Lender for purposes of this Section of any such losses, expenses or liabilities shall, absent manifest error, be conclusive, provided that such determinations are made in good faith. 2.14. Use of Proceeds. The proceeds of the Loans shall be used by the Borrower (i) to consummate the amendment and restatement of this Agreement as set forth herein, (ii) to finance Permitted Acquisitions of Facilities pursuant to this Agreement, (iii) to pay reasonable fees and expenses in connection herewith and with such Permitted Acquisitions; (iv) to provide working capital for the Borrower and its Subsidiaries; and (v) for general corporate purposes. 2.15. Recovery of Payments. (a) The Borrower agrees that to the extent the Borrower makes a payment or payments to or for the account of the Agent, the Lenders or the Issuing Bank, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or similar state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the Credit Obligation intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been received. (b) If any amounts distributed by the Agent to a Lender are subsequently returned or repaid by the Agent to the Borrower or its representative or successor in interest, whether by court order or by settlement approved by the Lender in question, such Lender will, promptly upon receipt of notice thereof from the Agent, pay the Agent such amount. If any such amounts are recovered by the Agent from the Borrower or its representative or successor in interest, the Agent shall redistribute such amounts to the Lenders on the same basis as such amounts were originally distributed. 2.16. Pro Rata Treatment. (a) Except for Swingline Loans, all funding of Borrowings, continuations and conversions of Loans shall be made by the Lenders pro rata on the basis of their relative Revolving Credit Commitments (in the case of initial funding of Revolving Credit Loans) or Loans (in the case of continuations and conversions of Revolving Credit Loans), as applicable from time to time. 45 (b) Each Lender agrees that if it shall receive any amount hereunder (whether by voluntary payment, realization upon security, exercise of the right of setoff or banker's lien, counterclaim or cross action, or otherwise, applicable to the payment of any of the Credit Obligations that exceeds its ratable share (according to the proportion of (i) the amount of such Credit Obligations due and payable to such Lender at such time to (ii) the aggregate amount of such Credit Obligations due and payable to all Lenders at such time) of payments on account of such Credit Obligations then or therewith obtained by all the Lenders to which such payments are required to have been made, such Lender shall forthwith purchase from the other Lenders such participations in such Credit Obligations as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each such other Lender shall be rescinded and each such other Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery, together with an amount equal to such other Lender's ratable share (according to the proportion of (i) the amount of such other Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to the provisions of this subsection may, to the fullest extent permitted by law, exercise any and all rights of payment (including, without limitation, setoff, banker's lien or counterclaim) with respect to such participation as fully as if such participant were a direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or similar law, any Lender receives a secured claim in lieu of a setoff to which this subsection applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this subsection to share in the benefits of any recovery on such secured claim. 2.17. Sale and Assignment of Existing Loans. (a) Each of the Original Lenders party hereto that is selling Existing Loans pursuant to this SECTION 2.17 (each, a "Selling Lender," and collectively, the "Selling Lenders") hereby represents and warrants to (i) each of the Lenders party hereto that is not an Original Lender, and (ii) each other Original Lender party hereto that is purchasing Existing Loans pursuant to this SECTION 2.17 (the Lenders described under (i) and (ii), each, a "Purchasing Lender," and collectively, the "Purchasing Lenders"), that it is the legal and beneficial owner of the interest in the Existing Loans being assigned by it hereunder and that such interest is free and clear of any adverse claim. In order to give effect to the assignment to the Purchasing Lenders of their respective Pro Rata Shares of the Existing Loans to be concurrently converted to Revolving Credit Loans hereunder as of the Amendment Effective Date, all as contemplated hereunder, each Selling Lender shall and does hereby sell and assign to each Purchasing Lender, without recourse, representation or warranty (except as set forth in the first sentence of this subsection (a)), and each Purchasing Lender shall and does hereby purchase and assume from each Selling Lender, a portion of all of the rights and obligations of each Selling Lender with respect to such Existing Loans converted to Revolving Credit Loans hereunder as of the Amendment Effective Date and to each of the Loan Documents, in each case in the amounts set forth in Annex 1 hereto (the "Assigned Rights"), such that after giving effect to such sale and assignment, the Lenders shall own the Existing Loans converted to Revolving Credit Loans hereunder in proportion to their respective Revolving Credit Commitments. Upon payment by the Purchasing Lenders to the Selling Lenders of the amounts calculated by the Agent pursuant to subsection (b) below, each Lender shall be entitled to its respective Pro Rata Share of (y) all interest on and any fees in respect of the Revolving Credit Loans and Revolving Credit Commitments which accrue on and after the Amendment Effective Date and (z) all payments of principal made on the Revolving Credit Loans attributable to such Lender that occur after the Amendment Effective Date. 46 (b) Pursuant to the sale and assignment of the Assigned Rights to the Purchasing Lenders under this SECTION 2.17, each Selling Lender is entitled to receive a payment from each Purchasing Lender in an amount equal to the portion of such Selling Lender's Existing Loans representing the Assigned Rights ratably purchased by each Purchasing Lender. In order to facilitate and give effect to the sale and assignment of the Assigned Rights, each of the Selling Lenders and Purchasing Lenders agrees that (i) the Agent shall calculate the amount owing to the Selling Lenders and to be paid or funded by the Purchasing Lenders, (ii) each of the Purchasing Lenders shall pay or fund, as the case may be, to the Agent the amount specified by the Agent in writing to such Purchasing Lender, and (iii) the Agent shall, to the extent such payments or fundings are actually made, apply such amounts ratably to pay the amount owed to the Selling Lenders. 2.18. Letters of Credit. (a) Subject to and upon the terms and conditions herein set forth, so long as no Default or Event of Default has occurred and is continuing, the Issuing Bank will, at any time and from time to time on and after the Amendment Effective Date and prior to the Revolving Credit Facility Termination Date, and upon request by the Borrower in accordance with the provisions of SECTION 2.18(B), issue for the account of the Borrower one or more irrevocable standby letters of credit denominated in Dollars and in a form customarily used or otherwise approved by the Issuing Bank (together with all amendments, modifications and supplements thereto, substitutions therefor and renewals and restatements thereof, collectively, the "Letters of Credit"). Notwithstanding the foregoing: (i) No Letter of Credit shall be issued the Stated Amount upon issuance of which (i) when added to all other Letter of Credit Outstanding at such time, would exceed $5,000,000 or (ii) when added to all other Letter of Credit Outstanding at such time (exclusive of Reimbursement Obligations that are repaid with the proceeds of, and simultaneously with the incurrence of, Revolving Credit Loans) and the aggregate principal amount of all Revolving Credit Loans and Swingline Loans then outstanding, would exceed the Total Revolving Credit Commitment at such time; (ii) No Letter of Credit shall be issued that by its terms expires more than one (1) year after its date of issuance or the Revolving Credit Facility Maturity Date, whichever is earliest; provided, however, that a Letter of Credit may, if requested by the Borrower and approved by the Issuing Bank, provide by its terms, and on terms acceptable to the Issuing Bank, for renewal for successive periods of one year or less, unless and until the Issuing Bank shall have delivered a notice of nonrenewal to the beneficiary of such Letter of Credit; and (iii) The Issuing Bank shall be under no obligation to issue any Letter of Credit if, at the time of such proposed issuance, (A) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Requirement of Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Issuing Bank is not otherwise compensated) not in effect on the Amendment Effective Date, or any unreimbursed loss, cost or expense that was not applicable, in effect or known to the Issuing Bank as of the Amendment Effective Date 47 and that the Issuing Bank in good faith deems material to it, or (B) the Issuing Bank shall have actual knowledge, or shall have received notice from any Lender, prior to the issuance of such Letter of Credit that one or more of the conditions specified in SECTION 3.3 are not then satisfied or that the issuance of such Letter of Credit would violate the provisions of subsection (I) above unless the Required Lenders otherwise authorize the Issuing Bank to issue such Letter of Credit. (b) Whenever the Borrower desires the issuance of a Letter of Credit, the Borrower will notify the Issuing Bank (with copies to the Agent) in writing, by 12:00 noon, Charlotte, North Carolina local time, at least three (3) Business Days (or such shorter period as is acceptable to the Issuing Bank in any given case) prior to the requested date of issuance thereof. Each such request (each, a "Letter of Credit Request") may not be revoked at any time after the Issuing Bank has completed processing and issued the Letter of Credit, shall be given in the form of EXHIBIT B-5 and shall be appropriately completed to specify (i) the proposed date of issuance (which shall be a Business Day), (ii) the proposed Stated Amount and expiry date of the Letter of Credit, and (iii) the name and address of the proposed beneficiary or beneficiaries of the Letter of Credit. The Borrower will also complete any application procedures and documents reasonably required by the Issuing Bank in connection with the issuance of any Letter of Credit, it being understood that in the event of any conflict between such documents and the Loan Documents, the Loan Documents shall control. The Agent will, promptly upon its receipt thereof, notify each Lender of the Letter of Credit Request. Upon its issuance of any Letter of Credit, the Issuing Bank will promptly notify each Lender of such issuance and will notify each Lender with a Revolving Credit Commitment of the amount of its participation therein under SECTION 2.18(C). (c) Immediately upon the issuance of any Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred to each Lender with a Revolving Credit Commitment, and each such Lender (each, in such capacity, an "L/C Participant") shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation, pro rata to the extent of its Revolving Credit Percentage at such time, in such Letter of Credit, each drawing made thereunder, and the obligations of the Borrower under this Agreement with respect thereto and any security therefor (including the Collateral) or guaranty pertaining thereto; provided, however, that the fees and other charges relating to Letters of Credit described in SECTIONS 2.7(D) and (E) shall be payable directly to the Issuing Bank as provided therein, and the L/C Participants shall have no right to receive any portion thereof. Upon any change in the Revolving Credit Commitments of any of the Lenders pursuant to SECTION 10.5, with respect to all outstanding Letters of Credit and Reimbursement Obligations there shall be an automatic adjustment to the participations pursuant to this Section to reflect the new Revolving Credit Percentages of the assigning Lender and the Eligible Assignee. (d) The Borrower hereby agrees to reimburse the Issuing Bank by making payment to the Agent, for the account of the Issuing Bank, in immediately available funds, for any payment made by the Issuing Bank under any Letter of Credit (each such amount so paid until reimbursed, together with interest thereon payable as provided hereinbelow, a "Reimbursement Obligation") immediately after, and in any event on the date of, such payment, together with interest on the amount so paid by the Issuing Bank, to the extent not reimbursed prior to 2:00 p.m., Charlotte, North Carolina local time, on the date of such payment or disbursement, (i) for the period from the date of the payment to the date of receipt by the Borrower from the Issuing Bank of notice of such payment, at the Alternate Base Rate as in effect from time to time during such period, and (ii) for the period from the date of receipt by the Borrower from the Issuing Bank of notice of such payment to the date the Reimbursement Obligation created thereby is satisfied, at the Alternate Base Rate as in effect from time to time 48 during such period plus two percentage points (2.0%), such interest also to be payable on demand. The Borrower hereby authorizes and directs the Agent to, and the Agent shall, pay the Issuing Bank all Reimbursement Obligations payable hereunder by applying any funds then held in the Cash Collateral Account established pursuant to SECTION 2.18(I), and if such funds shall be insufficient to satisfy such Reimbursement Obligation in full, by drawing such amounts under the Revolving Credit Facility (to the extent of availability thereunder) as of the due dates of such Reimbursement Obligations, but the failure of the Agent to so pay the Issuing Bank by drawing under the Revolving Credit Facility will not affect the Borrower's obligations to pay the Reimbursement Obligations. Notwithstanding any such draw against the Revolving Credit Facility, the Agent shall provide the notices to the Borrower required by this SECTION 2.18(D). The Issuing Bank will provide the Agent and the Borrower with prompt notice of any payment or disbursement made under any Letter of Credit, although the failure to give, or any delay in giving, any such notice shall not release, diminish or otherwise affect the Borrower's obligations under this Section or any other provision of this Agreement. (e) In the event that the Issuing Bank makes any payment under any Letter of Credit and the Borrower shall not have satisfied in a timely manner in full its Reimbursement Obligation to the Issuing Bank pursuant to SECTION 2.18(D), and to the extent that any amounts then held in the Cash Collateral Account established pursuant to SECTION 2.18(I) shall be insufficient to satisfy such Reimbursement Obligation in full, the Issuing Bank will promptly notify the Agent, and the Agent will promptly notify each L/C Participant, of such failure. If the Agent gives such notice prior to 11:00 a.m., Charlotte, North Carolina local time, on any Business Day to any L/C Participant, such L/C Participant will make available to the Agent, for the account of the Issuing Bank, its Pro Rata Share (calculated with respect to its Revolving Credit Percentage) of the amount of such payment on such Business Day in immediately available funds. If the Agent gives such notice after 11:00 a.m., Charlotte, North Carolina local time, on any Business Day to any such L/C Participant, such L/C Participant shall make its Pro Rata Share of such amount available to the Agent on the next succeeding Business Day. If and to the extent such L/C Participant shall not have so made its Pro Rata Share of the amount of such payment available to the Agent, such L/C Participant agrees to pay to the Agent, for the account of the Issuing Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent, at the Federal Funds Rate. The failure of any L/C Participant to make available to the Agent its Pro Rata Share of any payment under any Letter of Credit shall not relieve any other L/C Participant of its obligation hereunder to make available to the Agent its Pro Rata Share of any payment under any Letter of Credit on the date required, as specified above, but no L/C Participant shall be responsible for the failure of any other L/C Participant to make available to the Agent such other L/C Participant's Pro Rata Share of any such payment. Each such payment by an L/C Participant under this SECTION 2.18(E) of its Pro Rata Share of an amount paid by the Issuing Bank shall constitute a Revolving Credit Loan by such Lender (the Borrower being deemed to have given a timely Notice of Borrowing therefor) and shall be treated as such for all purposes of this Agreement; provided that for purposes of determining the available unused portion of the Total Revolving Credit Commitment immediately prior to giving effect to the application of the proceeds of such Revolving Credit Loans, the Reimbursement Obligation being satisfied thereby shall be deemed not to be outstanding at such time. (f) Whenever the Issuing Bank receives a payment in respect of a Reimbursement Obligation as to which the Agent has received, for the account of the Issuing Bank, any payments from the L/C Participants pursuant to SECTION 2.18(E), the Issuing Bank will promptly pay to the Agent, and the Agent will promptly pay to each L/C Participant that has paid its Pro Rata Share thereof, in immediately available funds, an amount equal to such L/C Participant's ratable share (based on the proportionate amount funded by such L/C Participant to the aggregate amount funded by all L/C Participants) of such Reimbursement Obligation. 49 (g) The Reimbursement Obligations of the Borrower, and the obligations of the L/C Participants to make payments to the Agent, for the account of the Issuing Bank, with respect to Letters of Credit, shall be irrevocable, shall remain in effect until the Issuing Bank shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit, and, except to the extent resulting from any gross negligence or willful misconduct on the part of the Issuing Bank as finally determined by a court of competent jurisdiction and not subject to any appeal (or pursuant to arbitration as set forth in SECTION 10.3(B)), shall not be subject to counterclaim, setoff or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) Any lack of validity or enforceability of this Agreement, any of the other Loan Documents or any documents or instruments relating to any Letter of Credit; (ii) Any change in the time, manner or place of payment of, or in any other term of, all or any of the Credit Obligations in respect of any Letter of Credit, whether or not the Borrower has notice or knowledge thereof; (iii) The existence of any claim, setoff, defense or other right that the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Agent, the Issuing Bank, any Lender or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated hereby or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iv) Any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, any errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, telecopier or otherwise, or any errors in translation or in interpretation of technical terms, other than due to the Issuing Bank's gross negligence or willful misconduct; (v) Any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit (the Issuing Bank's sole obligation, in determining whether to pay under any Letter of Credit, being to examine documents required to be delivered under such Letter of Credit in good faith and without gross negligence to ascertain that such documents appear on their face to comply with the terms of such Letter of Credit), any non-application or misapplication by the beneficiary or any transferee of the proceeds of such drawing or any other act or omission of such beneficiary or transferee in connection with such Letter of Credit; (vi) The exchange, release, surrender or impairment of any Collateral or other security for the Credit Obligations; (vii) The occurrence of any Default or Event of Default; or (viii) Subject to the Issuing Bank's obligation set forth in the parenthetical in clause (V) above, any other circumstance or event whatsoever, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a Guarantor. 50 None of the foregoing shall impair, prevent or otherwise affect any of the rights and powers granted to the Issuing Bank hereunder. Any action taken or omitted to be taken by the Issuing Bank under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall be binding upon the Borrower and each L/C Participant and shall not create or result in any liability of the Issuing Bank to the Borrower or any L/C Participant. It is expressly understood and agreed that, for purposes of determining whether a wrongful payment under a Letter of Credit resulted from the Issuing Bank's gross negligence or willful misconduct, (i) the Issuing Bank's acceptance of documents that appear on their face to comply with the terms of such Letter of Credit, without responsibility for further investigation, regardless of any notice or information to the contrary, (ii) the Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect (so long as such document appears on its face to comply with the terms of such Letter of Credit), and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and (iii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute gross negligence or willful misconduct of the Issuing Bank. (h) If at any time after the Amendment Effective Date the Issuing Bank or any L/C Participant determines that the introduction of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by the Issuing Bank or any L/C Participant with any request or directive by any such authority (whether or not having the force of law) shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by the Issuing Bank or participated in by any L/C Participant or (ii) impose on the Issuing Bank or any L/C Participant any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit, and the result of any of the foregoing is to increase the cost to the Issuing Bank or L/C Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by the Issuing Bank or such L/C Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit, then the Borrower will, within fifteen (15) days after delivery to the Borrower by the Issuing Bank or such L/C Participant of written demand therefor (with a copy thereof to the Agent), pay to the Issuing Bank or such L/C Participant such additional amounts as shall compensate the Issuing Bank or such L/C Participant for such increase in costs or reduction in return; provided that such demand must be made on the Borrower within one hundred twenty (120) days after the Issuing Bank or relevant L/C Participant obtains actual knowledge that such Issuing Bank or L/C Participant is entitled to such payment. A certificate submitted to the Borrower by the Issuing Bank or such L/C Participant, as the case may be (a copy of which certificate shall be sent by the Issuing Bank or such L/C Participant to the Agent), setting forth the basis for the determination of such additional amount or amounts necessary to compensate the Issuing Bank or such L/C Participant as aforesaid, shall be conclusive and binding on the Borrower absent manifest error provided it is made in good faith. (i) At any time and from time to time (i) during the continuance of an Event of Default, the Agent, at the direction, or with the consent, of the Required Lenders, may require the Borrower to deliver to the Agent such additional amount of cash as is equal to the difference between the aggregate Stated Amount of all Letters of Credit at any time outstanding (whether 51 or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder) and the amount then on deposit in the Cash Collateral Account (as hereinafter defined) and (ii) in the event of a repayment under SECTION 2.5(C), the Agent will retain such amount as may then be required to be retained under the proviso in SECTION 2.5(C), such amount in each case under clauses (I) and (II) above to be held by the Agent in a cash collateral account (the "Cash Collateral Account") as security for, and for application to, the Borrower's Reimbursement Obligations. The Borrower hereby grants to the Agent, for the benefit of the Issuing Lender and the Lenders, a lien upon and security interest in the Cash Collateral Account and all amounts held therein from time to time as security for Letter of Credit Outstanding, and for application to the Borrower's Reimbursement Obligations as and when the same shall arise. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest on the investment of such amounts in Cash Investments, which investments shall be made at the direction of the Borrower (unless a Default or Event of Default shall have occurred and be continuing, in which case the determination as to investments shall be made at the option and in the discretion of the Agent), amounts in the Cash Collateral Account shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. In the event of a drawing, and subsequent payment by the Issuing Bank, under any Letter of Credit at any time during which any amounts are held in the Cash Collateral Account, the Agent will deliver to the Issuing Bank an amount equal to the Reimbursement Obligation created as a result of such payment (or, if the amounts so held are less than such Reimbursement Obligation, all of such amounts) to reimburse the Issuing Bank therefor. Any amounts remaining in the Cash Collateral Account after the expiration of all Letters of Credit and reimbursement in full of the Issuing Bank for all of its obligations thereunder shall be held by the Agent, for the benefit of the Borrower, with such amounts to be applied against the Credit Obligations in such order and manner (x) as the Borrower may direct in the absence of a Default or an Event of Default and (y) otherwise, as the Agent may direct; provided, however, that the Cash Collateral Account shall not be subject to setoff except with the consent of the Required Lenders provided in SECTION 8.2. If the Borrower is required to provide cash collateral pursuant to SECTION 2.5(C), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower on demand, provided that after giving effect to such return (i) the sum of (x) the aggregate principal amount of all Revolving Credit Loans, Letter of Credit Outstanding and Swingline Loans outstanding at such time would not exceed the lesser of the Total Revolving Credit Commitments at such time or the Revolving Credit Borrowing Availability and (ii) no Default or Event of Default shall have occurred and be continuing at such time. If the Borrower is required to provide cash collateral as a result of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower promptly after all Events of Default have been waived. Notwithstanding anything to the contrary contained herein, Agent may, without notice to the Borrower, sell or liquidate any of the foregoing investments at any time if the proceeds thereof are required for any release of funds permitted or required hereunder, and Agent shall not be liable or responsible for any loss, cost or penalty resulting from any such sale or liquidation. With respect to any funds received by Agent for deposit into the Cash Collateral Account after 10:00 a.m., Charlotte, North Carolina, time, the Agent shall not be required to invest such funds or to effect such investment instruction until the following Business Day. (j) Notwithstanding any termination of the Commitments or repayment of the Loans, or both, the obligations of the Borrower under this SECTION 2.18 shall remain in full force and effect until the Issuing Bank and the L/C Participants shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit. 52 2.19. Replacement of Lenders. The Borrower may, at any time and so long as no Default or Event of Default has then occurred and is continuing, replace any Lender (a) that has requested additional amounts from the Borrower under SECTION 2.12, SECTION 2.11(A) or SECTION 2.11(B) or the obligation of which to make or maintain LIBOR Loans has been suspended under SECTION 2.11(D) by written notice to such Lender and the Agent given not more than thirty (30) days after any such event. Within sixty (60) days of such notice, the Borrower shall give written notice to such Lender and the Agent identifying one or more Persons each of which qualifies as an Eligible Assignee and shall be reasonably acceptable to the Agent (each, a "Replacement Lender," and collectively, the "Replacement Lenders") to replace such Lender (the "Replaced Lender"), provided that (i) the second notice from the Borrower to the Replaced Lender and the Agent provided for hereinabove shall specify an effective date for such replacement (the "Replacement Effective Date"), which shall be at least five (5) Business Days after such notice is given, (ii) as of the relevant Replacement Effective Date, each Replacement Lender shall enter into an Assignment and Acceptance with the Replaced Lender pursuant to SECTION 10.5(A) (but shall not be required to pay the processing fee otherwise payable to the Agent pursuant to SECTION 10.5(A)), pursuant to which such Replacement Lenders collectively shall acquire, in such proportion among them as they may agree with the Borrower and the Agent, all (but not less than all) of the Commitments, End Loaded Lease Commitments, outstanding Loans and End Loaded Lease Loans of the Replaced Lender, and, in connection therewith, shall pay to the Replaced Lender, as the purchase price in respect thereof, an amount equal to the sum as of the Replacement Effective Date (without duplication) of (y) the unpaid principal amount of, and all accrued but unpaid interest on, all outstanding Loans and End Loaded Lease Loans of the Replaced Lender and (z) the Replaced Lender's ratable share of all accrued but unpaid fees owing to the Replaced Lender hereunder and under the End Loaded Lease Credit Agreement, and (iii) all other obligations of the Borrower owing to the Replaced Lender (other than those specifically described in clause (ii) above in respect of which the assignment purchase price has been, or is concurrently being, paid), including, without limitation, amounts payable under SECTION 2.13 as a result of the actions required to be taken under this Section, shall be paid in full by the Borrower to the Replaced Lender on or prior to the Replacement Effective Date. ARTICLE III CONDITIONS OF BORROWING 3.1. Conditions of Loans under Original Credit Agreement. The obligation of each Lender to make Loans in connection with the initial Borrowing (as such terms are defined in the Original Credit Agreement) under the Original Credit Agreement was subject to the satisfaction of the conditions precedent set forth in Sections 3.1 and 3.2 of the Original Credit Agreement, which conditions have heretofore been satisfied. 3.2. Conditions to Effectiveness. The effectiveness of this Agreement and the amendment and restatement of the Original Credit Agreement effected hereby is subject to the satisfaction of the condition set forth in the last sentence of SECTION 10.14 and the following conditions precedent: 3.2.1. Executed Loan Documents. (a) Loan Documents. The Notes and all other Loan Documents to be executed on or prior to the Amendment Effective Date shall have been duly authorized, executed and delivered to the appropriate Lenders and the Swingline Lender by the Borrower, in form and substance satisfactory to the Lenders, shall be in full force and effect and no Default shall exist thereunder, each Lender and the Swingline Lender shall have received its original Notes and a copy of each other Note, and the Agent shall have received a copy of each Note. 53 (b) Security and Pledge Agreement. The Security and Pledge Agreement shall have been duly authorized, executed and delivered to the Agent and each Lender by the Borrower and the Guarantors, together with, to the extent not previously delivered, all certificates for the Stock being pledged thereunder and duly executed undated stock powers for each such certificate, and together with, to the extent not previously delivered, all promissory notes (duly endorsed in blank), initial transaction statements and other documents requested by the Agent and the Lenders to perfect the security interests granted therein. The Security and Pledge Agreement shall be in full force and effect and no Default shall exist thereunder, and the Agent and each Lender shall have received a fully executed original thereof. (c) Guaranty Documents. Each Subsidiary of the Borrower (other than The Woodrum Group, Inc. and InProNet, Inc.) existing as of the Amendment Effective Date shall have duly authorized, executed and delivered to the Agent and each Lender a Guaranty Agreement and the other Guaranty Documents in form and substance satisfactory to the Lenders, each such document shall be in full force and effect and no Default shall exist thereunder, and the Agent and each Lender shall have received a fully executed original thereof. (d) Financing Statements. Financing Statements and all other filings or recordations necessary to perfect the security interest of the Agent, on behalf of the Lenders, in the Collateral shall have been filed, and the Agent shall have received confirmation in a form acceptable to the Lenders that such security interest constitutes a valid and perfected first priority security interest therein to the extent such security interest can be perfected by filing a financing statement, subject only to Permitted Liens. (e) Mortgages; Title Insurance. Amended and Restated Mortgages shall have been duly authorized, executed and delivered by the Borrower and the Guarantors (as applicable), shall have been recorded, registered and filed in a manner acceptable to the Agent, shall be in full force and effect and no default shall exist thereunder, and the Agent shall have received fully executed copies thereof, and each Lender shall have received a photocopy thereof. To the extent not previously delivered, the Agent, for the benefit of the Lenders, shall have received policies of title insurance or title insurance binders in form and substance satisfactory to the Agent, from title insurance companies duly licensed to do business in the states where the Realty is located, selected by the Borrower and acceptable to the Agent, in amounts satisfactory to the Agent but not to exceed the fair market value of the Realty, on standard ALTA (1992) Loan Policy forms, with respect to each tract of Realty being encumbered by the liens of the Mortgages, all premiums thereon shall have been paid, and the policy shall insure that the Mortgages constitute valid, enforceable first priority liens on the Realty, free and clear from all title defects and encumbrances whatsoever except for and subject to Permitted Liens, and with such exceptions as are acceptable to the Agent, and shall include revolving credit endorsements, variable rate endorsements and such other endorsements as the Agent may request, to the extent available in the applicable jurisdictions. Such title insurance policies (or binders, as the case may be) with respect to the Realty may not contain general survey exceptions except with the Agent's prior written consent. To the extent title insurance policies (or binders, as the case may be) have been previously delivered to the Agent, this CLAUSE (E) shall only require (with respect to title insurance) (i) an endorsement to such title insurance (or binders, as the case may be) insuring that the amended and restated Mortgages constitute valid enforceable, first priority liens on the Realty, free and clear from all title defects and encumbrances whatsoever except from and subject to Permitted Liens and with such exceptions as are acceptable to the Agent and (ii) payment of premiums thereon. 54 (f) Surveys. To the extent not previously delivered, the Agent shall have received a metes-and-bounds survey of each tract or parcel of the Realty being encumbered by the lien of the Mortgages, in form and substance satisfactory to the Agent. (g) Environmental Assessments. To the extent not previously delivered, the Agent shall have received an environmental assessment with respect to each tract or parcel of the Realty, in form and substance satisfactory to the Agent. (h) Landlord Consents. To the extent not previously delivered or waived, a Landlord Consent with respect to each of the Facility Leased Properties shall have been duly authorized, executed and delivered to the Agent by the tenant and the landlord with respect thereto, shall be in full force and effect and no Default shall exist thereunder, shall be recorded, registered and filed in the appropriate real estate records in a manner acceptable to the Agent, and the Agent shall have received a fully executed copy thereof. (i) Certain Subordinated Debt. To the extent not previously subordinated, the obligations of the Borrower and its Subsidiaries under the Intercompany Management Agreements existing as of the Amendment Effective Date shall be subordinated to the Credit Obligations and the Guaranty Obligations on terms acceptable to the Lenders in their sole discretion. 3.2.2. Closing Certificates; Etc. (a) Certificate of the Borrower. The Agent and each Lender shall have received a certificate dated as of the Amendment Effective Date from the Chief Executive Officer, Chief Financial Officer, Vice President-Finance or Vice President-Controller of the Borrower, in form and substance satisfactory to the Lenders, to the effect that, to their knowledge, (i) all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true, correct and complete in all material respects as of the Amendment Effective Date, (ii) neither the Borrower nor any of its Subsidiaries is in violation of any of the covenants contained in this Agreement and the other Loan Documents, (iii) after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing, and (iv) the Borrower has satisfied each of the conditions set forth in this Section to be satisfied by the Borrower. (b) Secretaries' Certificates. The Agent and each Lender shall have received a certificate dated as of the Amendment Effective Date from the Secretary or an Assistant Secretary of the Borrower and each Guarantor, in form and substance satisfactory to the Lenders, certifying: (i) that the articles or certificate of incorporation delivered to the Agent and each Lender in connection with the closing of the Original Credit Agreement are in full force and effect on the Amendment Effective Date and have not been amended since December 17, 1996 (or if such articles or certificate of incorporation have been amended thereafter, that attached thereto is a copy of such articles or certificate of incorporation and all amendments thereto, certified as of a recent date by the Secretary of State (or other equivalent officer) of the relevant state of incorporation, which documents have not been amended since such date of certification); (ii) that the bylaws delivered to the Agent and each Lender in connection with the closing of the Original Credit Agreement are in full force and effect on the Amendment Effective Date and have not been amended since December 17, 1996 (or if such bylaws have been amended thereafter, that attached thereto is a copy of such bylaws and all amendments thereto); (iii) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors and stockholders (if necessary) of such corporation, authorizing the execution, delivery and performance of this Agreement and the other Loan Documents, as applicable; and (iv) as to the incumbency and genuineness of the signature of each officer of such corporation executing this Agreement or any of the other Loan Documents and authorized 55 to request any Borrowing, as applicable. The Agent and each Lender shall also have received a similar certificate dated as of the Amendment Effective Date from the General Partner of the Palestine Limited Partnership and the General Partner of Mexia Principal Healthcare Limited Partnership, respectively, in form and substance satisfactory to the Agent. (c) Certificates of Existence or Good Standing. The Agent and each Lender shall have received (i) long-form certificates as of a recent date of the good standing or existence of the Borrower and each Guarantor under the laws of its state of incorporation or organization and each state where the Borrower and each Guarantor is qualified to transact business, and (ii) where reasonably available, certificates as of a recent date from the department of revenue or other appropriate Governmental Authority of each such state indicating that the Borrower or such Guarantor, as appropriate, has filed all required tax returns and owes no delinquent taxes. (d) Opinion of Counsel to the Borrower and the Guarantors. The Agent and each Lender shall have received the favorable opinions of Tonkon, Torp, Galen, Marmaduke & Booth, Oregon counsel to the Borrower, Waller Lansden, Dortch & Davis, Tennessee counsel to the Borrower and the Guarantors, Faegre & Benson LLP, Colorado counsel to the Borrower and the Guarantors, Donohoe, Jamerson & Carroll, Texas counsel to the Borrower and the Guarantors, Argue Pearson Harbison & Myers, LLP, California counsel to the Borrower and the Guarantors, Barnes & Thornburg, Indiana counsel to the Borrower and the Guarantors, each such opinion to be addressed to the Agent, for the benefit of the Lenders, the Issuing Bank and each Lender, and in form and substance satisfactory to the Agent and each Lender. (e) UCC Search. The Agent and each Lender shall have received the results of a search of all filings made against the Borrower and each Guarantor under the Uniform Commercial Code as in effect in any state in which any assets of any Borrower or any Guarantor are located, indicating that the Collateral is free and clear of any liens or encumbrances except for Permitted Liens or for which UCC-3 termination statements are being delivered. (f) Insurance. The Agent shall have received certificates, and certified copies of policies, of insurance, in form and substance satisfactory to the Agent, upon the Collateral and the business of the Borrower and each Guarantor, with the additional insured, mortgagee and loss payable clauses and endorsements required by Section 5.4. (g) Termination of Golder, Thoma Agreement. The Professional Services Agreement between the Borrower and GTCR Fund IV shall have been terminated and of no further force or effect. 3.2.3. Consents; No Adverse Change. (a) Consents and Approvals. All necessary approvals, authorizations and consents, if any are required, of any Person and all Governmental Authorities having jurisdiction with respect to the Collateral and the transactions contemplated by this Agreement shall have been obtained. (b) No Injunction, Etc. No action, proceeding, investigation, claim, regulation or legislation shall have been instituted, threatened or proposed before any court or other Governmental Authority to enjoin, restrain or prohibit, or to obtain substantial damages in respect of, or that is related to or arises out of this Agreement or the consummation of the transactions contemplated hereby or that, in the Required Lenders' discretion, would make inadvisable the consummation of the transactions contemplated by this Agreement. 56 (c) No Material Adverse Change. Since the date of the most recent audited Financial Statements of the Borrower and each Guarantor, there shall not have occurred any Material Adverse Change or any event, condition or state of facts that could reasonably be expected to have a Material Adverse Effect, other than as specifically contemplated by this Agreement. (d) Event of Default. No Default or Event of Default shall have occurred and be continuing. 3.2.4. Financial Matters. (a) Financial Statements. The Lenders shall have received the Financial Statements from the Borrower, in form and substance satisfactory to the Lenders. (b) Financial Condition Certificate. The Agent and each Lender shall have received a Financial Condition Certificate together with the attachments required thereby (including, without limitation, the Projections), all in substantially the form of EXHIBIT E. (c) Taxes. All taxes, fees and other charges then due in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents shall have been paid by the Borrower. 3.2.5. End Loaded Lease Facility Documentation. All documentation under the End Loaded Lease Facility shall be satisfactory in form and substance to the Agent and the Lenders. 3.2.6. Miscellaneous. (a) Disbursement Instructions; Account Designation Letter. The Agent shall have received an Account Designation Letter, together with written instructions from an Authorized Officer of the Borrower, including wire transfer information, directing the payment of the proceeds of Loans to be made hereunder on the Amendment Effective Date. If any Debt is being refinanced or otherwise paid off on the Amendment Effective Date with the proceeds of the Loans, the funds required for such payoff shall be earmarked by the Agent for the benefit of the refinanced lender and shall be paid directly from the Agent to the refinanced lender pursuant to a payoff letter under which the refinanced lender agrees to release any and all liens on the assets of the Borrower and its Subsidiaries upon payment in full. (b) Proceedings and Documents. The Agent and the Lenders shall have received copies of all other documents, certificates, opinions, instruments and other evidence as each may reasonably request, in form and substance reasonably satisfactory to the Agent and the Lenders, with respect to the transactions contemplated by this Agreement and the taking of all actions in connection therewith. 3.3 Conditions to All Loans and Advances. The obligation of the Lenders to make any Loan hereunder (including any Loans made on the Amendment Effective Date, but excluding Revolving Loans made for the purpose of repaying Refunded Swingline Loans or to fund Reimbursement Obligations) and the obligation of the Issuing Bank to issue any Letters of Credit are subject to the continued validity of all Loan Documents and the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Each of the representations and warranties made by the Borrower contained in ARTICLE IV shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of the Borrowing Date, except to the extent the facts upon which such representation and warranty are based may be changed as a result of transactions or occurrences permitted or contemplated hereby or such representation or warranty relates solely to a prior date; 57 (b) No Default or Event of Default shall have occurred on the Borrowing Date or after giving effect to the Loans to be made or Letters of Credit to be issued on such Borrowing Date; and (c) Since the date of the most recent audited consolidated financial statements of the Borrower, to the knowledge of the Borrower, there shall not have occurred any Material Adverse Change or a Material Adverse Effect, other than as specifically contemplated by this Agreement. 3.4 Waiver of Conditions Precedent. If any Lender makes any Loan hereunder, or if the Issuing Bank issues any Letter of Credit, prior to the fulfillment of any of the conditions precedent set forth in this ARTICLE III, the making of such Loan or the issuance of such Letter of Credit shall constitute only an extension of time for the fulfillment of such condition and not a waiver thereof, and unless the Required Lenders indicate otherwise in writing, the Borrower shall thereafter use its best efforts to fulfill each such condition promptly. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Credit Agreement, to make the Loans and to continue to make the Loans, and to induce the Issuing Bank to issue, and the Lenders to participate in, the Letters of Credit, the Borrower makes the following warranties and representations to the Agent, the Issuing Bank and each Lender on the date hereof and on the date of each Borrowing (except to the extent any such representation or warranty relates solely to a prior date and except to the extent that the facts upon which such representation or warranty is based have changed as a result of a transaction or occurrence permitted or contemplated by this Agreement), after giving effect to the transactions contemplated hereby, except as specifically provided otherwise: 4.1. Corporate Organization and Power; Capital Structure. (a) The Borrower and each of its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (ii) is qualified to do business and is in good standing in every other jurisdiction where the nature of its business or the ownership of its properties requires it to be so qualified and where the failure to be so qualified could reasonably be expected to have a Material Adverse Effect, which jurisdictions as of the Amendment Effective Date are set forth on SCHEDULE 4.1(A); (iii) except as set forth on SCHEDULE 4.2 and except for Subsidiaries acquired or created after the Amendment Effective Date in compliance with SECTIONS 5.12 and 6.7, has no Subsidiaries or Affiliates (other than its officers, directors and shareholders) and, except for investments made in compliance with SECTION 6.7, is not a partner or joint venturer in any partnerships or joint ventures; (iv) has the corporate power to own and give a lien on and security interest in its Collateral and to engage in the transactions contemplated hereby; and (v) has the full corporate power, authority and legal right to execute and deliver this Agreement and the other Loan Documents to which it is a party and to perform and observe the terms and provisions thereof. Neither the Borrower nor any of its Subsidiaries has, during the preceding five (5) years, been known as or used any other corporate, fictitious or trade names in the United States other than as set forth on SCHEDULE 4.1(A). 58 (b) The authorized capital stock of the Borrower consists of twenty-five thousand (25,000) shares of Series A Senior Preferred Stock, no par value, of which zero (0) shares are issued and outstanding, fifty thousand (50,000) shares of Series B Junior Preferred Stock, no par value, of which zero (0) shares are issued and outstanding, one hundred thousand (100,000) shares of Preferred Stock, par value $0.01 per share, of which zero (0) shares are issued and outstanding and twenty-five million (25,000,000) shares of Common Stock, par value $0.01 per share, of which twelve million three hundred- four thousand seven hundred sixty-eight (12,304,768) shares are issued and outstanding. All of the outstanding capital stock of the Borrower is duly and validly issued, fully paid and non-assessable and was offered, issued and sold in compliance with all federal and state securities laws applicable to the Borrower. None of the outstanding capital stock of the Borrower has been issued in violation of any preemptive or other rights of its shareholders. The Borrower does not have outstanding any securities or other rights which are either by their terms or by contract convertible or exchangeable into capital stock of or other equity interest in the Borrower, as the case may be nor any preemptive or similar rights to subscribe for or to purchase, or any options or warrants or agreements for the purchase or issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock or other equity interest or securities convertible into its capital stock or other equity interest, except, as set forth on SCHEDULE 4.1(B). 4.2. Subsidiaries. SCHEDULE 4.2 contains a complete and accurate list of the Subsidiaries of the Borrower as of the Amendment Effective Date showing, as to each Subsidiary, the number of shares of Stock or other Interests and the owner of each class of Stock or other Interests authorized and outstanding. Except as set forth on SCHEDULE 4.2, all of such issued and outstanding shares of Stock or other Interests of all of such of Borrower's Subsidiaries that are owned by the Borrower or its Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Borrower or its Subsidiaries, free and clear of any liens, charges, encumbrances, security interests, claims or restrictions of any nature whatsoever, except for liens in favor of the Agent, for the benefit of the Lenders, granted under the Loan Documents, and there are no other equity securities of any such Subsidiaries issued and outstanding or reserved for any purpose. 4.3. Enforceability of Loan Documents; Compliance with Other Instruments. Except as set forth on SCHEDULE 4.3, each of the Loan Documents to which the Borrower or any Guarantor is a party, as the case may be, has been duly authorized by all necessary corporate action on the part of the Borrower or such Guarantor, has been validly executed and delivered by the Borrower or such Guarantor and is the legal, valid and binding obligation of the Borrower or such Guarantor, enforceable against the Borrower or such Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or by general principles of equity. Neither the Borrower nor any of its Subsidiaries is in default with respect to any indenture, loan agreement, mortgage, lease, deed or similar agreement to which it is a party or by which it, or any of its property, is bound which default could reasonably be expected to have a Material Adverse Effect. Neither the execution, delivery or performance of the Loan Documents by the Borrower and the Guarantors, nor compliance by the Borrower and the Guarantors therewith: (a) conflicts or will conflict with or results or will result in any breach of, or constitutes or will constitute with the passage of time or the giving of notice or both, a default under, (i) any Requirement of Law or (ii) any material agreement or instrument to which the Borrower or any Guarantor is a party or by which it, or any of its property, is bound or (b) results or will result in the creation or imposition of any lien, charge or encumbrance upon the properties of the Borrower or any of its Subsidiaries pursuant to any such agreement or instrument, except for Permitted Liens. 59 4.4. Governmental Authorization. (a) No authorization, consent or approval of, or declaration or filing with, any Governmental Authority is required for the valid execution and delivery by the Borrower and its Subsidiaries of the Loan Documents to which they are a party or the consummation by the Borrower and its Subsidiaries of the loan transactions contemplated hereby and thereby, including repayment of the Credit Obligations and pledging the Collateral, except for the filing and recording of the Financing Statements, the Mortgages, the Landlord Consents and collateral assignments of registered trademarks, patents and copyrights which constitute Collateral, and except for filings and notices unrelated to perfection of security interests and liens in Collateral and required to be made or given by the Borrower and its Subsidiaries after the Amendment Effective Date in the ordinary conduct of their business operations. The Borrower and its Subsidiaries have, and are in good standing with respect to, all governmental approvals, permits, certificates, inspections, consents and franchises necessary to continue to conduct business as heretofore conducted and to own or lease and operate its properties as now owned or leased by it where the failure to have and maintain the same could reasonably be expected to have a Material Adverse Effect. (b) The Borrower and each of its Subsidiaries has, to the extent applicable, (i) obtained (or been duly assigned) all required certificates of need or determinations of need, as required by the relevant state Governmental Authority, for the ownership and operation of their businesses as currently operated; and (ii) obtained and maintains in good standing all licenses required by any Requirement of Law or required based on the operation of the applicable business, where the failure to have and maintain the same could reasonably be expected to have a Material Adverse Effect. (c) Each professional employee, officer and director of the Borrower and its Subsidiaries providing professional services to patients of the Borrower or any such Subsidiary is duly licensed (where license is required) by each state or state agency or commission, or any other governmental agency having jurisdiction over the provisions of such services by such employee, officer or director, in which the Borrower or any of its Subsidiaries is located, required to enable such employee, officer or director to provide the professional services necessary to enable the Borrower or such Subsidiary to operate as currently operated and as presently contemplated to be operated except to the extent the failure to have such a license could not reasonably be expected to have a Material Adverse Effect. All such required licenses are in full force and effect on the date hereof and have not been revoked or suspended or otherwise limited except to the extent such resolution, suspension or limitation could not reasonably be expected to have a Material Adverse Effect. Each physician retained or otherwise engaged as an independent contractor by the Borrower or any of its Subsidiaries possesses a valid narcotics number issued by the United States Drug Enforcement Administration and a valid state narcotics registration if required by any Requirement of Law or by the nature of the services provided by such physician. 4.5. Financial Statements. (a) The Borrower has heretofore furnished to each Lender copies of the Financial Statements. The Financial Statements have been prepared in accordance with Generally Accepted Accounting Principles (subject, with respect to the unaudited Financial Statements, to the absence of notes required by Generally Accepted Accounting Principles and to normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby on a consolidated basis as of the dates thereof and the consolidated results of operations of the Persons covered thereby for the periods then ended. Except as fully reflected in the most recent Financial Statements and the notes thereto, as of the Amendment Effective Date, and taking into account the Loans to be made on the Amendment Effective Date and the other transactions contemplated by the Loan Documents, there will be 60 no material liabilities or obligations with respect to the Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute, contingent or otherwise and whether or not due). Since the date of the most recent Financial Statements, there has been no Material Adverse Change. Neither the Borrower nor any of its Subsidiaries has directly or indirectly declared, ordered, paid, made or set apart any amounts or property for any dividend, share acquisition or other distribution, or agreed to do so, except as permitted by SECTION 6.8. (b) The Borrower has prepared, and has heretofore furnished to each Lender copies of, annual projected balance sheets and statements of income and cash flows of the Borrower and its Subsidiaries for the three-year period commencing on the date set forth therein (the "Projections"). In the opinion of the Borrower's management, the assumptions used in preparation of the Projections were reasonable when made and are reasonable as of the Amendment Effective Date. The Projections have been prepared in good faith by the executive and financial personnel of the Borrower in light of the historical financial performance and the financial and operating condition of the Borrower and its Subsidiaries prior to the Amendment Effective Date, give effect to the transactions contemplated by the Loan Documents, the End Loaded Lease Facility and the Borrower's initial public equity offering and, in the opinion of the Borrower's management, represent, as of the Amendment Effective Date, a reasonable estimate of the future performance and financial condition of the Borrower and its Subsidiaries, subject to the uncertainties and approximations inherent in any projections and without representation or warranty that such projected performance and financial condition will actually be achieved, it being acknowledged by the Lenders and the Agent that the actual results may differ from the projected results and the differences may be material. 4.6. Solvency. (i) On the Amendment Effective Date, prior to the transactions contemplated by this Agreement, the Borrower and each of its Subsidiaries (taking into account rights of contribution) is, and the Borrower and its Subsidiaries, on a consolidated basis are, Solvent, and (ii) after giving effect to the transactions contemplated hereby, the Borrower and each of its Subsidiaries (taking into account rights of contribution) will be Solvent, and the Borrower and its Subsidiaries on a consolidated basis will be Solvent. 4.7. Places of Business. SCHEDULE 4.7 lists, as of the Amendment Effective Date, (i) the chief executive office and places of business (including county or town designation), as provided in the Uniform Commercial Code, of the Borrower and each of its Subsidiaries, (ii) the locations at which the Borrower and each of its Subsidiaries maintains, or presently intends to maintain, billing and related records relating to Accounts Receivable, and (iii) all locations where personal property valued at $100,000 or more in the aggregate of the Borrower and each of its Subsidiaries is presently maintained. 4.8. Leased Properties. SCHEDULE 4.8 lists, as of the Amendment Effective Date, (i) all material real property leased by the Borrower or any of its Subsidiaries, and (ii) all personal property leased by the Borrower or any of its Subsidiaries requiring lease payments in excess of $100,000 per year, including in each case the name of the lessors and a description of the locations of such property. The Borrower and each of its Subsidiaries enjoys peaceful and undisturbed possession under all of its real property leases, and all such leases are valid and in full force and effect. The Borrower has delivered complete and accurate copies of all such leases to the Agent and the Lenders. 4.9. Realty. SCHEDULE 4.9 lists all real property owned as of the Amendment Effective Date by the Borrower or any of its Subsidiaries. 61 4.10. Assets for Conduct of Business. The Borrower and each of its Subsidiaries possesses adequate assets, licenses, patents, copyrights, trademarks and trade names necessary to continue to conduct its business substantially as heretofore conducted without any material conflict with the rights of other Persons. 4.11. Insurance. SCHEDULE 4.11 accurately summarizes all insurance policies or programs of the Borrower and its Subsidiaries in effect as of the Amendment Effective Date, and indicates the insurer's name, policy number, expiration date, amount of coverage, type of coverage, exclusions and deductibles, and also indicates any self-insurance program that is in effect. 4.12. Ownership of Properties. Except as set forth on SCHEDULE 4.12, (a) each of the Borrower and its Subsidiaries has good and marketable title to all real property owned by it, holds interests as lessee under valid leases in full force and effect with respect to all leased real and material personal property used in connection with its business, and has good title to all of its other properties and assets, including, without limitation, the assets reflected in the most recent Financial Statements (except as sold or otherwise disposed of since the date thereof in the ordinary course of business), in each case free and clear of all liens, claims or encumbrances other than Permitted Liens; and (b) other than the Financing Statements in favor of the Agent and protective filings with respect to operating leases that may be filed after the Amendment Effective Date or with respect to Permitted Liens, no financing statement that names the Borrower or any of its Subsidiaries as debtor has been filed and is still in effect, and neither the Borrower nor any of its Subsidiaries has signed any other financing statement or any security agreement authorizing any secured party thereunder to file any such financing statement. 4.13. First Priority. The provisions of the Loan Documents (whether executed and delivered prior to or on the Amendment Effective Date or thereafter), are and will be effective to create in favor of the Agent, for the benefit of the Lenders, upon the proper filing of all Financing Statements and other recordations contemplated thereunder in the jurisdictions and locations contemplated thereby (or, in the case of the Pledge Agreement, the possession by the Agent of certificates evidencing the securities pledged thereby without notice of an adverse claim or, in the case of motor vehicles, the endorsement of certificates of title), a valid and enforceable first priority perfected security interest in and lien upon all right, title and interest of the Borrower and its Subsidiaries in the Collateral described therein, subject only to Permitted Liens, and except as and to the extent the Agent's liens cannot be perfected by filing under the Uniform Commercial Code. Upon (i) delivery and continued possession by the Agent, without notice of adverse claim, of certificates evidencing the securities pledged pursuant to the Security and Pledge Agreement, (ii) endorsement and delivery to the Agent of certificates of title for motor vehicles, and (iii) the filing of collateral assignments of patents and trademarks with the U.S. Patent and Trademark Office, the Agent shall have a valid and enforceable first priority security interest in and lien upon all right, title and interest of the Borrower and its Subsidiaries in such Collateral, subject only to Permitted Liens. 4.14. Litigation; Government Regulation. Except as set forth in SCHEDULE 4.14, (a) there are no judgments, injunctions or similar orders or decrees and no actions, suits, investigations or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or its business that could reasonably be expected to have a Material Adverse Effect, or that question the validity of this Agreement or any of the Loan Documents, at law or in equity before any applicable court, arbitrator or Governmental Authority with appropriate jurisdiction, and (b) neither the Borrower nor any of its Subsidiaries is in violation of or in default under any Requirement of Law where such violation could reasonably be expected to have a Material Adverse Effect. 62 4.15. Taxes. Except as set forth in SCHEDULE 4.15, neither the Borrower nor any of its Subsidiaries is delinquent in the payment of any taxes that have been levied or assessed by any Governmental Authority against it or its assets where such delinquency could reasonably be expected to have a Material Adverse Effect. Except as set forth in SCHEDULE 4.15, as of the Amendment Effective Date, each of the Borrower and its Subsidiaries (a) has timely filed all tax returns that are required by law to be filed prior to the date hereof, and has paid all taxes shown on said returns and all other assessments or fees levied upon it or upon its properties to the extent that such taxes, assessments or fees have become due, and if not due, such taxes have been adequately provided for and sufficient reserves therefor established on its books of account, in each case where the failure to do so could reasonably be expected to have a Material Adverse Effect, and (b) is current with respect to payment of all federal and state withholding taxes, social security taxes and other payroll taxes, in each case where the failure to do so could reasonably be expected to have a Material Adverse Effect. 4.16. ERISA; Employee Benefits. (a) SCHEDULE 4.16 lists, as of the Amendment Effective Date, all Employee Plans and Pension Plans ("Plans") maintained or sponsored by the Borrower and its Subsidiaries or to which the Borrower or any of its Subsidiaries is obligated to contribute and separately identifies all Qualified Plans (as defined below) and all Multiemployer Plans. The Borrower has delivered true and correct copies of all such Plans to the Agent. (b) Each such Plan is in compliance with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state law, including all requirements under the Internal Revenue Code or ERISA for filing reports (which are true and correct in all material respects as of the date filed), the noncompliance with which could reasonably be expected to have a Material Adverse Effect, and benefits have been paid in accordance with the provisions of each such Plan. (c) The form of each Plan intended to be qualified under Section 401 of the Internal Revenue Code ("Qualified Plan") to the knowledge of the Borrower qualifies under Section 401 of the Internal Revenue Code, and the trusts created thereunder are, to the knowledge of the Borrower, exempt from tax under the provisions of Section 501 of the Internal Revenue Code, and to the knowledge of the Borrower nothing has occurred that would cause the loss of such qualification or tax-exempt status. (d) There is no outstanding liability under Title IV of ERISA with respect to any Plan maintained or sponsored by the Borrower and its Subsidiaries (as to which the Borrower or any of its Subsidiaries is or may be liable), nor with respect to any Plan to which any of the Borrower or its Subsidiaries (wherein the Borrower or any of its Subsidiaries is or may be liable) contributes or is obligated to contribute that could reasonably be expected to have a Material Adverse Effect. (e) None of the Qualified Plans subject to Title IV of ERISA has any unfunded benefit liability as defined in Section 4001(a)(18) of ERISA (as to which the Borrower or any of its Subsidiaries is or may be liable) that could reasonably be expected to have a Material Adverse Effect. (f) No Plan maintained or sponsored by the Borrower or any of its Subsidiaries provides medical or other welfare benefits or extends coverage relating to such benefits beyond the date of a participant's termination of employment with the Borrower or such Subsidiary, except to the extent required by Section 4980B of the Internal Revenue Code and at the sole expense of the participant or the beneficiary of the participant to the fullest extent permissible under such Section of the Internal Revenue Code. The Borrower and its Subsidiaries have 63 complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Internal Revenue Code. (g) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan maintained or sponsored by the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is obligated to contribute. (h) As of the Amendment Effective Date, there are no pending or, to the knowledge of the Borrower, threatened claims, actions or lawsuits, other than routine claims for benefits in the usual and ordinary course, asserted or instituted against (i) any Plan maintained or sponsored by the Borrower and its Subsidiaries or their assets, or (ii) any fiduciary with respect to any Plan for which the Borrower or any of its Subsidiaries may be directly or indirectly liable, through indemnification obligations or otherwise. (i) Neither the Borrower nor any of its Subsidiaries has incurred or, to the knowledge of the Borrower, reasonably expects to incur (i) any liability (and no event has occurred that, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability under Title IV of ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan. (j) Neither the Borrower nor any of its Subsidiaries has engaged, directly or indirectly, in a nonexempt prohibited transaction (as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA) in connection with any Plan that could reasonably be expected to have a Material Adverse Effect. 4.17. Compliance with Laws. The Borrower and each of its Subsidiaries has duly complied with, and the Collateral and their business operations and leaseholds are in compliance with, all Requirements of Law, including, without limitation, all federal and state securities laws, OSHA, and Titles XVIII and XIX of the Social Security Act (42 U.S.C. ss.ss. 1395 et seq. and ss.ss. 1396 et seq., respectively, as amended from time to time), the Bloodborne Pathogens Standard, the Medicare Regulations, the Medicaid Regulations and the MediCal Regulations, except to the extent that noncompliance could not reasonably be expected to have a Material Adverse Effect; provided, that with respect to compliance with Environmental Laws, this representation shall be made to the best of Borrower's knowledge to the extent and solely to the extent that representations made pursuant to SECTION 4.18 regarding compliance with Environmental Laws are so qualified. 4.18. Environmental Matters. Except as could not reasonably be expected to result in a Material Adverse Effect: (a) Except as reflected in SCHEDULE 4.18 (i) no Hazardous Material is or has been generated, used, released, treated, disposed of or stored, or otherwise located, in, on or under the Realty (or any portion thereof), and no part of the Realty or other property owned, leased or operated by the Borrower or its Subsidiaries (now or in the past), including without limitation the soil and groundwater located thereon and thereunder, has been contaminated by any Hazardous Material; (ii) no improvements on the Realty contain any asbestos or substances containing asbestos; (iii) none of the Realty has been the subject of a remedial action; and (iv) to the best of the Borrower's knowledge, the foregoing statements are true and correct with respect to all of the real property adjoining any of the Realty. 64 (b) To the best of the Borrower's knowledge, no portion of the Realty has been used as or for a mine, a landfill, a dump or other disposal facility, a gasoline service station, or a petroleum products storage facility, and none of the Realty or other property owned, leased or operated by the Borrower or its Subsidiaries (now or in the past) has, pursuant to any Environmental Law, been placed on the "National Priorities List" or "CERCLIS List" (or any similar federal, state or local list) of sites subject to possible environmental problems. (c) Except as set forth in SCHEDULE 4.18, there are no underground storage tanks situated on the Realty and, to the best of the knowledge of the Borrower, no underground storage tanks have ever been situated on the Realty. (d) Except as set forth in SCHEDULE 4.18, all activities and operations of the Borrower and its Subsidiaries meet the requirements of all applicable Environmental Laws, Borrower and its Subsidiaries have not violated any Environmental Law in the past, and the Realty has never been the site of a violation of any Environmental Law. (e) Except as set forth on SCHEDULE 4.18, neither the Borrower nor its Subsidiary has sent a Hazardous Material to a site which, pursuant to any Environmental Law, (1) has been placed on the "National Priorities List" or "CERCLIS List" (or any similar federal, state or local list) of sites subject to possible environmental problems, or (2) is subject to or the source of a claim, an administrative order or other request to take "response," "removal," "corrective" or "remedial" action, as defined in any Environmental Law, or to pay for or contribute to the costs of cleaning up the site. (f) Neither the Borrower nor any of its Subsidiaries is involved in any suit or proceeding and or has received any notice from any Governmental Authority or other third party, with respect to a release or threat of release of any Hazardous Material, or violation or alleged violation of any Environmental Law, and neither the Borrower nor any of its Subsidiaries has received notice of any claim from any person or entity relating to property damage or to personal injuries from exposure to any Hazardous Material. (g) The Borrower and its Subsidiaries have timely filed all reports required to be filed, has acquired all necessary certificates, approvals and permits, and have generated and maintained in all material respects all required data, documentation and records required under all Environmental Laws. 4.19. Margin Securities. (a) Neither the Borrower nor any of its Subsidiaries owns any "margin stock" within the meaning of Regulation U. None of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock, maintaining, reducing or retiring any Debt that was originally incurred to purchase or carry margin stock or for any other purpose that would violate Regulation G, Regulation U, Regulation T or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, or for any purpose that would violate the Exchange Act. (b) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds of the Loans) will violate or result in a violation of Section 7 of the Exchange Act. Neither the Borrower nor any of its Subsidiaries owns or intends to carry or purchase directly or indirectly any "margin security" within the meaning of the Exchange Act. 4.20. Full Disclosure. None of the Loan Documents or any other written statements furnished to the Agent or any Lender by or on behalf of the Borrower or any of its Subsidiaries in connection with the Loan Documents contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances under which they were made, not misleading. 65 4.21. Contracts; Labor Disputes. Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement, or subject to any charge, corporate restriction, judgment, injunction, decree, rule, regulation or order of any court or other Governmental Authority, that has or could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries is a party to, and there is not pending or, to the Borrower's knowledge, threatened, any labor dispute, strikes, lock-out, grievance, work stoppage or walkouts relating to any labor contract to which the Borrower or any of its Subsidiaries is a party that has or could reasonably be expected to have a Material Adverse Effect. 4.22. Reimbursement from Third Party Payors. The accounts receivable of the Borrower and its Subsidiaries have been and will continue to be adjusted to reflect reimbursement policies of third party payors such as Medicare, Medicaid, MediCal, Blue Cross/Blue Shield, private insurance companies, health maintenance organizations, preferred provider organizations, managed care systems and other third party payors, including, without limitation, adjustments under any capitation arrangement, fee schedule, discount formula or cost-based reimbursement. 4.23. Fraud and Abuse. Neither the Borrower nor any Subsidiary, nor any of its stockholders, officers or directors, acting on behalf of the Borrower or any Subsidiary, have engaged on behalf of Borrower or any Subsidiary in any of the following: (i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any applications for any benefit or payment under Medicare, Medicaid or MediCal programs; (ii) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment under Medicare, Medicaid or MediCal programs; (iii) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment under Medicare, Medicaid or MediCal programs on its own behalf or on behalf of another, with intent to secure such benefit or payment fraudulently; (iv) knowingly and willfully making or causing to be made a payment, directly or indirectly, to a physician as an inducement to reduce or limit services provided with respect to individuals who are entitled to any benefit or payment under Medicare, Medicaid or MediCal programs and are under the direct care of the physician; (v) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering or paying such remuneration (a) in return for referring an individual to a Person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare, Medicaid or MediCal, or (b) in return for purchasing, leasing or ordering or arranging for or recommending the purchasing, leasing or ordering of any good, facility, service, or item for which payment may be made in whole or in part by Medicare, Medicaid or MediCal; (vi) knowingly and willfully offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person (x) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare, Medicaid or MediCal, or (y) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part by Medicare, Medicaid or MediCal. With respect to this Section, knowledge by any employees, representatives and agents of the Borrower or a Subsidiary of any of the events described in this Section shall not be imputed to the Borrower or such Subsidiary unless such knowledge was obtained or learned by a Senior Officer in his or her official capacity as a Senior Officer of the Borrower or such Subsidiary. No activity of the Borrower or any Subsidiary shall be considered to be a breach of this Section, except in the case of an intentional violation thereof, until the Borrower or such Subsidiary has received notification, written or oral, by a 66 Governmental Authority of competent jurisdiction as to any such violation. In addition, neither the Borrower nor any Subsidiary shall be considered to have breached this section so long as (a) they shall have taken such actions (including implementation of appropriate internal controls) as may be reasonably necessary to avoid such breaches and (b) such breaches, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.24. Event of Default. No Default or Event of Default has occurred and is continuing. 4.25. Single Business Enterprise. The Borrower and the Guarantors operate, and intend to operate, as a single business enterprise. Although separate entities, the Borrower and the Guarantors operate under a common business plan. Each of the Borrower and the Guarantors will accordingly benefit from the financing arrangement established by this Agreement. The Borrower acknowledges that the Agent and the Lenders are relying on the agreement by each Guarantor to execute and deliver the Guaranty Documents in committing to the Facilities. ARTICLE V AFFIRMATIVE COVENANTS Until payment in full of all Credit Obligations and the termination of the Lenders' obligation to make Loans and the Issuing Bank's obligation, on behalf of the Lenders, to issue Letters of Credit, the Borrower covenants and agrees that: 5.1. Financial and Business Information about the Borrower. The Borrower shall deliver to the Agent and the Lenders: (a) Within forty-five (45) days after the close of each of the first three fiscal quarters of each fiscal year of the Borrower, beginning with the current fiscal quarter, an unaudited consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal quarter, and unaudited consolidated and consolidating statements of income, and consolidated retained earnings and cash flows for the Borrower and its Subsidiaries for the fiscal quarter then ended and for that portion of the fiscal year then ended, in each case beginning with the fiscal quarter ending March 31, 1998 setting forth comparative figures for the corresponding fiscal quarter in the preceding fiscal year, and in each case setting forth comparable budgeted figures for the fiscal quarter then ended, together with a breakdown of such income statements per hospital, all prepared in accordance with Generally Accepted Accounting Principles (subject to the absence of notes required by Generally Accepted Accounting Principles and subject to normal and reasonable year-end audit adjustments) applied on a basis consistent with that of the preceding quarter or containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the quarter, and certified by the Chief Executive Officer, Chief Financial Officer, Vice President-Finance or Vice President-Controller of the Borrower to be true and accurate in all material respects (subject to normal and reasonable year-end audit adjustments); (b) As soon as practicable and in any event within one hundred (100) days after the close of any fiscal year of the Borrower, beginning with the close of the current fiscal year, an audited consolidated balance sheet and unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal year, audited consolidated and 67 unaudited consolidating statements of income and audited consolidated retained earnings and cash flows for the Borrower and its Subsidiaries for the fiscal year then ended, in each case beginning with the fiscal year ending December 31, 1997 setting forth unaudited comparative figures for the preceding fiscal year and in each case, setting forth comparable budgeted figures for the fiscal year then ended, including the notes to each, audited (except as previously noted) by a nationally recognized, "Big Six" independent certified public accountant or other independent certified public accountant reasonably acceptable to the Required Lenders, and together with a breakdown of such income statements per hospital, all such audited statements prepared in accordance with Generally Accepted Accounting Principles applied on a basis consistent with those of the preceding year or containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the year, certified by the Chief Executive Officer, Chief Financial Officer, Vice President-Finance or Vice President-Controller of the Borrower to be true and accurate in all material respects, and, with respect to audited statements, accompanied by a report thereon by such certified public accountants, containing an opinion that is not qualified in any materially negative respect, including as to going concern or scope of audit; (c) Concurrently with the delivery of the financial statements described in subsection (B) above, a letter from the independent certified public accountants that, based on the independent certified public accountant's examination of the financial statements of the Borrower and its Subsidiaries, the accountants did not obtain knowledge of the occurrence or existence of any Default or Event of Default, or a statement specifying the nature and period of existence of any such condition or event disclosed by their examination; provided, however, that such accountants shall not be liable to anyone by reason of their failure to obtain knowledge of any Event of Default or Default that would not be disclosed in the course of an audit conducted in accordance with generally accepted auditing standards; (d) Concurrently with the delivery of the financial statements described in subsections (A) and (B) above, a Compliance Certificate with respect to the period covered by the financial statements then being delivered, together with an Interest Rate Calculation Worksheet and a Covenant Compliance Worksheet reflecting the computation of the financial covenants set forth in ARTICLE VI as of the last day of the period covered by such financial statements; (e) As soon as practicable and in any event within thirty (30) days after the close of each fiscal year of the Borrower, beginning with the current fiscal year, an annual operating budget and capital budget prepared on a quarterly basis for the Borrower and its Subsidiaries on a consolidated basis, in form and detail reasonably acceptable to the Agent, including, without limitation, a breakdown per hospital; (f) Promptly upon their becoming available, copies of (i) all financial statements, material reports and proxy statements that the Borrower or any of its Subsidiaries shall send or make available generally to its stockholders, (ii) all registration statements and prospectuses that the Borrower or any of its Subsidiaries shall render to or file with the Securities and Exchange Commission, the National Association of Securities Dealers or any national securities exchange, (iii) all material reports and other statements (other than routine reports prepared in the ordinary course of business that would not result in any adverse action) that the Borrower or any of its Subsidiaries may render to or file with any other Governmental Authority, including, without limitation, the Environmental Protection Agency, OSHA and state environmental and health authorities and agencies, and (iv) all press releases and other statements that the Borrower or any of its Subsidiaries shall make available generally to the public concerning developments in the business of the Borrower or any of its Subsidiaries, other than press releases or statements issued in the ordinary course of business; 68 (g) Promptly after review by the Borrower's Board of Directors, but in any event within thirty (30) days after the Borrower's receipt thereof, copies of any management letters from certified public accountants; (h) Upon request by the Agent, but no more frequently than quarterly (except during the continuance of an Event of Default), concurrently with each delivery of the financial statements described in subsections (A) and (B), an aging of the Accounts of the Borrower on a consolidated basis as of the end of such fiscal quarter; (i) Concurrently with each delivery of the financial statements described in subsection (A) and (B), a statistical summary of management contracts between the Borrower or any of its Subsidiaries and hospitals and other healthcare facilities; (j) Promptly upon the reasonable request therefor, copies of any annual report required to be filed under ERISA in connection with any Employee Plan and such other additional information about any Employee Plan as may be reasonably requested; (k) Promptly after receipt, copies of any environmental assessments or audits on properties owned, operated or leased by the Borrower or its Subsidiaries; and (l) Upon the Agent's or any Lender's request, such other information about the Collateral or the financial condition and operations of the Borrower and its Subsidiaries as the Agent or any Lender may from time to time reasonably request. 5.2. Notice of Certain Events. The Borrower shall promptly, but in no event later than five (5) Business Days after a Senior Officer of the Borrower obtains knowledge thereof, give written notice to the Agent and the Lenders of: (a) Any litigation or proceeding brought against the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect; (b) Any written notice of a violation of a Requirement of Law received by the Borrower or any of its Subsidiaries from any Governmental Authority that, if such violation were established and not promptly corrected, could reasonably be expected to have a Material Adverse Effect; (c) Any attachment, judgment, lien, levy or order in excess of $500,000 that may be placed on or assessed against the Borrower or any of its Subsidiaries or any of the Collateral, except for Permitted Liens; (d) Any Default or Event of Default; provided that the notice period provided above shall not be deemed to be a cure period or extension for any Default or Event of Default; (e) Receipt by any Borrower or any of it Subsidiaries of (i) any notice of loss of Joint Commission on Accreditation of Healthcare Organizations accreditation, loss of participation under any material reimbursement program or loss of applicable health care licenses at any facility owned or lease or managed by the Borrower or any of its Subsidiaries; and (ii) any other material deficiency notice, compliance order or adverse report issued by any Governmental Authority or accreditation commission having jurisdiction over licensing, accreditation or operation of any such facility or by any Governmental Authority or private insurance company pursuant to a provider agreement, which, if not promptly complied with or cured, could result in the suspension or forfeiture of any license, certification, or accreditation 69 necessary for any such facility to carry on its business as then conducted or the suspension or termination of any insurance or reimbursement program available to the facility; (f) Receipt or delivery by the Borrower or any of its Subsidiaries of any material notice (including without limitation any first refusal, put or call notice) pursuant to the Palestine Limited Partnership Agreement or any other material shareholder, partnership, operating or similar agreement; (g) Any default or event of default under any lease relating to the Leased Properties under which the Borrower or any Subsidiary is lessee which could reasonably be expected to have a Material Adverse Effect; or (h) Any default or event of default under any agreement or instrument to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries, or any of their property, is bound, the termination of which could reasonably be expected to have a Material Adverse Effect. 5.3. Corporate Existence and Maintenance of Properties. The Borrower shall, and shall cause each of its Subsidiaries to: (a) Maintain and preserve in full force and effect its corporate existence, except as otherwise permitted by SECTION 6.1, and all material rights, privileges and franchises; provided, however, that the Borrower may permit the liquidation or dissolution of any of its Subsidiaries (and any such Subsidiary may suffer such liquidation or dissolution) if, at the time of such liquidation or dissolution, such Subsidiary has no assets, engages in no business and otherwise has no activities other than activities related to the maintenance of its corporate existence and good standing; provided, further, however that the Borrower may sell, divest or transfer any assets or its ownership of Telplan, Inc. without respect to the provisions hereof; (b) Conduct its business in an orderly and efficient manner, keep its properties in good working order and condition (normal wear and tear excepted) and from time to time make all needed repairs to, renewals of or replacements of its properties (except to the extent that any of such properties are obsolete or are being replaced) so that the efficiency of its business operations shall be maintained and preserved; and (c) File or cause to be filed in a timely manner all reports, applications, estimates and licenses required by any Governmental Authority that, if not timely filed, could reasonably be expected to have a Material Adverse Effect. 5.4. Maintenance of Insurance. (a) The Borrower will, and will cause each of its Subsidiaries to, maintain and pay for insurance upon all of its assets and properties, including the Collateral, wherever located, and all real property owned or leased by it, in such amounts and against such risks as is customarily maintained by similar businesses in similar locations, and will (if not previously delivered), at the Amendment Effective Date, deliver certificates of such insurance to the Agent with satisfactory loss payable endorsements naming the Agent as an additional loss payee, additional insured and/or mortgagee thereunder, as its interests may appear, as appropriate. Within thirty (30) days after the Amendment Effective Date, the Borrower shall deliver (if not previously delivered) to the Agent certified copies of the original policies of all insurance on the Collateral. 70 (b) Each such policy of insurance shall contain a clause requiring the insurer to give not less than thirty (30) days (or ten (10) days for nonpayment) prior written notice to the Agent before any cancellation of the policies for any reason whatsoever. The Borrower hereby directs, and will cause each of its Subsidiaries to direct, all insurers under policies of property and casualty insurance on the Collateral to pay all proceeds payable thereunder directly to the Agent when such proceeds, on an aggregate basis for any claim or series of related claims, exceed $1,000,000. The Agent, on behalf of the Lenders, shall hold all such proceeds for the account of the Borrower and its Subsidiaries. So long as no Default or Event of Default has occurred and is continuing, the Agent shall immediately deliver to the Borrower any insurance proceeds received by the Agent in the amount of $1,000,000 or less, in the aggregate, for any claim or series of related claims. So long as no Default or Event of Default has occurred and is continuing, the Agent shall, at the Borrower's request, disburse proceeds in excess of $1,000,000 for the purpose of replacing or repairing destroyed or damaged assets, as and when required to be paid and upon presentation of evidence satisfactory to the Agent of such repair estimates and other documents as the Agent may reasonably request, or, if the Borrower has not requested any such disbursement for one hundred twenty (120) consecutive days, shall apply such proceeds in whole or in part as a prepayment of the Loans in accordance with SECTION 2.5(A). If an Event of Default has occurred and is continuing, the Borrower hereby irrevocably makes, constitutes and appoints the Agent (and all officers, employees or agents designated by the Agent) as its true and lawful agent (and attorney-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing its name or the name of any Subsidiary on any check, draft, instrument or other item or payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. (c) If the Borrower or any of its Subsidiaries fails to obtain and maintain any of the policies of insurance required to be maintained hereunder or to pay any premium in whole or in part, then the Agent may, at the Borrower's expense, without waiving or releasing any obligation or Default by the Borrower hereunder, procure the same, but shall not be required to do so. All sums so disbursed by the Agent, including reasonable attorneys' fees, court costs, expenses and other charges related thereto, shall be payable on demand by the Borrower to the Lenders and shall be additional Credit Obligations hereunder, secured by the Collateral. (d) Upon the reasonable request of the Agent from time to time, the Borrower shall deliver to the Agent evidence that the insurance required to be maintained pursuant to this Agreement is in effect. 5.5. Maintenance of Books and Records; Inspection. (a) The Borrower shall, and shall cause each of its Subsidiaries to, maintain adequate books, accounts and records, and prepare all financial statements required under this Agreement in accordance with Generally Accepted Accounting Principles and in material compliance with all Requirements of Law. (b) The Borrower shall, and shall cause each of its Subsidiaries to, permit employees or agents of the Agent (or any Lender, at the Lenders' expense), during normal business hours upon reasonable notice to inspect its properties and to examine or audit its books, records, reports, accounts and other papers and make copies and memoranda of them, and to discuss its affairs, finances and accounts with its officers and employees and, with advance written approval of the Chief Executive Officer, Chief Financial Officer, Vice President-Finance or Vice President-Controller of the Borrower (which approval shall not be unreasonably withheld), the independent public accountants of the Borrower and its Subsidiaries (and by this provision the Borrower and each of its Subsidiaries authorizes said accountants to discuss the finances and affairs of the Borrower or such Subsidiary), all at such reasonable times and as 71 often as may be reasonably requested without undue interference in the business and operations of the Borrower and its Subsidiaries. 5.6. Compliance with ERISA. The Borrower shall, and shall cause each of its Subsidiaries to make timely payment of contributions required to meet the minimum funding standards set forth in ERISA with respect to any Employee Plan. The Employee Plans of the Borrower and each of its Subsidiaries shall be operated in such a manner that neither the Borrower nor any Subsidiary will incur any tax liability under Section 4980B of the Internal Revenue Code or any liability to any qualified beneficiary as defined in Section 4980B that could reasonably be expected to have a Material Adverse Effect. 5.7. Payment of Taxes. The Borrower shall, and shall cause each of its Subsidiaries to, pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties would attach thereto, and all lawful claims that, if unpaid, might become a material lien or charge upon any of its properties; provided, however, that the Borrower or any of its Subsidiaries may in good faith by appropriate proceedings and with due diligence contest any such tax, assessment, charge, levy or claim if the Borrower or such Subsidiary establishes reserves therefor in accordance with Generally Accepted Accounting Principles. 5.8. Compliance with Laws. The Borrower shall, and shall cause each of its Subsidiaries to, (i) have all licenses, permits, certifications approvals and authorizations required by Governmental Authorities necessary to the ownership, occupation or use of its properties or the conduct of its business, and maintain the same at all times in full force and effect, except to the extent that a failure to have or maintain the same could not reasonably be expected to have a Material Adverse Effect, and (ii) comply with all Requirements of Law in respect of the conduct of its business, the ownership of its property and the Collateral, including, without limitation, Titles XVIII and XIX of the Social Security Act, Medicare Regulations, Medicaid Regulations, MediCal Regulations, ERISA, OSHA and the Bloodborne Pathogens Standard, other than those the failure to comply with which could not reasonably be expected to have a Material Adverse Effect. 5.9. Name Change. The Borrower shall notify the Agent and the Lenders at least fifteen (15) days prior to the effective date of any change of the name of the Borrower or any of its Subsidiaries, and prior to such effective date the Borrower or such Subsidiary shall execute any amended or new Financing Statements and other Loan Documents necessary to maintain and continue the perfected security interest of the Agent in all of the Collateral and shall take such other actions and execute such documents as the Agent shall reasonably request. 5.10. Disbursement of Proceeds by the Borrower. (a) At the request of the Agent, the Borrower shall obtain an intercompany promissory note with respect to advances of any portion of the Loans to any Subsidiary of the Borrower and any other amounts owing from any Subsidiary of the Borrower to the Borrower from time to time, and shall promptly thereafter grant to the Agent a first priority perfected security interest in such promissory note as security for the Credit Obligations. Notwithstanding the foregoing, the Borrower shall obtain, at or prior to the advance of any portion of the Loans to any Non-Wholly Owned Subsidiary, an intercompany promissory note with respect to advances of any portion of the Loans to any Non-Wholly Owned Subsidiary and any other amounts owing from any Non-Wholly Owned Subsidiary of the Borrower to the Borrower from time to time and shall promptly thereafter grant to the Agent a first priority security interest in such promissory note as security for the Credit Obligations. 72 (b) If any Subsidiary becomes a debtor under the Bankruptcy Code, the Agent, on behalf of the Lenders, is authorized, but not required, to file proofs of claim with respect to such intercompany Debt on behalf of the Borrower and vote the rights of the Borrower in any plan of reorganization with regard to any Debt owed by such Subsidiary to the Borrower. The Agent, on behalf of the Lenders, is further empowered to demand, sue for, collect and receive every payment and distribution on such Debt owing to the Borrower in such Subsidiary's bankruptcy proceeding. 5.11. Creation or Acquisition of New Subsidiaries. The Borrower and its Subsidiaries may from time to time create or acquire new Subsidiaries subject to the terms of this Agreement, provided that (i) each new Subsidiary having assets with a gross value (determined in accordance with Generally Accepted Accounting Principles) in excess of $100,000 (or upon obtaining assets, including but not limited to the proceeds of Investments, loans, or other distributions from the Borrower or another Subsidiary, in excess of $100,000 in the case of an existing Subsidiary which previously had assets with a gross value less than $100,000) will execute and deliver to the Agent (with sufficient copies for each Lender) an amendment or accession to the Guaranty Agreement (pursuant to which such new Subsidiary shall become a party thereto), an amendment or accession to the Security and Pledge Agreement, Financing Statements, certificates of title, stock certificates and other documents reasonably required by the Agent, all in form and substance satisfactory to the Agent, pursuant to which such new Subsidiary shall secure its obligations under the Guaranty Agreement by first priority, perfected security interests in all Stock, Interests and promissory notes owned by such Subsidiary, subject only to Permitted Liens, (ii) the Borrower and/or the other Guarantors will execute and deliver to the Agent (with sufficient copies for each Lender) an amendment or supplement to the Security and Pledge Agreement, in form and substance satisfactory to the Agent, pursuant to which all of the Stock or Interests of such new Subsidiary that is directly or indirectly owned by the Borrower shall be pledged to the Agent under the Security and Pledge Agreement, together with the certificates representing such Stock or Interests and stock powers duly executed in blank, and (iii) the Borrower will cause each such new Subsidiary to execute and deliver, and will cause to be delivered, all documentation of the type described in SECTIONS 3.2.2(B) and 3.2.2(C) and 3.2.2(D) as such new Subsidiary would have had to deliver were it a Subsidiary on the Amendment Effective Date. 5.12. Certain Permitted Acquisitions; Asset Purchases. (a) Subject to the remaining provisions of this SECTION 5.12 applicable thereto and subject to the definition of "Permitted Acquisitions" herein, the Borrower and its Subsidiaries may from time to time after the Amendment Effective Date effect Permitted Acquisitions, so long as with respect to each Permitted Acquisition, no Default or Event of Default is in existence at the time of the consummation of such Permitted Acquisition or would exist after giving effect thereto. (b) At the time of each Permitted Acquisition involving the creation or acquisition of a Subsidiary or the acquisition of Stock or other Interest of any Person, the Borrower and the Guarantors shall have complied with SECTION 5.11. (c) Not less than ten (10) Business Days prior to the consummation of any Permitted Acquisition of $5,000,000 or greater or requiring approval of the Required Lenders, the Borrower shall deliver to the Agent and each Lender the following items, each in form and substance reasonably satisfactory to the Agent: (i) a description of the material terms of such Permitted Acquisition (including, without limitation a description of the acquisition, a description of the acquiror, 73 the Acquisition Amount and method and structure of payment), of each facility, Person, business, lease or asset that is the subject of such Acquisition, (each, a "Target"), together with the most current draft of the acquisition or other purchase or lease agreement; (ii) historical financial statements of each Target (if applicable) for the two (2) most recent fiscal years available and for any interim periods since the most recent fiscal year-end for which such interim statements are available; (iii) projected revenue and EBITDAR contribution levels for the Target for a three-year period following the consummation of such Permitted Acquisition or such asset purchase or lease, together with any appropriate statement of assumptions and pro forma adjustments and including a detailed report of expense adjustments requested by the Borrower; and (iv) a description of all Debt and liens being assumed in connection with such Permitted Acquisition. (d) The Borrower will deliver to the Agent and each Lender (i) copies of any material modifications or supplements to the draft agreements submitted pursuant to CLAUSE (C)(I) above prior to the closing of the Acquisition and (ii) a copy of the fully executed acquisition or other purchase or lease agreement (including schedules and exhibits thereto) within sixty (60) days after the closing thereof, except as set forth in subsection (E) below. (e) Within thirty (30) days after the end of each fiscal quarter, the Borrower will deliver to the Agent and each Lender the documents required by subsections (C)(I), (C)(II) and (D) above for each Permitted Acquisition of less than $5,000,000 that does not require the consent of the Required Lenders. (f) No Acquisition may be effected unless: (i) calculations are made by the Borrower of compliance with the covenants contained in SECTIONS 6.9 through 6.16, inclusive, for the most recent calculation period ended immediately prior to the date of such Acquisition, on a pro forma basis as if the Acquisition had occurred on the first day of such period, and shall show that all such covenants will be complied with, giving effect to the pro forma consolidation of the business acquired, and if such Acquisition is $2,500,000 or greater or requires approval of the Required Lenders, such calculations shall be reasonably satisfactory to the Agent; (ii) the Borrower in good faith believes that the financial covenants contained in such SECTIONS 6.9 through 6.16, inclusive, will continue to be met on a quarterly basis for the one year period following the date of the consummation of the Acquisition on a quarterly basis; (iii) prior to the consummation of the Acquisition of $2,500,000 or greater or that requires consent of the Required Lenders, the Borrower shall furnish the Agent and the Lenders with an officer's certificate executed by an Authorized Officer of the Borrower, certifying to the best of his knowledge as to compliance with the requirements of preceding clauses (I) and (II) and SECTION 5.12(C), and containing the pro forma calculations required by the preceding clause (I); and 74 (iv) except for Acquisitions for which the Acquisition Amounts are within the Dollar limits set forth in the definition of "Permitted Acquisitions" herein, the Required Lenders shall have consented thereto in writing. (g) The consummation of each Permitted Acquisition, shall be deemed to be a representation and warranty by the Borrower that all conditions to be satisfied by the Borrower hereon have been satisfied, that the same is permitted in accordance with the terms of this Agreement and that the information submitted by the Borrower pursuant to subsections (C) through (F) above, as appropriate, is true and correct in all material respects as of the date such certificate is given, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, for purposes of SECTIONS 3.3 and 7.1. 5.13. Lease of Realty. Subject to SECTION 6.15 hereof, promptly, and in any event within ten (10) days after any lease of any Realty by the Borrower or any Subsidiary, the Borrower will deliver a Landlord Consent with respect to each Facility Leased Property. 5.14. Further Assurances. The Borrower shall, and shall cause each of its Subsidiaries to, make, execute, endorse, acknowledge and deliver to the Agent and the Lenders any amendments, restatements, modifications or supplements hereto and any other agreements, instruments or documents, and take any and all such other actions, as may from time to time be reasonably requested by the Agent or the Lenders to effect, confirm or further assure or protect and preserve the interests, rights and remedies of the Lenders and the Agent under this Agreement and the other Loan Documents. 5.15. Cash Deposits. Commencing ninety (90) days after the Amendment Effective Date, all cash in excess of ten percent (10%) of the aggregate amount of all cash of the Borrower and its Subsidiaries (excluding deposits in transit) shall be consolidated no less frequently than once a week in an account or accounts maintained with one or more Lenders. 5.16. Year 2000. The Borrower shall use its best commercial efforts to assure that the Borrower's and its Subsidiaries' computer based systems are able to operate and effectively process data including dates on and after January 1, 2000. At the request of the Agent, the Borrower shall provide the Agent assurance acceptable to the Agent of the Borrower's and its Subsidiaries' year 2000 capability. 5.17. Updates to Schedules. Should any of the information or disclosures provided on any of the Schedules attached hereto (other than Schedules relating solely to representations and warranties made as of the Amendment Effective Date or any other specific date) become outdated or incorrect in any material respect, the Borrower shall promptly provide the Agent in writing such revisions or updates to such Schedules as may be necessary or appropriate to update or correct the same; provided, however, that the Schedules will be deemed automatically updated without any further action on the part of the Borrower, the Agent, or the Required Lenders with respect to information provided by the Borrower in writing to the Agent in connection with a Permitted Acquisition, so long as the Borrower indicates to the Agent that such information is intended to update the Schedules; and provided, further, that no Schedule shall be deemed to have been amended, modified or superseded by any such correction or update that would disclose the occurrence of an event or condition which constitutes a Default or Event of Default, nor shall any breach of warranty or representation resulting from the inaccuracy or incompleteness of any such Schedule be deemed to have been cured thereby, unless such inaccuracy or incompleteness is the result of transactions or events expressly permitted hereunder (including Permitted Acquisitions) or unless the Required Lenders, in their sole and absolute discretion, shall have accepted in writing such revisions or updates to such Schedule. 75 5.18. Use of Proceeds. The Borrower shall use the proceeds of any Loans made by the Lenders to the Borrower pursuant to this Agreement for legal and proper corporate uses, duly authorized by the Board of Directors of the Borrower, consistent with all applicable laws and statutes, as in effect from time to time. ARTICLE VI NEGATIVE COVENANTS Until payment in full of the Credit Obligations and termination of the Lenders' obligation to make Loans and the Issuing Bank's obligation, on behalf of the Lenders, to issue Letters of Credit, the Borrower covenants and agrees that it will not, and will not permit any of its Subsidiaries to, individually or in the aggregate: 6.1. Merger, Consolidation. Except as permitted by SECTION 5.3, liquidate, wind up or dissolve, or enter into any consolidation, merger or other combination, or agree to do any of the foregoing; provided, however, that: (i) the Borrower may merge or consolidate with another Person so long as (x) the Borrower is the surviving corporation, (y) if such merger or consolidation is in connection with a Permitted Acquisition, the applicable conditions of SECTIONS 5.11 and 5.12 shall be satisfied, and (z) immediately after giving effect thereto, no Default or Event of Default would exist; and (ii) any Subsidiary may merge or consolidate with another Person so long as (w) the Person surviving such merger or consolidation is the Borrower or a Guarantor, (y) if such merger or consolidation is in connection with a Permitted Acquisition, the applicable conditions of SECTIONS 5.11 and 5.12 shall be satisfied, and (z) immediately after giving effect thereto, no Default or Event of Default would exist. 6.2. Debt. Create, incur, assume or suffer to exist any Debt other than: (i) Debt incurred pursuant to this Agreement and the other Loan Documents; (ii) Debt in an aggregate principal amount not in excess of $35,000,000 incurred pursuant to the End Loaded Lease Facility. (iii) Debt existing on the date hereof as set forth in SCHEDULE 6.2 attached hereto; provided that the Debt is not increased above the amount then outstanding; (iv) accrued expenses, current trade payables and other current liabilities arising in the ordinary course of business and not incurred through the borrowing of money; (v) unsecured intercompany Debt (x) of any Subsidiary to the Borrower, (y) of any Subsidiary to a Guarantor, and (z) of the Borrower to any Guarantor, provided that any such Debt under this clause (V) is incurred in the ordinary course of business and, if requested by the Agent or required pursuant to SECTION 76 5.10(A), is evidenced by one or more promissory notes pledged to the Agent pursuant to the Security and Pledge Agreement, is payable on demand and, is fully subordinated in right of payment to the Credit Obligations and the Guaranty Obligations, as applicable; and provided further, that intercompany Debt for money borrowed by the Palestine Limited Partnership shall not exceed those obligations evidenced by the Palestine Limited Partnership Note and that all other intercompany Debt owed by Palestine Limited Partnership shall not exceed amounts currently payable pursuant to the Hospital Management Agreement dated in or about June, 1996, between Palestine-Principal, Inc., a Tennessee corporation, and the Palestine Limited Partnership, as such agreement may be amended, supplemented or renewed from time to time in compliance with SECTION 6.25 hereof. (vi) Contingent Obligations permitted by SECTION 6.3; (vii) Debt of the Borrower under any Swap Agreement relating to the Debt incurred under this Agreement; provided that the notional amount of all such agreements at any time shall not exceed the aggregate amount of the Commitments at such time; (viii) Debt assumed or incurred in connection with a Permitted Acquisition to the extent such Debt is (i) approved by and, if required by the Required Lenders, subordinated on terms acceptable to the Required Lenders or (ii) permitted pursuant to clause (xii) of this SECTION 6.2; (ix) Debt with respect to financed insurance premiums not past due; (x) unsecured Subordinated Debt; (xi) Capital Lease Obligations for a Facility lease, which Capital Lease Obligations were assumed or incurred as a Permitted Acquisition; (xii) Debt in an aggregate principal amount not in excess of $5,000,000 incurred by the Borrower pursuant to the Cash Management Line of Credit; and (xiii) other Debt (including, without limitation, Debt secured by purchase money liens described in clause (E) of the definition of Permitted Liens and Capital Lease Obligations) in an aggregate principal amount at any time outstanding not to exceed $7,500,000 for the Borrower and its Subsidiaries. 6.3. Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligation other than: (i) endorsements of instruments or items of payment for deposit or collection in the ordinary course of business; (ii) Contingent Obligations incurred pursuant to the Loan Documents; (iii) Contingent Obligations consisting of the indemnification by the Borrower or any of its Subsidiaries of (x) the officers, directors, employees and agents of the Borrower or such Subsidiary, to the extent permissible under the corporation law of the jurisdiction in which the Borrower or such Subsidiary is organized, (y) commercial banks, investment bankers and other independent consultants or professional advisors 77 pursuant to agreements relating to the underwriting of the Borrower's or such Subsidiary's securities or the rendering of banking or professional services to the Borrower or such Subsidiary and (z) landlords, licensors, licensees and other parties pursuant to agreements entered into in the ordinary course of business by the Borrower or such Subsidiary; (iv) customary indemnification obligations of the Borrower and its Subsidiaries incurred in connection with Permitted Acquisitions made in compliance with SECTION 5.12; (v) unsecured amounts payable under earnouts, approved by and subordinated on terms acceptable to the Required Lenders, and other contingent obligations, in each case incurred by any Borrower or any Subsidiary in connection with a Permitted Acquisition, whether or not earned or matured; (vi) performance, appeal and bid bonds and pledges and deposits pursuant to workers' compensation and similar requirements, in each case to the extent permitted under the definition of "Permitted Liens" contained herein; (vii) obligations under Letters of Credit issued under SECTION 2.18; (viii) Contingent Obligations described on SCHEDULE 6.3 attached hereto, without giving effect to any increases thereof without the written consent of the Required Lenders; (ix) guarantees by the Borrower or any of its Subsidiaries of obligations of the Borrower or its Subsidiaries under leases permitted hereunder; (x) guarantees by the Borrower or any of its Subsidiaries of any other Debt permitted under SECTION 6.2 and guaranties permitted by SECTION 6.7; (xi) guarantees by the Borrower or any of its Subsidiaries of physician compensation to the extent such guarantees under Generally Accepted Accounting Principles would not be reflected as a specific Dollar amount on the liability side of such Person's balance sheet; (xii) other Contingent Obligations not to exceed $2,000,000 at any time. 6.4. Liens and Encumbrances. Create, assume or suffer to exist any deed of trust, mortgage or encumbrance, lien (including a lien of attachment, judgment or execution) or security interest (including the interest of a conditional seller of goods) securing a charge or obligation, in or on any of its property, real or personal, whether now owned or hereafter acquired, except for Permitted Liens. 6.5. Disposition of Assets. Sell, lease, transfer, convey or otherwise dispose of any of its assets or property, including, without limitation, the Collateral, except for (i) sales of inventory in the ordinary course of business; (ii) the sale of worn out or obsolete equipment for fair market value or the exchange of used or obsolete equipment for replacement equipment; (iii) the sale of permitted temporary or overnight investments; (iv) dispositions not otherwise permitted by this SECTION 6.5, not exceeding $2,000,000 in the aggregate, for the Borrower and its Subsidiaries, for any fiscal year; (v) any sale, lease, transfer or conveyance from one Subsidiary to another Subsidiary or to the Borrower, or from the Borrower to any Subsidiary, in 78 accordance with SECTION 6.6, provided that, immediately after giving effect thereto, no Default or Event of Default would exist; and provided, further, that no sale, lease, transfer, conveyance or other disposition of Collateral may be made from a Subsidiary existing on the Amendment Effective Date to any Subsidiary created or acquired after the Amendment Effective Date unless such sale, lease, transfer, conveyance or other disposition falls within the $2,000,000 basket set forth in clause (iv) above; (vi) the sale of any investment products sold to the Borrower by any Lender or any Affiliate thereof; (vii) the sale, divestiture or transfer of any assets of, or the Borrower's ownership interest in, Telplan, Inc.; and (viii) dispositions made in compliance with the terms of the End Loaded Lease Facility of property (y) financed with the proceeds of the End Loaded Lease Facility or (z) conveyed to the Trust by the Borrower or any Subsidiary. 6.6. Transactions with Related Persons. Except for Subordinated Debt and except as set forth on SCHEDULE 6.6 or as expressly permitted by SECTIONS 5.12, 6.1, 6.2, 6.3(II, III, VII, VIII and IX), 6.5, 6.7, 6.8, 6.17 and 6.20 or otherwise contemplated by this Agreement, directly or indirectly make any loan or advance to, or purchase, assume or guarantee any Debt to or from, any of its officers, directors, stockholders or Affiliates, or subcontract any operations to any Affiliate, or enter into any other transaction with any Affiliate, except (a) in the ordinary course of and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and (b) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate. 6.7. Restricted Investments. Except as otherwise permitted in SECTIONS 6.2, 6.3, 6.5 and 6.8, directly or indirectly, purchase, own, invest in or otherwise acquire any capital stock, evidence of indebtedness or other obligation or security or any interest whatsoever in any other Person, or make or permit to exist any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any other Person, or become a partner or joint venturer in any partnership or joint venture, or consummate an Acquisition, or make a commitment or otherwise agree to do any of the foregoing, other than: (a) Cash Investments; (b) loans and advances to employees for reasonable travel, moving and business expenses incurred in the ordinary course of business; (c) Accounts owing to the Borrower or any of its Subsidiaries created in the ordinary course of business and payable in accordance with customary terms prevailing in the industry; (d) prepaid expenses incurred in the ordinary course of business; (e) loans, advances, or extensions of credit to, guaranties of and investments existing as of the Amendment Effective Date in corporations, partnerships and other Persons as of the Amendment Effective Date as set forth on SCHEDULE 6.7; (f) investments in Subsidiaries and Permitted Acquisitions made in accordance with terms of this Agreement, including SECTIONS 5.11 and 5.12; (g) investments by the Borrower under any Swap Agreement relating to the Debt incurred under this Agreement; provided that the notional amount of all such Swap Agreements at any time shall not exceed the aggregate amount of the Commitments at such time; 79 (h) physician loans, guaranties and similar obligations incurred in connection with the recruitment of physicians in the ordinary course of business and customary for hospitals similar to those operated by the Borrower and its Subsidiaries; (i) loans or advances from a Subsidiary to the Borrower or to another Subsidiary that is a Guarantor or from the Borrower to a Subsidiary that is a Guarantor so long as the requirements of SECTION 5.10(A) and SECTION 6.2(V) are satisfied; (j) loans, advances and extensions of credit acquired in connection with a disposition of assets permitted by SECTION 6.5 hereof; (k) notes and other investments received in connection with bankruptcy in settlement of claims; (l) temporary or overnight investments and any other investment products sold to the Borrower by any Lender or any Affiliate thereof; and (m) any other investments which are not described in clauses (A) through (L) above, not to exceed during the term of the Loans, $2,000,000 in the aggregate at any one time outstanding. 6.8. Restricted Payments; Certain Distributions; Preferred Stock. (a) Declare or pay any dividends or distributions upon any of its Stock or Interest (other than dividends paid in Stock of the Borrower and dividends or distributions paid or payable by a Subsidiary to the Borrower or another Subsidiary), except as set forth on SCHEDULE 6.8; or (b) purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its Stock or other Interests, any shares of Stock or other Interests of any Affiliate or any option, warrant or other right to acquire shares of its Stock or Stock or other Interests of any Affiliate (other than purchases, redemptions, retirements and other acquisitions by a Subsidiary of shares, Interests, options, warrants or other rights issued thereby held by the Borrower or another Subsidiary), except the Palestine Limited Partnership may purchase the partnership interests (or a portion thereof) of Mother Frances Hospital Regional Health Care Center under the Palestine Limited Partnership Agreement so long as no Default or Event of Default then exists or would result immediately after giving effect thereto; or (c) make any distribution of cash, property or assets other than Stock among the holders of shares of its Stock (other than distributions made by Subsidiaries to the Borrower or another Subsidiary); or (d) enter into or amend any agreement relating to any of the foregoing (excluding agreements relating only to Subsidiaries with the Borrower or another Subsidiary) including without limitation any agreement restricting or imposing requirements regarding the payment of dividends and distributions; or (e) issue any preferred stock or other equity with redemption features without the consent of the Required Lenders. 80 6.9. Consolidated Adjusted Debt to Annualized Consolidated EBITDAR. Permit the ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDAR to be greater than 4.5 to 1.0 as of the end of any fiscal quarter, beginning with the fiscal quarter ending March 31, 1998 to and including the fiscal quarter ending December 31, 1998; and to be greater than 5.0 to 1.0 for any fiscal quarter thereafter; provided, that not withstanding the foregoing, if the Borrower completes a subordinated debt offering in an aggregate principal amount greater than or equal to $75,000,000 at any time prior to December 31, 1998, then the Borrower shall not permit the ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDA to be greater than 5.0 to 1.0 for any period following the completion of such offering. 6.10. Consolidated Adjusted Senior Debt to Annualized Consolidated EBITDAR. Permit the ratio of Consolidated Adjusted Senior Debt to Annualized Consolidated EBITDAR to be greater than 4.5 to 1.0 as of the end of any fiscal quarter, beginning with the fiscal quarter ending March 31, 1998 to and including the fiscal quarter ending December 31, 1998; to be greater than 4.0 to 1.0 for any fiscal quarter thereafter through the fiscal quarter ending March 31, 2000; and to be greater than 3.50 to 1.0 for any fiscal quarter thereafter; provided, that notwithstanding the foregoing, if the Borrower completes a subordinated debt offering in an aggregate principal amount greater than or equal to $75,000,000 at any time prior to December 31, 1998, then the Borrower shall not permit the ratio of Consolidated Adjusted Senior Debt to Annualized Consolidated EBITDAR to be greater than 4.0 to 1.0 for any period following the completion of such offering through the quarter ending March 31, 2000; and to be greater than 3.5 to 1.0 for any fiscal quarter thereafter. 6.11. Joint Venture EBITDAR. Permit Annualized Joint Venture EBITDAR as of the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 1997 to exceed an amount equal to twenty percent (20%) of Annualized Consolidated EBITDAR as of the end of such fiscal quarter. 6.12. Minimum Net Worth. Permit Consolidated Net Worth to be less than $84,000,000 as of the end of any fiscal quarter beginning with the fiscal quarter ending on December 31, 1997; plus eighty-five percent (85%) of Consolidated Net Income (but excluding any net loss) for all periods from and after April 1, 1998; plus ninety percent (90%) of the aggregate amount of all increases in the stated capital and additional paid in capital accounts of the Borrower resulting from the issuance of equity securities or other capital investments after the Amendment Effective Date. 6.13. Fixed Charge Coverage. Permit the ratio of Annualized Consolidated EBITDAR to Fixed Charges to be less than or equal to 1.2 to 1.0 for any fiscal quarter beginning with the fiscal quarter ending December 31, 1997. 6.14. Capital Expenditures. Permit Capital Expenditures (excluding, for measurement dates on or prior to September 30, 1998, aggregate acquisition expenditures and current building programs incurred on or prior to December 31, 1997 at Parkview Regional Hospital, Mexia, Texas and Colorado Plains Medical Center, Fort Morgan, Colorado, not to exceed $3,200,000) for the four (4) consecutive fiscal quarters ending on the last day of any fiscal quarter beginning with the fiscal quarter ending December 31, 1997 to exceed five percent (5%) of Consolidated Net Revenues for the four (4) consecutive fiscal quarters then ending. 6.15. Landlord Consents. Permit Annualized Non-Landlord Consent EBITDAR as of the end of any fiscal quarter beginning with the fiscal quarter ending December 31, 1997 to exceed an amount equal to ten percent (10%) of Annualized Consolidated EBITDAR as of the end of such fiscal quarter. 81 6.16. Parkview Regional Hospital/EBITDAR to Facility Rent Expense. Permit the ratio of EBITDAR of Parkview Regional Hospital to Facility Rent Expense of Parkview Regional Hospital to be less than 1.75 to 1.0 at any time. 6.17. Sale and Leaseback. Enter into any arrangement with any Person providing for the leasing by the Borrower or any of its Subsidiaries of any asset that has been sold or transferred by the Borrower or such Subsidiary to such Person, except that (a) the Borrower or any of its Subsidiaries between themselves may enter any sale and leaseback so long as the provisions of SECTION 6.6 are satisfied, (b) the Borrower or any of its Subsidiaries may enter into a sale and leaseback transaction regarding the purchase and subsequent sale and leaseback of new equipment and machinery so long as the Borrower complies with the covenants set forth in SECTIONS 6.2(XII), 6.6, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14 and 6.15 and there is otherwise no Default or Event of Default, (c) the Borrower may enter into a sale and leaseback transaction regarding the Headquarters Building, Portland, Multnomah County, Oregon upon fair and reasonable terms in an arm's length transaction so long as (i) the Borrower complies with the covenants set forth in SECTION 6.2(XII), 6.6, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15 and 6.16, (ii) there is otherwise no Default or Event of Default, (iii) in connection with such transaction, the Borrower delivers a Landlord Consent to the Agent and such other items described in SECTION 3.2 that would have been required had such Realty been leased on the Amendment Effective Date, and such other documents relating to such Realty as the Required Lenders shall reasonably request and (d) the Borrower may enter into a sale and leaseback pursuant to the End Loaded Lease Facility of property transferred under SECTION 6.5(VIII). 6.18. New Business. Engage in any business other than businesses primarily within the Line of Business or make any material change in any of its business objectives, purposes and operations that could reasonably be expected to result in a Material Adverse Effect. 6.19. Subsidiaries or Partnerships. Except as otherwise permitted by the terms of this Agreement (including but not limited to SECTIONS 5.11, 5.12 and 6.7 hereof), (a) become a partner or joint venturer in any partnership or joint venture, or (b) create or acquire any new Subsidiary. 6.20. Management Contracts. Enter into any agreements whereby the management or control of its business as a whole or the business of any Facility as a whole shall be delegated to or placed in any persons other than its governing body and officers, the Borrower or one of the Borrower's Subsidiaries, other than the Intercompany Management Agreements. All Intercompany Management Agreements existing as of the Amendment Effective Date are described on SCHEDULE 6.20. 6.21. Limitation on Certain Restrictions. Directly or indirectly create or otherwise cause or suffer to exist or become effective any restriction or encumbrance on (a) the ability of the Borrower and its Subsidiaries to perform and comply with their obligations under the Loan Documents or (b) the ability of any Subsidiary of the Borrower to make any dividend payments or other distributions in respect of its capital stock, to repay Debt owed to the Borrower or any other Subsidiary, to make loans or advances to the Borrower or any other Subsidiary, or to transfer any of its assets or properties to the Borrower or any other Subsidiary, in each case other than such restrictions or encumbrances existing under or by reason of (i) the Loan Documents, (ii) applicable Requirements of Law and (iii) customary non-assignment and no-sale provisions in any lease governing a leasehold interest or any installment purchase agreement governing purchase money Debt. 82 6.22. No Other Negative Pledges. Directly or indirectly permit, enter into or suffer to exist any agreement or restriction that prohibits or conditions the creation, incurrence or assumption of any lien, security interest or other encumbrance upon or with respect to any part of its property or assets, whether now owned or hereafter acquired, or agree to do any of the foregoing, other than as set forth in this Credit Agreement and the other Loan Documents. 6.23. Hazardous Wastes. Violate any Environmental Law or permit any Hazardous Material to be brought onto any of the Realty or any other property owned, leased or operated by the Borrower or its Subsidiaries, if the results thereof could reasonably be expected to have a Material Adverse Effect. If any material Hazardous Material is brought or found thereon or therein, except as may be permitted above (and then only in compliance with all applicable Environmental Laws), Borrower, at its expense, shall immediately remove it, with proper disposal, and perform all required environmental response, removal, corrective and remedial actions in a diligent manner and in accordance with all Environmental Laws, the Borrower's obligations hereunder to survive any foreclosure of any Mortgage or other deed of trust or mortgage. The Borrower shall promptly, after any officer of either of the Borrower learns or obtains knowledge of the occurrence thereof, give written notice to the Agent of receipt of any written notice of any material violation or noncompliance, order or request for information from any Governmental Agency with respect to any Environmental Law, and shall promptly remedy any breach of any Environmental Law by the Borrower or its Subsidiaries. Agent shall have the right (at the expense of the Borrower during the continuance of an Event of Default or if required by any Governmental Authority regulating the Agent) to enter upon the Realty or other property owned, leased or operated by the Borrower or its Subsidiaries, or any part thereof (through its employees and/or agents), to verify compliance by the Borrower and its Subsidiaries with the terms of this Agreement and to conduct such environmental assessments and audits as Agent shall deem advisable to facilitate such verification; provided, however, BORROWER AND ITS SUBSIDIARIES HEREBY ACKNOWLEDGE THAT ALL HAZARDOUS MATERIAL HANDLING PRACTICES AND ENVIRONMENTAL PRACTICES AND PROCEDURES ARE THE SOLE RESPONSIBILITY OF THE BORROWER AND ITS SUBSIDIARIES, AND THE BORROWER AND ITS SUBSIDIARIES HAVE FULL DECISION-MAKING POWER WITH RESPECT THERETO. BORROWER AND ITS SUBSIDIARIES FURTHER ACKNOWLEDGE THAT NEITHER THE AGENT NOR ANY LENDER IS AN ENVIRONMENTAL CONSULTANT, ENGINEER, INVESTIGATOR OR INSPECTOR OF ANY TYPE WHATSOEVER. NO ACT (OR DECISION NOT TO ACT) OF THE AGENT OR ANY LENDER RELATED TO THIS AGREEMENT OR ANY LOAN DOCUMENT SHALL GIVE RISE TO ANY OBLIGATION OR LIABILITY ON THE PART OF THE AGENT OR ANY LENDER WITH RESPECT TO ENVIRONMENTAL MATTERS. IN NO EVENT SHALL ANY INFORMATION OBTAINED FROM THE AGENT OR ANY LENDER OR THEIR RESPECTIVE AGENTS PURSUANT TO THIS AGREEMENT OR ANY LOAN DOCUMENT CONCERNING THE ENVIRONMENTAL CONDITION OF THE REALTY OR OTHER PROPERTY BE CONSIDERED BY THE BORROWER OR ANY SUBSIDIARY (OR ANY OTHER RECIPIENT OF SAID INFORMATION) AS CONSTITUTING LEGAL OR ENVIRONMENTAL CONSULTING, ENGINEERING, INVESTIGATING OR INSPECTING ADVICE, AND NEITHER THE BORROWER NOR ANY OF ITS SUBSIDIARIES (NOR ANY OTHER RECIPIENT OF SAID INFORMATION) SHALL RELY ON SAID INFORMATION. THE RESPONSIBILITY FOR COMPLIANCE WITH ENVIRONMENTAL LAWS RESTS SOLELY WITH THE BORROWER AND ITS SUBSIDIARIES. 6.24. Fiscal Year. Change its fiscal year from a calendar year ending December 31. 83 6.25. Amendments; Prepayments of Debt, Etc. (a) Amend in any respect the certificate or articles of incorporation, bylaws, partnership agreement, operating agreement or similar governing document of the Borrower or any of its Subsidiaries (other than to permit a name change or other immaterial amendment not inconsistent with this Agreement), any Intercompany Management Agreement, any shareholder agreement (to the extent such amendment would impose any obligation on the Borrower or any of its Subsidiaries inconsistent with this Agreement), or (b) except with respect to the Debt created under the Loan Documents, customary trade discounts, purchase money Debt, Capital Leases, financed insurance premiums, Swap Agreements and permitted intercompany Debt, make any voluntary or optional payment or prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due), or exchange, any Debt. 6.26. Location of Assets; Places of Business. Without thirty (30) days' prior written notice to the Agent and the execution and delivery of Financing Statements reasonably satisfactory to the Agent, (i) maintain any Inventory or Equipment that constitutes Collateral (other than items in transit or under repair) at any location other than the locations set forth on SCHEDULE 4.7 or (ii) change its principal place of business to a location other than that set forth on SCHEDULE 4.7. 6.27. Account Documents. Without thirty (30) days' prior written notice to the Agent and the execution and delivery of Financing Statements reasonably satisfactory to the Agent, remove the billing and related records relating to Accounts from the locations set forth on SCHEDULE 4.7. 6.28. No Inconsistent Transactions or Agreements. Enter into any transaction or agreement, or enter into any amendment or other modification to any currently existing agreement, that by its terms prohibits or materially restricts the ability of the Borrower to pay the principal of or interest on the Loans. 6.29. Fraud and Abuse. Neither the Borrower nor any Subsidiary, nor any of its stockholders, officers or directors, acting on behalf of the Borrower or any Subsidiary, shall engage on behalf of Borrower or any Subsidiary in any of the following: (i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any applications for any benefit or payment under Medicare, Medicaid or MediCal programs; (ii) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment under Medicare, Medicaid or MediCal programs; (iii) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment under Medicare, Medicaid or MediCal programs on its own behalf or on behalf of another, with intent to secure such benefit or payment fraudulently; (iv) knowingly and willfully making or causing to be made a payment, directly or indirectly, to a physician as an inducement to reduce or limit services provided with respect to individuals who are entitled to any benefit or payment under Medicare, Medicaid or MediCal programs and are under the direct care of the physician; (v) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering or paying such remuneration (a) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare, Medicaid or MediCal, or (b) in return for purchasing, leasing or ordering or arranging for or recommending the purchasing, leasing or order of any good, facility, service, or item for which payment may be made in whole or in part by Medicare, Medicaid or MediCal; or (vi) knowingly and willfully offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person (x) to refer an individual to a person for the furnishing or arranging for the furnishing of 84 any item or service for which payment may be made in whole or in part by Medicare, Medicaid or MediCal, or (y) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part by Medicare, Medicaid or MediCal. With respect to this Section, knowledge by any employees, representatives and agents of the Borrower or a Subsidiary of any of the events described in this Section shall not be imputed to the Borrower or such Subsidiary unless such knowledge was obtained or learned by a Senior Officer in his or her official capacity as a Senior Officer of the Borrower or such Subsidiary. Neither the Borrower nor any Subsidiary shall be considered to have breached this Section, except in the case of an intentional violation thereof, until the Borrower or such Subsidiary has received notification, written or oral, by a Governmental Authority of competent jurisdiction as to any such violation. In addition, neither the Borrower nor any Subsidiary shall be considered to have breached this Section so long as (a) they shall have taken such actions (including implementation of appropriate internal controls) as may be reasonably necessary to avoid such breaches and (b) such breaches, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 6.30. Compliance with ERISA. (a) Take any action or fail to take any action, the result of which action or inaction could be a liability of the Borrower or any of its Subsidiaries to the pension Benefit Guaranty Corporation or to a Multiemployer Plan or (ii) participate in any Prohibited Transaction that could subject the Borrower or any of its Subsidiaries to any civil penalty under ERISA or tax under the Internal Revenue Code, in each case that could reasonably be expected to have a Material Adverse Effect. ARTICLE VII EVENTS OF DEFAULT 7.1. Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) The Borrower (i) fails to pay any principal amount of the Credit Obligations when due, or (ii) fails to pay any interest and fees on the Credit Obligations within two (2) Business Days after the due date thereof; (b) The Borrower or any of its Subsidiaries fails or neglects to observe, perform or comply with any term, provision, condition or covenant contained in SECTION 5.3(A), 5.12, 5.13 or ARTICLE VI; (c) The Borrower or any of its Subsidiaries fails or neglects to observe, perform or comply with any term, provision, condition or covenant contained in SECTION 5.1, 5.2(C), 5.2(E), 5.2(F) or 2.13, and the same is not cured to the Required Lenders' satisfaction within fifteen (15) days after the earlier of (i) written notice to the Borrower by the Agent of the existence of such Default, or (ii) the date on which the Borrower or such Subsidiary acquires knowledge thereof; (d) The Borrower or any of its Subsidiaries fails or neglects to observe, perform or comply with any term, provision, condition or covenant contained herein except those specified in subsections (A), (B) and (C) above, and the same is not cured to the Required Lenders' satisfaction within thirty (30) days after the earlier of (i) written notice to the Borrower by the Agent of the existence of such Default, or (ii) the date on which the Borrower or such Subsidiary acquires knowledge thereof; 85 (e) If any representation or warranty made in writing by or on behalf of the Borrower or any of its Subsidiaries in this Agreement, in the other Loan Documents or in any other agreement now existing or hereafter executed between the Borrower or any of its Subsidiaries and the Agent or any Lender shall prove to have been false or misleading in any material respect when made; (f) The occurrence of any default or event of default on the part of the Borrower or any of its Subsidiaries (including specifically, but without limitation, defaults due to nonpayment) under the terms of any agreement, document or instrument (including without limitation any Swap Agreement, or any other similar agreement with any other Person, and any Operative Agreement (as defined by reference in the definition of End Loaded Lease Facility herein) under the End Loaded Lease Facility) pursuant to which the Borrower or such Subsidiary has incurred any Debt (other than the Credit Obligations) in excess of $1,000,000, which default or event of default would permit acceleration of such Debt and which is not cured within any applicable grace or cure period; (g) (i) The termination of any hospital lease agreement; or (ii) the termination of any other agreement, contract or instrument to which the Borrower or any of its Subsidiaries is a party or by which it or any of its properties are bound where such termination could reasonably be expected to result in a Material Adverse Effect; (h) The occurrence of an event of default under any of the Material Loan Documents (other than a Landlord's Consent) or in any other agreement now existing or hereafter executed evidencing or securing any of the Credit Obligations, taking into account any applicable grace or cure provisions thereof; (i) The occurrence of an event of default under the Participation Agreement, the Lease, each applicable Ground Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust Agreement, the Certificates, the Security Agreement and each applicable Mortgage Instrument (each as defined in the Participation Agreement) under the End Loaded Lease Facility or in any other agreement now existing or hereafter executed evidencing or securing any of the obligations of the Trust, the Borrower or its Subsidiaries under such Operative Documents (other than due to the Agent's or any Lender's failure to file a continuation statement), taking into account any applicable grace or cure provisions thereof; (j) The occurrence of any uninsured damage to or loss, theft or destruction of the Collateral or other assets of the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect; (k) The filing by the Borrower or any of its Subsidiaries (with assets having a value of $250,000 or more) of any voluntary petition seeking liquidation, reorganization, arrangement, readjustment of debts or for any other relief under the Bankruptcy Code or under any other act or law pertaining to insolvency or debtor relief, whether state, federal or foreign, now or hereafter existing; (l) The filing against the Borrower or any of its Subsidiaries (with assets having a value of $250,000 or more) of any involuntary petition seeking liquidation, reorganization, arrangement, readjustment of debts or for any other relief under the Bankruptcy Code or under any other act or law pertaining to insolvency or debtor relief, whether state, federal or foreign, now or hereafter existing, which petition is not dismissed discharged, stayed or bonded within sixty (60) days after the date of filing; 86 (m) A custodian, trustee, receiver or assignee for the benefit of creditors is appointed or takes possession of the Collateral or any other assets of the Borrower or any of its Subsidiaries (with assets having a value of $250,000 or more) which appointment continues undischarged, undismissed, unstayed or unbonded for 60 days or more; (n) The Borrower or any of its Subsidiaries (with assets having a value of $250,000 or more) ceases, or the Borrower and its Subsidiaries, on a consolidated basis, cease, to be Solvent (taking into account any rights of contribution); (o) A notice of lien, levy or assessment is filed of record against any portion of the assets of the Borrower or any of its Subsidiaries by the United States, or any department, agency or instrumentality thereof, or by any other Governmental Authority or any other Person, including, without limitation, the Pension Benefit Guaranty Corporation, or if any taxes or debts owing at any time or times hereafter to any one of them becomes a lien or encumbrance (other than a Permitted Lien) upon the Collateral or any other asset of the Borrower or any of its Subsidiaries, and the same is not dismissed, released, bonded or discharged within five (5) days after the same becomes a lien or encumbrance or, in the case of ad valorem taxes, prior to the last day when payment may be made without penalty and, if bonded, such bond (or a replacement bond) shall not continue in effect at all times until such judgment is dismissed or discharged, and any such event could reasonably be expected to have a Material Adverse Effect; (p) The entry of judgments or the issuance of warrants of attachment, execution or similar process against the Borrower or any of its Subsidiaries or any of their assets of $500,000 or more in the aggregate in excess of the proceeds of insurance available therefor, which shall not be paid, dismissed, discharged, stayed pending appeal or bonded within fifteen (15) days after entry and, if bonded, such bond (or a replacement bond) shall not continue in effect at all times until such judgment is dismissed or discharged; (q) The occurrence of any of the following events: (i) the happening of a Reportable Event that could give rise to liability (that is not waived by the Pension Benefit Guaranty Corporation or by the Required Lenders, or if such liability can be avoided by any corrective action of the Borrower, such corrective action is not completed within ninety (90) days after the occurrence of such Reportable Event) with respect to any Pension Plan; (ii) the termination of any Pension Plan in a "distress termination" under the provisions of Section 4041 of ERISA; (iii) the appointment of a trustee by an appropriate United States District Court to administer any Pension Plan; (iv) the institution of any proceedings by the Pension Benefit Guaranty Corporation to terminate any Pension Plan or to appoint a trustee to administer any such plan; and (v) the failure of the Borrower to notify the Lenders promptly upon receipt by the Borrower of any notice of the institution of any proceeding or any other actions that may result in the termination of any such plan; (r) (i) The guaranty given by any Guarantor of the Borrower under the Guaranty Agreement shall, for any reason other than the satisfaction in full of all Credit Obligations and termination of this Agreement or the release of such Subsidiary from its Guaranty Obligations under the Guaranty Agreement in accordance with the terms thereof, cease to be in full force and effect at any time or is declared to be null and void or (ii) any such Subsidiary denies that it has any further liability under the Guaranty Agreement or gives notice to such effect, and such denial or notice is not revoked within one Business Day after the earlier of (A) receipt by the Borrower of notice from the Agent or any Lender of such denial or notice or (B) the Borrower becomes aware of such denial or notice being made or given, as the case may be; (s) The occurrence of a Change of Control; 87 (t) Martin S. Rash or Richard D. Gore shall cease to be the Chief Executive Officer and Chief Financial Officer, respectively, of the Borrower or involved in the day-to-day operations of the Borrower and its Subsidiaries, and within 120 days following the cessation of their respective involvement, the relevant executive is not succeeded by a chief executive officer or chief financial officer, as applicable, reasonably acceptable to the Required Lenders; or (u) The Borrower or any Subsidiary, to the extent, if any, presently participating or required by law to participate, in Medicaid, Medicare or MediCal programs shall fail to be eligible for any reason to participate in Medicaid, Medicare or MediCal programs or to accept assignments or rights to reimbursement under Medicaid Regulations, Medicare Regulations or MediCal Regulations, such failure could reasonably be expected to have a Material Adverse Effect, and such failure shall also continue beyond the completion of any appeal process diligently pursued by the Borrower or such Subsidiary in good faith. ARTICLE VIII RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT 8.1. Remedies; Termination of Commitments, Acceleration, Etc. Upon and at any time after the occurrence and during the continuance of any Event of Default, the Agent shall at the direction, or may with the consent, of the Required Lenders, take any or all of the following actions at the same or different times: (a) Declare the Revolving Credit Commitments of each Lender, the Swingline Commitment of the Swingline Lender, and the Issuing Bank's obligation to issue Letters of Credit, to be terminated, whereupon the same shall terminate (provided that, upon the occurrence of an Event of Default with respect to the Borrower pursuant to SECTIONS 7.1(K), (L) or (M), all of the Revolving Credit Commitments and the Swingline Commitment, together with the Issuing Bank's obligation to issue Letters of Credit, shall automatically be terminated); (b) Declare all or any part of the outstanding principal amount of the Loans, all unpaid interest accrued thereon, and all other amounts payable under this Agreement, the Notes and the other Loan Documents to be immediately due and payable, whereupon such outstanding principal amounts, accrued interest and other such amounts shall become immediately due and payable without presentment, demand, protest, notice of intent to accelerate or other notice or legal process of any kind, all of which are hereby knowingly and expressly waived by the Borrower (provided that, upon the occurrence of an Event of Default with respect to the Borrower pursuant to SECTIONS 7.1(K), (L) or (M), all such outstanding principal amounts, accrued interest and other such amounts shall automatically become immediately due and payable); (c) Direct the Borrower to deliver (and the Borrower hereby agrees, upon receipt of notice of such direction from the Agent, to deliver) to the Agent from time to time such additional amount of cash as is equal to the difference between the aggregate Stated Amount of all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder) and the amount then on deposit in the Cash Collateral Account, such amount to be held by the Agent in the Cash Collateral Account as security for the Borrower's Reimbursement Obligations as described in SECTION 2.18(I); and 88 (d) Exercise all rights and remedies available to it under this Agreement, the other Loan Documents and applicable law. 8.2. Right of Setoff. Upon the occurrence and during the continuance of, and prior to any express written waiver by the Required Lenders of, an Event of Default, the Agent and each Lender may, and are hereby authorized by the Borrower, at any time and from time to time, to the fullest extent permitted by applicable law, without advance notice to the Borrower (any such notice being expressly waived by the Borrower) and irrespective of demand for payment, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held in other than a fiduciary account and any other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any or all of the Credit Obligations now or hereafter existing, whether or not such Credit Obligations have matured. The Agent agrees to notify the Borrower after any such setoff or application, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Agent and each Lender under this SECTION 8.2 are in addition to the other rights and remedies (including other rights of setoff) that such Lender may have. NOTWITHSTANDING THE FOREGOING, NEITHER THE AGENT NOR ANY LENDER SHALL EXERCISE, OR ATTEMPT TO EXERCISE, ANY RIGHT OF SETOFF, BANKER'S LIEN, OR THE LIKE, AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF THE BORROWER HELD BY THE AGENT OR ANY LENDER, WITHOUT THE PRIOR WRITTEN CONSENT OF THE REQUIRED LENDERS, AND ANY LENDER VIOLATING THIS PROVISION SHALL INDEMNIFY THE AGENT AND THE OTHER LENDERS FROM ANY AND ALL COSTS, EXPENSES, LIABILITIES AND DAMAGES RESULTING THEREFROM. The contractual restriction on the exercise of setoff rights provided in the foregoing sentence is solely for the benefit of the Agent and the Lenders and may not be enforced by the Borrower. 8.3. Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of the Agent's and the Lenders' rights and remedies set forth in this Agreement is not intended to be exhaustive, and the exercise by the Agent or any Lender of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder, under the Loan Documents or under any other agreement between the Borrower or any of its Subsidiaries and the Agent or the Lenders or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Borrower or any of its Subsidiaries and the Agent or the Lenders or their agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. ARTICLE IX THE AGENT 9.1. Appointment. Each Lender hereby irrevocably appoints and authorizes First Union to act as Agent hereunder and under the other Loan Documents and to take such actions as agent on its behalf hereunder and under the other Loan Documents, and to exercise such powers and to perform such duties, as are specifically delegated to the Agent by the terms hereof or thereof, together with such other powers and duties as are reasonably incidental thereto. 89 9.2. Nature of Duties. The Agent shall have no duties or responsibilities other than those expressly set forth in this Agreement and the other Loan Documents. The Agent shall not have, by reason of this Agreement or any other Loan Document, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any other Loan Document, express or implied, is intended to or shall be so construed as to impose upon the Agent any obligations or liabilities in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact that it selects with reasonable care. The Agent shall be entitled to consult with legal counsel, independent public accountants and other experts selected by it with respect to all matters pertaining to this Agreement and the other Loan Documents and its duties hereunder and thereunder and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. The Lenders hereby acknowledge that the Agent shall not be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders (or, where a higher percentage of the Lenders is expressly required hereunder, such Lenders). 9.3. Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action taken or omitted to be taken by it or such Person under or in connection with the Loan Documents, except for its or such Person's own gross negligence or willful misconduct, (ii) responsible in any manner to any Lender for any recitals, statements, information, representations or warranties herein or in any other Loan Document or in any document, instrument, certificate, report or other writing delivered in connection herewith or therewith, for the execution, effectiveness, genuineness, validity, enforceability or sufficiency of this Agreement or any other Loan Document, or for the financial condition of the Borrower, its Subsidiaries or any other Person, or (iii) required to ascertain or make any inquiry concerning the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Loan Document or the existence or possible existence of any Default or Event of Default, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. 9.4. Reliance by the Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any notice, statement, consent or other communication (including, without limitation, any thereof by telephone, telecopy, telex, telegram or cable) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons. The Agent may deem and treat each Lender as the owner of its interest hereunder for all purposes hereof unless and until a written notice of the assignment, negotiation or transfer thereof shall have been given to the Agent in accordance with the provisions of this Agreement. The Agent shall be entitled to refrain from taking or omitting to take any action in connection with this Agreement or any other Loan Document (i) if such action or omission would, in the reasonable opinion of the Agent, violate any applicable law or any provision of this Agreement or any other Loan Document or (ii) unless and until it shall have received such advice or concurrence of the Required Lenders (or, where a higher percentage of the Lenders is expressly required hereunder, such Lenders) as it deems appropriate or it shall first have been indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking, continuing to take or omitting to take any such action. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent's acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of the Required Lenders (or, where a higher percentage of the Lenders is expressly required 90 hereunder, such Lenders), and such instructions and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders (including all subsequent Lenders). 9.5. Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representation or warranty to it and that no act by the Agent or any such Person hereafter taken, including any review of the affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that (i) it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, properties, financial and other condition and creditworthiness of the Borrower and its Subsidiaries and made its own decision to enter into this Agreement and extend credit to the Borrower hereunder, and (ii) it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action hereunder and under the other Loan Documents and to make such investigation as it deems necessary to inform itself as to the business, prospects, operations, properties, financial and other condition and creditworthiness of the Borrower and its Subsidiaries. Except as expressly provided in this Agreement and the other Loan Documents, the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information concerning the business, prospects, operations, properties, financial or other condition or creditworthiness of the Borrower, its Subsidiaries or any other Person that may at any time come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.6. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Agent shall have received written notice from the Borrower or a Lender referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent will give notice thereof to the Lenders as soon as reasonably practicable; provided, however, that if any such notice has also been furnished to the Lenders, the Agent shall have no obligation to notify the Lenders with respect thereto. The Agent shall (subject to SECTIONS 9.4 and 10.8) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders; provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action (except for those actions specified in SECTION 8.1(A), (B), (C) OR (D)), with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. Each Lender shall promptly give the Agent such a notice upon its actual knowledge of a Default or an Event of Default; provided, however, that the failure of any Lender to deliver such notice shall not, in the absence of gross negligence or willful misconduct, affect its rights hereunder or under the other Loan Documents. Each Lender agrees that the rights and remedies granted under this Agreement and the other Loan Documents shall be exercised solely by the Agent, at the direction or with the consent of the Required Lenders, and that no Lender shall have any right individually to exercise any such right or remedy except to the extent, if any, expressly provided herein or therein. 9.7. Indemnification. To the extent the Agent is not reimbursed by or on behalf of the Borrower, and without limiting the obligation of the Borrower to do so, the Lenders agree (i) to indemnify the Agent and its officers, directors, employees, agents, attorneys-in-fact and Affiliates, ratably in proportion to their percentages as used in determining the Required Lenders as of the date of determination, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses (including, 91 without limitation, reasonable attorneys' fees and expenses) or disbursements of any kind or nature whatsoever that may at any time (including at any time following the repayment in full of the Loans and the termination of the Commitments) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any documents contemplated by or referred to herein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing, and (ii) to reimburse the Agent upon demand, ratably in proportion to their percentages as used in determining the Required Lenders as of the date of determination, for any reasonable expenses incurred by the Agent in its capacity as Agent in connection with the preparation, negotiation, execution, delivery, administration, amendment, modification, waiver or enforcement (whether through renegotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement or any of the other Loan Documents (including, without limitation, reasonable attorneys' fees and expenses and compensation of agents and employees paid for services rendered on behalf of the Lenders); provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements to the extent resulting from the gross negligence or willful misconduct of the party to be indemnified. 9.8. The Agent in its Individual Capacity. With respect to its Commitments, the Loans made by it, the Letters of Credit issued or participated in by it and the Notes issued to it, the Agent in its individual capacity and not as Agent shall have the same rights and powers under the Loan Documents as any other Lender and may exercise the same as though it were not performing the agency duties specified herein; and the terms "Lenders," "Required Lenders," "holders of Notes" and any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, make investments in, and generally engage in any kind of banking, trust, financial advisory or other business with the Borrower, any of its Subsidiaries or any of their Affiliates as if the Agent were not performing the agency duties specified herein, and may accept fees and other consideration from any of them for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. 9.9. Successor Agent. The Agent may resign at any time by giving thirty (30) days' prior written notice to the Borrower and the Lenders. Upon any such notice of resignation and with the prior consent of the Borrower, which consent shall not be unreasonably withheld, the Required Lenders will appoint prior to the effectiveness of the retiring Agent's resignation from among the Lenders a successor to the Agent (provided that the Borrower's consent shall not be required in the event a Default or Event of Default shall have occurred and be continuing). If no successor to the Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within such thirty (30)-day period, then the retiring Agent may, on behalf of the Lenders and after consulting with the Lenders and the Borrower, appoint a successor Agent from among the Lenders. Upon the acceptance of any appointment as Agent by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring Agent's resignation as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. If no successor to the Agent has accepted appointment as Agent by the thirtieth (30th) day following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall thereafter perform all of the duties of the Agent hereunder and under the other Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided for hereinabove. 92 9.10. Collateral Matters. (a) The Agent is hereby authorized on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time (but without any obligation) to take any action with respect to the Collateral and the Security Documents that may be necessary to perfect and maintain perfected the Liens upon the Collateral granted pursuant to the Security Documents. (b) The Lenders hereby authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral (i) upon termination of the Commitments, termination or expiration of all outstanding Letters of Credit and payment in full of all of the Credit Obligations and termination of the End Loaded Lease Facility, (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition expressly permitted hereunder or under any other Loan Document or to which the Required Lenders have consented or (iii) otherwise pursuant to and in accordance with the provisions of any applicable Loan Document. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release Collateral pursuant to this subsection (B). 9.11. Issuing Bank and Swingline Lender. The provisions of this ARTICLE IX (other than SECTION 9.9) shall apply to the Issuing Bank and the Swingline Lender mutatis mutandis to the same extent as such provisions apply to the Agent. ARTICLE X MISCELLANEOUS 10.1. Survival. (a) The representations and warranties made by or on behalf of the Borrower or any of its Subsidiaries in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. Notwithstanding any other provision herein or anything provided or implied by law to the contrary, no termination or cancellation (regardless of cause or procedure) of the Commitments, this Agreement or any of the other Loan Documents shall in any way affect or impair the rights and obligations of the parties hereto with respect to any of the provisions of (i) SECTION 10.3, (ii) SECTION 2.15 or (iii) this Agreement and the other Loan Documents relating to indemnification or payment of costs and expenses, including, without limitation, all of the provisions of SECTIONS 2.11(A), 2.11(B), 2.12, 2.13, 2.18(H), 9.7, 10.6 and 10.7, and, in each case, such provisions shall survive any such termination or cancellation and the making and repayment of the Loans. (b) The Borrower, the Agent and the Lenders agree that: (i) ARTICLES IV and V and the other applicable provisions of this Credit Agreement are intended as the Agent's (on behalf of the Lenders) written request for information (and the Borrower's response) concerning the environmental condition of the real property; and (ii) each provision in this Credit Agreement (together with any indemnity applicable to a breach of any such provision) with respect to the environmental condition of the Realty is intended to be an "environmental provision" and as such it is expressly understood that the Borrower's duty to indemnify the Agent and the Lenders as specified hereunder shall survive the termination or cancellation of the Commitments or this Agreement and the making and repayment of the Loans. 93 10.2. Governing Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN NORTH CAROLINA AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA; PROVIDED THAT EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT OR, IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED THEREBY, THE INTERNAL LAWS OF THE STATE OF THE DOMICILE OF THE ISSUING BANK. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY PROCEEDING TO WHICH THE AGENT, THE ISSUING BANK, ANY LENDER OR THE BORROWER IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE ISSUING BANK, ANY LENDER OR THE BORROWER. THE BORROWER IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO BORROWER (ATTENTION: GENERAL COUNSEL) AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR FIFTEEN (15) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. 10.3. Arbitration; Remedies. (a) Upon demand of any party hereto, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any of the Loan Documents ("Disputes") between or among parties hereto or thereto shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include, without limitation, tort claims, counterclaims, disputes as to whether a matter is subject to arbitration, claims brought as class actions, claims arising from documents executed in the future, or claims arising out of or connected with the transactions contemplated by this Agreement or any of the Loan Documents. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA"), as in effect from time to time, and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be conducted in Charlotte, North Carolina. The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall 94 apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted, or if such person is not available, the single arbitrator may be a licensed attorney. Notwithstanding the foregoing, this arbitration provision does not apply to Disputes under or related to any interest rate protection agreements. (b) Notwithstanding the preceding binding arbitration provisions, the Borrower and the Agent, on behalf of the Lenders, agree to preserve, without diminution, certain remedies, more particularly described below, that any party hereto may employ or exercise freely, independently or in connection with an arbitration proceeding or after an arbitration action is brought. The Agent, on behalf of the Lenders, and the Borrower shall have the right to proceed in any court of proper jurisdiction or by self-help to exercise or prosecute the following remedies, as applicable: (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted under any Loan Documents or under applicable law or by judicial foreclosure and sale, including a proceeding to confirm the sale; (ii) all rights of self-help including peaceful occupation of real property and collection of rents, setoff, and peaceful possession of personal property; (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and filing an involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of any arbitrator to grant similar remedies that may be requested by a party in a Dispute. The Borrower and the Agent, on behalf of the Lenders, agree that they shall not have a remedy of punitive or exemplary damages against the other in any Dispute and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. 10.4. Notice. All notices and other communications provided for hereunder shall be in writing (including facsimile transmission) and mailed, telecopied or delivered to the party to be notified at the following addresses (provided, however, that Syndication Agency Services of First Union National Bank will not receive copies of regular financial reports and the attorneys listed below will receive neither regular financial reports nor the business information submitted to the Agent and the Lenders): If to Borrower: Province Healthcare Company 105 Westwood Place, Suite 400 Brentwood, Tennessee 37027 Attention: Vice President - Finance Telephone: (615) 370-1377 Telecopy: (615) 370-1259 with a copy (which copy shall not constitute notice) to: Waller Lansden Dortch & Davis, PLLC Nashville City Center 511 Union Street, Suite 2100 Nashville, Tennessee 37219-1760 Attention: Ralph W. Davis Telephone: (615) 252-2481 Telecopy: (615) 244-6804 95 If to the Agent or the Issuing Bank: First Union National Bank One First Union Center, TW-10 Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telephone: (704) 374-2698 Telecopy: (704) 383-0288 with a copy to: First Union National Bank 150 Fourth Avenue North 2nd Floor Nashville, Tennessee 37219 Attention: Carolyn Hannon Telephone: (615) 251-9374 Telecopy: (615) 251-9247 with a copy to: First Union National Bank One First Union Center, 5th Floor 301 South College Street Charlotte, North Carolina 28288-0735 Attention: Valerie Cline Telephone: (704) 383-6237 Telecopy: (704) 383-9144 with a copy to: Robinson, Bradshaw & Hinson, P.A. 101 North Tryon Street Suite 1900 Charlotte, North Carolina 28246 Attention: Stokely G. Caldwell, Jr. Telephone: (704) 377-8332 Telecopy: (704) 378-4000 If to any Lender: At the address set forth on its signature page hereto. or to such other address as any party may designate for itself by like notice to all other parties hereto. All such notices and communications shall be deemed to have been given (i) if mailed as provided above by any method other than overnight delivery service, on the third Business Day after deposit in the mails, postage prepaid, (ii) if transmitted by overnight delivery service or telecopied, when delivered for overnight delivery or transmitted by telecopier, respectively, with appropriate confirmation of delivery, or (iii) if delivered by hand, upon delivery; provided that notices and communications to the Agent shall not be effective until received by the Agent. All wire transfers to the Agent shall be sent to First Union National Bank, ABA Routing #053000219, to the credit of First Union National Bank, Charlotte, North Carolina, Attention: Syndication Agency Services, G/L #465906, RC #5007, RE: Province Healthcare Company, unless otherwise instructed by the Agent. 10.5. Assignments, Participations. 96 (a) With the prior consent of the Agent and the Borrower, which consent shall not be unreasonably withheld (except in the case of a Default or Event of Default in which case no consent of the Borrower shall be required), each Lender may assign to one or more other Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the outstanding Loans made by it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of an equal, pro rata percentage of such Lender's rights and obligations (including its Commitments and its End Loaded Lease Commitment) under this Agreement and the End Loaded Lease Credit Agreement, (ii) except in the case of an assignment to an Affiliate of such Lender or a Person that, immediately prior to such assignment, was a Lender, (1) the amount of the Commitments of such assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to each such assignment) shall in no event be less than the lesser of (y) the aggregate Commitments of such Lender immediately prior to such assignment or (z) $5,000,000, and (2) the amount of the Swingline Commitment being assigned pursuant to any such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than Swingline Commitment, (iii) each such assignment shall be to an Eligible Assignee, (iv) the parties to each such assignment will execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment, and will pay a processing fee of $3,000 to the Agent for its own account, and (v) the assignee shall prepare and deliver to the Agent (for delivery to the Borrower) any forms and other documents required by SECTION 2.12(C). Upon such execution, delivery, acceptance and recording of the Assignment and Acceptance, from and after the effective date specified therein (a) the assignee thereunder shall be deemed a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of such Lender hereunder with respect thereto, and (b) the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of such assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the assigning Lender and the assignee thereunder confirm to and agree with each other, and with the other parties hereto, as follows: (i) other than as may be provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document or any other instrument or document furnished hereto or pursuant thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of its Subsidiaries or the performance or observance by the Borrower or any of its Subsidiaries of any of their obligations under this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee has received a copy of this Agreement, together with copies of the Financial Statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (iv) such assignee will, independently and without reliance upon the Agent, the assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents and any other instruments and agreements referred to herein or therein, and to exercise such powers and to perform such duties hereunder and thereunder, as are specifically delegated to or required of the Agent by the terms hereof or 97 thereof and such other powers as are reasonably incidental thereto; and (vii) such assignee will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) The Agent will maintain a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Issuing Bank or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any Note or Notes subject to such assignment, the Agent will, if such Assignment and Acceptance has been completed and is in substantially the form of EXHIBIT D, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give notice thereof to the Borrower. Within five (5) Business Days after its receipt of such notice, the Borrower, at its own expense, will execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note or Notes to the order of such assignee in an amount equal to the Commitment or Commitments assumed by it pursuant to such Assignment and Acceptance and, to the extent the assigning Lender has retained its Commitments hereunder, a new Note or Notes to the order of the assigning Lender in an amount equal to the Commitment or Commitments retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the forms of EXHIBITS A-1 and A-2, as appropriate. (e) Each Lender may sell to one or more other Persons participations in any portion comprising less than all of its rights and obligations under this Agreement (including, without limitation, a portion of its Commitments, the outstanding Loans made by it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible for the performance of such obligations, (iii) the Borrower, the Issuing Bank, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (iv) any such participation shall be in an amount of not less than $5,000,000, (v) no Lender shall sell any participation that, when taken together with all other participations, if any, sold by such Lender, covers all of such Lender's rights and obligations under this Agreement (including, without limitation, all of its Commitments, the outstanding Loans made by it and the Note or Notes held by it), (vi) each such participation shall be of an equal, pro rata percentage of such Lender's rights and obligations (including its Commitments), (vii) no Lender shall permit any participant to have any voting rights or any right to control the vote of such Lender with respect to any amendment, modification, waiver, consent or other action hereunder or under any other Loan Document except as to actions of the type described in SECTION 10.8(A), and (viii) the parties to each such participation shall pay a processing fee of $3,000 to the Agent for its own account. In the case of a participation, the participant shall not have any rights under this Agreement or any of the other Loan Documents, the participant's rights against the granting Lender in respect of such participation to be those set forth in the participation agreement, and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation; provided, however, that each such participant shall have the rights of a Lender for purposes of SECTIONS 2.11(A), 98 2.11(B), 2.12, 2.13 and 8.2, and shall be entitled to the benefits thereof, to the extent that the Lender selling such participation would be entitled to such benefits if the participation had not been sold. (f) With the prior consent of the Required Lenders and the Borrower, which consent shall not be unreasonably withheld, the Issuing Bank may assign all, but not less than all, of its rights and obligations as Issuing Bank under this Agreement, including, without limitation, its commitment to issue Letters of Credit, to any Eligible Assignee, and upon acceptance of such assignment, the successor Issuing Bank shall succeed to such rights and obligations and the assigning Issuing Bank shall be discharged therefrom. (g) The Agent, the Issuing Bank and each Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the assignee or participant, or proposed assignee or participant, any information relating to the Borrower and its Subsidiaries furnished to it by or on behalf of any other party hereto, provided that such assignee or participant or proposed assignee or participant agrees in writing to the Agent, the Issuing Bank or such Lender, as the case may be, to keep such information confidential to the same extent required of the Lenders under SECTION 10.17. (h) Nothing in this Agreement or the other Loan Documents shall prohibit any Lender or participant from pledging or assigning its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the outstanding Loans made by it and the Note or Notes held by it, including Collateral therefor) to any Federal Reserve Bank in accordance with applicable law. 10.6. Fees and Expenses. Whether or not the transactions contemplated by this Agreement shall be consummated, the Borrower shall be obligated: (a) to pay or reimburse the Agent upon demand and after notice in accordance with SECTION 10.4 for all reasonable expenses (including, without limitation, reasonable attorneys' fees, but excluding salaries of the Agent's regularly employed personnel and overhead) incurred or paid by the Agent in connection with: (i) the preparation, execution, delivery, interpretation, modification, amendment or termination of this Agreement or the other Loan Documents or any consent or waiver requested by the Borrower hereunder or thereunder; (ii) upon the occurrence and during the continuance of any Event of Default, charges for appraisers, examiners, environmental consultants, auditors or similar Persons whom the Agent may engage with respect to rendering opinions concerning the financial condition of the Borrower and its Subsidiaries; and (iii) upon the occurrence and during the continuance of any Event of Default, any commercially reasonable attempt to inspect, verify, protect, preserve, collect, sell, liquidate or otherwise dispose of the Collateral or any other assets of the Borrower or any Guarantor; (b) to pay or reimburse the Agent and each Lender upon demand and after notice in accordance with SECTION 10.4 for all reasonable expenses (including, without limitation, reasonable attorneys' fees, but excluding salaries of the Agent's or such Lender's regularly employed personnel and overhead) incurred or paid by the Agent or such Lender in connection with: (i) any litigation, contest, dispute, suit or proceeding or action (whether instituted by the Agent, the Lenders, or any of them, the Borrower or any other Person) in any way relating to this Agreement or the other Loan Documents (other than a dispute solely between or among the Lenders or the Lenders and the Agent); (ii) any attempt by the Agent or such Lender to enforce any of its rights against the Borrower or any other Person that may be obligated to the Agent or such Lender by virtue of this Agreement or the other Loan Documents; and (iii) any refinancing or restructuring of the credit arrangement provided under this Agreement in the nature of a "work-out" or in any insolvency or bankruptcy proceeding; 99 (c) to pay and hold the Agent and each Lender harmless from and against any and all liability and loss with respect to or resulting from the nonpayment or delayed payment of any and all intangibles, documentary stamp and other similar taxes, fees and excises, if any, including any interest and penalties, that may be, or be determined to be, payable in connection with the transactions contemplated by this Agreement and the other Loan Documents or in any modification hereof or thereof; and (d) to pay and hold the Agent and each Lender harmless from and against any and all finder's or brokerage fees and commissions that may be payable in connection with the transactions contemplated by this Agreement and the other Loan Documents, other than any fees or commissions of finders or brokers engaged by the Agent or any Lender. 10.7. Indemnification. From and at all times after the date of this Agreement, and in addition to the costs and expenses payable under SECTION 10.6 and all of the Agent's and the Lenders' other rights and remedies against the Borrower, the Borrower agrees to indemnify and hold harmless the Agent, the Issuing Bank and each Lender and each of their directors, officers, employees, agents and their Affiliates (each, an "Indemnified Person") against any and all claims, losses, damages, liabilities, costs and expenses of any kind or nature whatsoever, including, without limitation, reasonable attorneys' fees, reasonable costs and expenses (collectively, "Indemnified Costs") incurred by or asserted against any such Indemnified Person from and after the date hereof, whether direct or indirect, as a result of or arising from or in any way relating to any suit, action or proceeding (including any inquiry or investigation) by any Person, whether threatened or initiated, asserting a claim for any legal or equitable remedy under any statute or regulation, including, without limitation, any federal or state securities laws, or under any common law or equitable cause or otherwise, arising from or in connection with the negotiation, preparation, execution, performance or enforcement of this Agreement or the other Loan Documents or any of the transactions contemplated herein or therein, and including, without limitation, Environmental Claims, whether or not such Indemnified Person is a party to any such action, proceeding or suit or the target of any such inquiry or investigation; provided, however, that no Indemnified Person shall have the right to be indemnified hereunder for any Indemnified Costs resulting from the gross negligence or willful misconduct of such Indemnified Person (as finally determined by a court of competent jurisdiction or pursuant to arbitration as set forth in SECTION 10.3) or resulting from any dispute solely between or among the Lenders or the Lenders and the Agent. Without limiting the generality of the foregoing, the Indemnified Costs with respect to Environmental Claims shall include, without limitation, amounts paid in settlement of claims, all consultant and expert fees and expenses of any Indemnified Person incurred in connection with any investigation of site conditions, any abatement, cleanup, remediation, removal or restoration work, or liability for any damages or injuries of any Person or to land, air, water or other natural resources. All of the foregoing losses, damages, costs and expenses of any Indemnified Person shall be payable by the Borrower within thirty (30) days after demand, and shall be additional Credit Obligations hereunder. In the event that the foregoing indemnity is unavailable or insufficient to hold each Indemnified Person harmless, then the Borrower will contribute to amounts paid or payable by such Indemnified Persons in respect of their losses, claims, damages or liabilities in such proportions as appropriately reflect the relative benefits received by and fault of the Borrower and such Indemnified Persons in connection with the matters as to which such losses, claims, damages or liabilities relate and other equitable considerations. Any Indemnified Party may submit a claim for indemnification hereunder by delivering written notice of such claim to the Borrower and, unless the claimant is the Agent, to the Agent, and such notice shall describe in reasonable detail the basis for the claim, the amount or estimated amount of the claim, and such other information as the Borrower or the Agent shall reasonable request. 100 10.8. Amendments, Waivers, Etc. Except as may be otherwise specifically set forth in this Agreement or the other Loan Documents, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be amended, modified, waived, discharged or terminated, and no consent to any departure by the Borrower from any provision hereof or thereof may be given, except in a writing signed by the Required Lenders; provided, however, that: (a) no such amendment, modification, waiver, discharge, termination or consent shall, without the consent of each Lender holding Credit Obligations directly affected thereby, (i) reduce the principal amount of, or rate of interest on, any Loan, or reduce any fees or other Credit Obligations (other than fees payable to the Agent for its own account) or any obligations of any Person now or hereafter primarily or contingently liable with respect to the Credit Obligations or (ii) postpone any date fixed for any payment of principal, interest (other than additional interest payable under SECTION 2.6(B) during the continuance of an Event of Default), fees (other than fees payable to the Agent for its own account) or any other Credit Obligations; (b) no such amendment, modification, waiver, discharge, termination or consent shall, without the consent of all Lenders, (i) increase the Commitments of any Lender (it being understood that a waiver of any Default or Event of Default or of any mandatory reduction in the Total Commitments shall not constitute such an increase), (ii) change the definition of "Required Lenders" or otherwise change the number or percentage of Lenders that shall be required for the Lenders or any of them to take or approve, or direct the Agent to take, any action hereunder, (iii) amend, modify or waive any of the provisions for extending, or take action to extend, the term of the Revolving Credit Facility, (iv) affect the obligation of the Lenders having Revolving Credit Commitments to become L/C Participants, (v) amend any provision of this SECTION 10.8, (vi) release all or substantially all of the Collateral or (vii) consent to the assignment or transfer by the Borrower, or by any other Person now or hereafter primarily or contingently liable with respect to the Credit Obligations, of any of its rights and obligations under this Agreement or any of the other Loan Documents; (c) no provision relating to the rights or obligations of the Swingline Lender or the Issuing Bank under this Agreement or any of the other Loan Documents may be amended, modified or waived without the consent of such Person; and (d) no provision relating to the rights or obligations of the Agent under this Agreement or any of the other Loan Documents may be amended, modified or waived without the consent of the Agent. 10.9. Rights and Remedies Cumulative, Non-Waiver, Etc. The enumeration of the Agent's and the Lenders' rights and remedies set forth in this Agreement and the other Loan Documents is not intended to be exhaustive, and the exercise by the Agent or any Lender of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder, under the other Loan Documents or under any other agreement between the Borrower and the Lenders, or any of them (or the Agent on their behalf), or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between any of the Borrower and the Agent or the Lenders or their agents or employees shall be effective to change, modify or discharge any provision of this Agreement or to constitute a waiver of any Event of Default. No 101 notice to or demand upon the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Agent or any Lender to exercise any right or remedy or take any other or further action in any circumstances without notice or demand. 10.10. Binding Effect, Assignment. All of the terms of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the successors and assigns of the Borrower, the Agent, the Issuing Bank and each Lender; provided, however, that (i) the Borrower may not sell, assign or transfer this Agreement or any portion hereof or thereof, including, without limitation, any of its rights, title, interests, remedies, powers and duties hereunder or thereunder and (ii) any assignees and participants of the Lenders and any successor Issuing Bank shall have such rights and obligations with respect to this Agreement and the other Loan Documents as are provided for in and pursuant to SECTION 10.5. 10.11. Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 10.12. Entire Agreement. THIS AGREEMENT AND THE LOAN DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF, INCLUDING WITHOUT LIMITATION THE COMMITMENT LETTER. THIS AGREEMENT, THE NOTES, THE OTHER LOAN DOCUMENTS AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 10.13. Interpretation. The captions to the various sections and subsections of this Agreement have been inserted for convenience only and shall not limit or affect any of the terms hereof. Unless the context otherwise requires, words in the singular include the plural and words in the plural include the singular, and the use of any gender shall be applicable to all genders. 10.14. Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, but all of which shall together constitute one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. 10.15. Conflict of Terms. The Exhibits and Schedules hereto and the other Loan Documents are incorporated in this Agreement by this reference thereto. Except as otherwise provided in this Agreement and except as otherwise provided in the other Loan Documents, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision of the other Loan Documents, the provision contained in this Agreement shall control. 10.16. Injunctive Relief. The Borrower recognizes that in the event it fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Agent and the Lenders. The Borrower therefore 102 agrees that the Agent and the Lenders, if the Agent so requests, shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages in any case where a remedy at law, in the reasonable good faith opinion of the Required Lenders, may prove to be inadequate relief. 10.17. Confidentiality. Each Lender agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all nonpublic confidential information provided in connection with this Agreement or any other Loan Document and agrees and undertakes that it shall not use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement. Any Lender may disclose such information (i) at the request of any bank regulatory authority or in connection with an examination of such Lender by any such authority, (ii) pursuant to subpoena or other court process, (iii) when required to do so in accordance with the provisions of any applicable law, (iv) at the express direction of any agency of any State of the United States of America or of any other jurisdiction in which such Lender conducts its business or (v) to such Lender's independent auditors and other professional advisors that have a reasonable need or basis for access thereto. The Lenders agree to use reasonable efforts to notify the Borrower within a reasonable period of time prior to any such disclosure, except no Lender shall be required to notify the Borrower of disclosures pursuant to a bank examination or audit. Notwithstanding the foregoing, the Borrower agrees and consents to the Agent's disclosure of information relating to this transaction to Gold Sheets and other similar bank trade publications. Such information will consist of deal terms and other information customarily found in such publications. 10.18. Effect of Amendment and Restatement. This Agreement amends and restates the Original Credit Agreement in its entirety; provided, however, that the provisions of the Original Credit Agreement and the other Credit Documents relating to indemnification or payment of fees, costs and expenses for the benefit of the Agent and the Lenders (in each case, as defined in the Original Credit Agreement), including, without limitation, the provisions of SECTIONS 2.11(A), 2.11(B), 2.12, 2.13, 2.18(H), 9.7, 10.6 and 10.7 of the Original Credit Agreement, shall survive the effectiveness of this Agreement and the amendment and restatement of the Original Credit Agreement effected hereby; provided, further, however, that the Original Credit Agreement remains in full force and effect until the Amendment Effective Date. Upon the effectiveness of this Agreement, (i) all Existing Loans (if any) shall be deemed to be Revolving Credit Loans hereunder, shall be evidenced by the Revolving Credit Notes and shall be entitled to all of the benefits of this Agreement and the other Loan Documents, and (ii) all other Loan Documents, instruments, certificates, financial statements and other documents executed or delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant to the Original Credit Agreement at any time prior to the effectiveness of this Agreement shall be deemed to have been executed or delivered pursuant to this Agreement. [Signature page to follow] 103 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their corporate names by their duly authorized corporate officers as of the date first above written. PROVINCE HEALTHCARE COMPANY By: /s/ CHRISTOPHER T. HANNON ---------------------------------------- Name: Christopher T. Hannon ----------------------------------- Title: Vice President of Finance ---------------------------------- FIRST UNION NATIONAL BANK, AS AGENT AND AS ISSUING BANK By: /s/ JOSEPH H. TOWELL ---------------------------------------- Name: Joseph H. Towell ----------------------------------- Title: Senior Vice President ---------------------------------- (signatures continued) 104 FIRST UNION NATIONAL BANK By: /s/ JOSEPH H. TOWELL ---------------------------------------- Name: Joseph H. Towell ----------------------------------- Title: Senior Vice President ---------------------------------- Revolving Credit Commitment: $23,460,127 Address: First Union National Bank One First Union Center, DC-5 301 South College Street Charlotte, North Carolina 28288-0735 Attention: Healthcare Finance Group Telephone: (704) 383-7121 Telecopy: (704) 383-9144 First Union National Bank 150 Fourth Avenue North 2nd Floor Nashville, Tennessee 37219 Attention: Carolyn Hannon Telephone: (615) 251-9374 Telecopy: (615) 251-9247 Wiring Instructions: First Union National Bank Charlotte, North Carolina ABA# 053000219 For further credit to: Syndication Agency Services GL# 465906 RC# 5007 Reference: Province Healthcare Company (signatures continued) 105 BANQUE PARIBAS By: /s/ ROGER MAY ---------------------------------------- Name: Roger May ----------------------------------- Title: AVP ---------------------------------- By: /s/ LARRY ROBINSON ---------------------------------------- Name: Larry Robinson ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $22,547,789 Lending Office, Hand Delivery Address and Mailing Address: Banque Paribas Houston Agency 1200 Smith Street, Suite 3100 Houston, Texas 77002 Telephone: (713) 659-4811 Telecopy: (713) 659-5234 Attention: Glenn Mealey Wiring Instructions: Bankers Trust Company New York ABA # 021001033 For Account 04202195 - Banque Paribas New York For further credit to: Acct. # 2144-001545 - Banque Paribas Houston Agency Reference: Province Healthcare Company Loan Operations Activity Contact: Banque Paribas 1200 Smith Street, Suite 3100 Houston, Texas 77002 Telephone: (713) 659-4811 Telecopy: (713) 659-5305 Primary Contact: Leah Evans-Hughes Secondary Contact: Kim Miller (signatures continued) 106 Banque Paribas Houston Agency Letter of Credit Activity Contact: Primary Contact: Bank Paribas New York 1200 Smith Street, Suite 3100 Houston, Texas 77002 Telephone: (713) 659-4811 Telecopy: (713) 659-3832 Telex: 166514 or 166343 Primary Contact: Cheryl Johnson Secondary Contact: Melissa Health Wiring Instructions for Letter of Credit Activity: Bankers Trust Company, New York ABA # 021001033 For Acct. # 04-204254 - Banque Paribas Houston Agency (signatures continued) 107 CREDIT LYONNAIS NEW YORK BRANCH By: /s/ JOHN OBERLE ---------------------------------------- Name: John Oberle ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $20,853,447 Lending Office, Hand Delivery Address and Mailing Address: Credit Lyonnais 1301 Avenue of the Americas New York, New York 10019 Telephone: (212) 261-7791 Telecopy: (212) 261-3440 Attention: Martin D. Golden Wiring Instructions: Credit Lyonnais New York, New York ABA # 0260-0807-3 Acct. # 01-88179-3701 Attention: Loan Servicing Reference: Province Healthcare Company (signatures continued) 108 NATIONSBANK OF TENNESSEE, N.A. By: /s/ ELIZABETH L. KNOX ---------------------------------------- Name: Elizabeth L. Knox ----------------------------------- Title: Senior Vice President ---------------------------------- Revolving Credit Commitment: $20,853,447 Lending Office, Hand Delivery Address and Mailing Address: NationsBank of Tennessee, N.A. 1 NationsBank Plaza TN1 100 04 17 Nashville, Tennessee 37239-1697 Telephone: (615) 749-3918 Telecopy: (615) 749-4951 Attention: Elizabeth Knox, SVP Wiring Instructions: NationsBank of Tennessee, N.A. Nashville, TN ABA # 064000020 Cr. GL 136621-0082 Specialized Loan Support Attn: Lareen Matthews Reference: Province Healthcare Company (signatures continued) 109 AMSOUTH BANK By: /s/ CATHY M. WIND ---------------------------------------- Name: Cathy M. Wind ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $17,377,872 Lending Office, Hand Delivery Address and Mailing Address: AmSouth Bank 333 Union Street, Suite 200 Nashville, Tennessee 37201 Telephone: (615) 291-5268 Telecopy: (615) 291-5257 Attention: Cathy Wind Wiring Instructions: AmSouth Bank ABA # 062000019 Attn: Kristi Mann (notify at 205-801-0250) Reference: Province Healthcare Company (signatures continued) 110 FIRST AMERICAN NATIONAL BANK By: /s/ SANDY HAMRICK ---------------------------------------- Name: Sandy Hamrick ----------------------------------- Title: Senior Vice President ---------------------------------- Revolving Credit Commitment: $13,033,404 Lending Office, Hand Delivery Address and Mailing Address: First American Center 2nd Floor - Healthcare Division Nashville, Tennessee 37237-0203 Telephone: (615) 748-2191 Telecopy: (615) 748-8480 Attention: Sandy Hamrick Wiring Instructions: First American National Bank Nashville, Tennessee ABA #: 064000017 For further credit to: WTCA# 901256 Attention: Frenisa Joy (615-365-5683) Reference: Province Healthcare Company (signatures continued) 111 KEY CORPORATE CAPITAL, INC. By: /s/ CHARLES J. SHOOP ---------------------------------------- Name: Charles J. Shoop ----------------------------------- Title: AVP ---------------------------------- Revolving Credit Commitment: $17,377,872 Lending Office, Hand Delivery Address and Mailing Address: KeyBank, N.A. 525 Vine Street, 6th Floor Cincinnati, Ohio 45202 Telephone: (513) 762-8292 Telecopy: (513) 762-8450 Attention: Charlie Shoop Wiring Instructions: KeyBank, N.A. ABA # 041001039 Commercial Loan Operations Acct. # 3057 Attn: Gina Iannaggi (216-689-3580) Reference: Province Healthcare Company (signatures continued) 112 LEHMAN COMMERCIAL PAPER INC. By: /s/ MICHELE SWANSON ---------------------------------------- Name: Michele Swanson ----------------------------------- Title: Authorized Signatory ---------------------------------- Revolving Credit Commitment: $17,377,872 Lending Office: Lehman Commercial Paper Inc. c/o Bankers Trust Company Corporate Trust & Agency Group, Loan Services 4 Albany Street, 7th Floor New York, New York 10006 Telephone: (212) 250-7262 Telecopy: (212) 250-6151 Attention: Chris Wahl and Lehman Commercial Paper Inc. 101 Hudson Street, 30th Floor Jersey City, New Jersey 07302 Telephone: (201) 524-4518 Telecopy: (201) 524-5847 Attention: Tom Wilson With copies of modifications to Credit Agreement and financial information only to: Michele Swanson Lehman Commercial Paper Inc. 3 World Financial Center, 10th Floor New York, New York 10285 Telephone: (212) 526-0330 Telecopy: (212) 528-0819 Lehman Commercial Paper Inc. Wiring Instructions: Bankers Trust ABA # 021-001-033 For further credit to: Favor NY Ltd. Loan Services / Lehman Acct. # 01-442-898 Attention: Chris Wahl (signatures continued) 113 NATIONAL CITY BANK OF KENTUCKY By: /s/ RODERIC M. BROWN ---------------------------------------- Name: Roderic M. Brown ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $17,377,872 Lending Office, Hand Delivery Address and Mailing Address: National City Bank of Kentucky 101 South Fifth Street Louisville, Kentucky 40202 Telephone: (502) 581-4369 Telecopy: (502) 581-4424 Attention: Roderic M. Brown Wiring Instructions: National City Bank of Kentucky ABA # 083000056 For further credit to: G/L # 151804 Commercial Loan Department Reference: Province Healthcare Company (signatures continued) 114 UNION BANK OF CALIFORNIA, N.A. By: /s/ ALBERT W. KELLEY ---------------------------------------- Name: Albert W. Kelley ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $17,377,872 Lending Office, Hand Delivery Address and Mailing Address: Union Bank of California 445 South Figueroa Street, 16th Floor Los Angeles, California 90071 Telephone: (213) 236-4284 Telecopy: (213) 236-7814 Attention: Albert W. Kelley, VP Wiring Instructions: Union Bank of California ABA # 1220-00496 For further credit to: Acct. # 070196431 Attn: Wire Clearing Account Reference: Province Healthcare Company (signatures continued) 115 FLEET NATIONAL BANK By: /s/ MARYANN S. SMITH ---------------------------------------- Name: MaryAnn S. Smith ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $17,377,872 Lending Office, Hand Delivery Address and Mailing Address: Fleet National Bank 75 State Street, MA BOF 04 A Boston, Massachusetts 02109 Telephone: (617) 346-1594 Telecopy: (617) 346-0610 Attention: Maryann S. Smith Wiring Instructions: Fleet National Bank ABA # 011000138 G/L # 1510351-03156 Reference: Province Healthcare Company (signatures continued) 116 MELLON BANK, N.A. By: /s/ MARSHA WICKER ---------------------------------------- Name: Marsha Wicker ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $13,033,404 Lending Office, Hand Delivery Address and Mailing Address: Mellon Bank, N.A. One Mellon Bank Center, Room 151-0370 Pittsburgh, Pennsylvania 15258-0001 Telephone: (412) 234-4458 Telecopy: (412) 236-0287 Attention: Scott Hennessee, Vice President Wiring Instructions: Mellon Bank, N.A. ABA # 0430-0026-1 Acct. # 990873800 Attn: Dan Steele Reference: Province Healthcare Company (signatures continued) 117 CORESTATES BANK, N.A. By: /s/ ELIZABETH D. MORRIS ---------------------------------------- Name: Elizabeth D. Morris ----------------------------------- Title: Vice President ---------------------------------- Revolving Credit Commitment: $6,951,149 Lending Office, Hand Delivery Address and Mailing Address: CoreStates Bank, N.A. 1339 Chestnut Street FC 1-8-3-22 Philadelphia, Pennsylvania 19101 Telephone: (215) 786-7275 Telecopy: (215) 973-2738 Attention: Liz Morris Wiring Instructions: CoreStates Bank, N.A. ABA # 031000011 A/C# 132-0452 Commercial Loan Services RC 2490 Reference: Province Healthcare Company 118 Annex 1 to Amended and Restated Credit Agreement First Union National Bank, as Agent Province Healthcare Company March 30, 1998 / $225,000,000 -----------------------------------
================================================================================================================================ EXISTING LOANS EXISTING LOANS AMOUNT (PRIOR TO (AFTER PURCHASED LENDER AGREEMENT) ASSIGNMENTS) (SOLD) PRO RATA SHARE COMMITMENT - -------------------------------------------------------------------------------------------------------------------------------- First Union National Bank $ 6,750,000 $4,692,025.49 ($2,057,974.51) 10.4267233067% $ 23,460,127 - -------------------------------------------------------------------------------------------------------------------------------- AmSouth Bank $ 6,075,000 $3,475,574.44 ($2,599,425.56) 7.7234987467% $ 17,377,872 - -------------------------------------------------------------------------------------------------------------------------------- Lehman Commercial Paper Inc. $ 5,625,000 $3,475,574.44 ($2,149,425.56) 7.7234987467% $ 17,377,872 - -------------------------------------------------------------------------------------------------------------------------------- Credit Lyonnais New York Branch $ 5,175,000 $4,170,689.32 ($1,004,310.68) 9.2681984933% $ 20,853,447 - -------------------------------------------------------------------------------------------------------------------------------- Banque Paribas Houston Agency $ 4,500,000 $4,509,557.83 $ 9,557.83 10.0212396222% $ 22,547,789 - -------------------------------------------------------------------------------------------------------------------------------- Key Bank of Oregon $ 4,500,000 $ 0 0% 7.7234987467% $ 0 - -------------------------------------------------------------------------------------------------------------------------------- Key Corporate Capital Inc. $ 0 $3,475,574.44 $ 3,475,574.44 7.7234987467% $ 17,377,872 - -------------------------------------------------------------------------------------------------------------------------------- National City Bank of Kentucky $ 4,500,000 $3,475,574.44 ($1,024,425.56) 7.7234987467% $ 17,377,872 - -------------------------------------------------------------------------------------------------------------------------------- Union Bank of California $ 4,500,000 $3,475,574.44 ($1,024,425.56) 7.7234987467% $ 17,377,872 - -------------------------------------------------------------------------------------------------------------------------------- First American National Bank $ 3,375,000 $2,606,680.83 ($ 768,319.17) 5.7926240578% $ 13,033,404 - -------------------------------------------------------------------------------------------------------------------------------- Nationsbank of Tennessee, N.A. $ 0 $4,170,689.32 $ 4,170,689.32 9.2681984933% $ 20,853,477 - -------------------------------------------------------------------------------------------------------------------------------- Corestates Bank, N.A $ 0 $1,390,229.77 $ 1,390,229.77 3.0893994978% $ 6,951,149 - -------------------------------------------------------------------------------------------------------------------------------- Fleet National Bank $ 0 $3,475,574.44 $ 3,475,574.44 7.7234987467% $ 17,377,872 - -------------------------------------------------------------------------------------------------------------------------------- Mellon Bank, N.A $ 0 $2,606,680.83 $ 2,606,680.83 5.7926240578% $ 13,033,404 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL $45,000,000 $ 45,000,000 100.0000% $225,000,000 ================================================================================================================================
The Schedules and Exhibits to the Amended and Restated Credit Agreement are on file at the Company's offices in Nashville, TN. EX-4.6 3 PARTICIPATION AGREEMENT 1 EXHIBIT 4.6 - ------------------------------------------------------------------------------- PARTICIPATION AGREEMENT Dated as of March 30, 1998 among PROVINCE HEALTHCARE COMPANY as the Construction Agent and as the Lessee, THE VARIOUS PARTIES HERETO FROM TIME TO TIME, as the Guarantors, FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES HERETO FROM TIME TO TIME, as the Holders, THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES HERETO FROM TIME TO TIME, as the Lenders, and FIRST UNION NATIONAL BANK, as the Agent for the Lenders and respecting the Security Documents, as the Agent for the Lenders and the Holders, to the extent of their interests - ------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page SECTION 1. THE LOANS.............................................................................................1 SECTION 2. HOLDER ADVANCES.......................................................................................2 SECTION 3. SUMMARY OF TRANSACTIONS...............................................................................2 3.1. Operative Agreements................................................................................2 3.2. Property Purchase...................................................................................2 3.3. Construction of Improvements; Lease or Disposition of Property......................................3 SECTION 4. THE CLOSINGS..........................................................................................3 4.1. Initial Closing Date................................................................................3 4.2. Initial Closing Date; Property Closing Dates; Acquisition Advances; Construction Advances...........3 SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS............................................................4 5.1. General.............................................................................................4 5.2. Procedures for Funding..............................................................................4 5.3. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders Relating to the Initial Closing Date and the Advance of Funds for the Acquisition of a Property.............................6 5.4. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders Relating to the Advance of Funds after the Acquisition Advance.............................................................11 5.5. Additional Reporting and Delivery Requirements on Completion Date and on Construction Period Termination Date...................................................................................13 5.6. The Construction Agent Delivery of Construction Budget Modifications...............................14 5.7. Restrictions on Liens..............................................................................14 5.8. Punch List Items...................................................................................14 5.9. Joinder Agreement Requirements.....................................................................14 SECTION 6. REPRESENTATIONS AND WARRANTIES.......................................................................15 6.2. Representations and Warranties of the Borrower.....................................................15 6.3. Representations and Warranties of Each Credit Party................................................18 SECTION 6B. GUARANTY............................................................................................23 6B.1. Guaranty of Payment and Performance...............................................................23 6B.2. Obligations Unconditional.........................................................................23 6B.3. Modifications.....................................................................................24 6B.4. Waiver of Rights..................................................................................24 6B.5. Reinstatement.....................................................................................25 6B.6. Remedies..........................................................................................25 6B.7. Limitation of Guaranty............................................................................25 6B.8. Payment of Amounts to the Agent...................................................................26 6B.9. Release of Guarantors.............................................................................26
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SECTION 7. PAYMENT OF CERTAIN EXPENSES...........................................................................26 7.1. Transaction Expenses...............................................................................26 7.2. [Intentionally Omitted]............................................................................27 7.3. Certain Fees and Expenses..........................................................................28 7.4. Facility Fee.......................................................................................28 SECTION 8. OTHER COVENANTS AND AGREEMENTS.......................................................................28 8.1. Cooperation with the Construction Agent or the Lessee..............................................28 8.2. Covenants of the Owner Trustee and the Holders.....................................................29 8.3. Credit Party Covenants, Consent and Acknowledgment.................................................30 8.4. Sharing of Certain Payments........................................................................34 8.5. Grant of Easements, etc............................................................................34 8.6. Appointment by the Agent, the Lenders, the Holders and the Owner Trustee...........................35 8.7. Collection and Allocation of Payments and Other Amounts............................................35 8.8. Release of Properties, etc.........................................................................39 SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.................................................................39 9.1. The Construction Agent's and the Lessee's Credit Agreement Rights..................................39 9.2. The Construction Agent's and the Lessee's Trust Agreement Rights...................................40 SECTION 10. TRANSFER OF INTEREST................................................................................40 10.1. Restrictions on Transfer..........................................................................40 10.2. Effect of Transfer................................................................................41 SECTION 11. INDEMNIFICATION.....................................................................................41 11.1. General Indemnity.................................................................................41 11.2. General Tax Indemnity.............................................................................44 11.3. Increased Costs, Illegality, etc..................................................................47 11.4. Funding/Contribution Indemnity....................................................................49 11.5. Withholding Taxes.................................................................................49 11.6. Replacement of Lenders and Holders................................................................52 11.7. EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC............................53 SECTION 12. MISCELLANEOUS.......................................................................................54 12.1. Survival of Agreements............................................................................54 12.2. No Broker, etc....................................................................................54 12.3. Notices...........................................................................................54 12.4. Counterparts......................................................................................56 12.5. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters...................................56 12.6. Headings, etc.....................................................................................58 12.7. Parties in Interest...............................................................................58 12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE; ARBITRATION...............58 12.9. Severability......................................................................................60 12.10. Liability Limited................................................................................60 12.11. Rights of the Credit Parties.....................................................................62 12.12. Further Assurances...............................................................................62 12.13. Calculations under Operative Agreements..........................................................62
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12.14. Confidentiality..................................................................................62 12.15. Financial Reporting/Tax Characterization.........................................................64 12.16. Set-off..........................................................................................64
EXHIBITS A Requisition Form (Sections 4.2, 5.2, 5.3 and 5.4) B Outside Counsel Opinion for the Lessee (Section 5.3(j)) C [Intentionally Omitted] D Officer's Certificate (Section 5.3(aa)) E Officer's Certificate (Section 5.3(bb)) F Officer's Certificate (Section 5.3(dd)) G Officer's Certificate (Section 5.3(ee)) H Legal Opinion of Owner Trustee's Counsel (Section 5.3(ff)) I Outside Counsel Opinion for the Lessee (Section 5.3(gg)) J Officer's Certificate (Section 5.5) K Description of Material Litigation (Section 6.3(d)) L Compliance Certificate M Form of Joinder Agreement (Section 5.9) N States of Incorporation/Formation and Principal Place of Business of Each Guarantor (Section 6.3(i)) Appendix A Rules of Usage and Definitions iii 5 PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT dated as of March 30, 1998 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, this "Agreement") is by and among PROVINCE HEALTHCARE COMPANY a Delaware corporation (the "Lessee" or the "Construction Agent"); the various parties hereto from time to time as guarantors (subject to the definition of Guarantors in Appendix A hereto, individually, a "Guarantor" and collectively, the "Guarantors"); FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually (in its individual capacity, the "Trust Company"), except as expressly stated herein, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1 (the "Owner Trustee", the "Borrower" or the "Lessor"); the various banks and other lending institutions which are parties hereto from time to time as lenders (subject to the definition of Lenders in Appendix A hereto, individually, a "Lender" and collectively, the "Lenders"); FIRST UNION NATIONAL BANK, a national banking association, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (in such capacity, the "Agent"); the various banks and other lending institutions which are parties hereto from time to time as holders of certificates issued with respect to the PHC Real Estate Trust 1998-1 (subject to the definition of Holders in Appendix A hereto, individually, a "Holder" and collectively, the "Holders"). Capitalized terms used but not otherwise defined in this Agreement shall have the meanings set forth in Appendix A hereto. In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. THE LOANS. Subject to the terms and conditions of this Agreement and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, the Lenders have agreed to make Loans to the Lessor from time to time in an aggregate principal amount of up to the aggregate amount of the Commitments of the Lenders in order for the Lessor to acquire the Properties and certain Improvements, to develop and construct certain Improvements in accordance with the Agency Agreement and the terms and provisions hereof, to construct Modifications and for the other purposes described herein, and in consideration of the receipt of proceeds of the Loans, the Lessor will issue the Notes. The Loans shall be made and the Notes shall be issued pursuant to the Credit Agreement. Pursuant to Section 5 of this Agreement and Section 2 of the Credit Agreement, the Loans will be made to the Lessor from time to time at the request of (a) the Construction Agent in consideration for the Construction Agent agreeing for the benefit of the Lessor, pursuant to the Agency Agreement, to acquire the Properties, to acquire the Equipment, to construct certain Improvements and to cause the Lessee to lease the Properties, each in accordance with the Agency Agreement and the other Operative Agreements or (b) the Lessee in consideration for the Lessee agreeing for the benefit of the 6 Lessor, pursuant to the Lease, to construct Modifications in accordance with the Lease and the other Operative Agreements. The Loans and the obligations of the Lessor under the Credit Agreement shall be secured by the Collateral. SECTION 2. HOLDER ADVANCES. Subject to the terms and conditions of this Agreement and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, on each date Advances are requested to be made in accordance with Section 5 hereof, each Holder shall make a Holder Advance on a pro rata basis to the Lessor with respect to the PHC Real Estate Trust 1998-1 based on its Holder Commitment in an amount in immediately available funds such that the aggregate of all Holder Advances on such date shall be three percent (3%) of the amount of the Requested Funds on such date; provided, that no Holder shall be obligated for any Holder Advance in excess of its pro rata share of the Available Holder Commitment. The aggregate amount of Holder Advances shall be up to the aggregate amount of the Holder Commitments. No prepayment or any other payment with respect to any Advance shall be permitted such that the Holder Advance with respect to such Advance is less than three percent (3%) of the outstanding amount of such Advance, except in connection with termination or expiration of the Term or in connection with the exercise of remedies relating to the occurrence of a Lease Event of Default. The representations, warranties, covenants and agreements of the Holders herein and in the other Operative Agreements are several, and not joint or joint and several. SECTION 3. SUMMARY OF TRANSACTIONS. 3.1. OPERATIVE AGREEMENTS. On the date hereof, each of the respective parties hereto and thereto shall execute and deliver this Agreement, the Lease, each applicable Ground Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust Agreement, the Certificates, the Security Agreement, each applicable Mortgage Instrument and such other documents, instruments, certificates and opinions of counsel as agreed to by the parties hereto. 3.2. PROPERTY PURCHASE. On each Property Closing Date and subject to the terms and conditions of this Agreement (a) the Holders will each make a Holder Advance in accordance with Sections 2 and 5 of this Agreement and the terms and provisions of the Trust Agreement, (b) the Lenders will each make Loans in accordance with Sections 1 and 5 of this Agreement and the terms and provisions of the Credit Agreement, (c) the Lessor will purchase and acquire good and marketable title to or ground lease pursuant to a Ground Lease, the applicable Property, each to be within an Approved State, identified by the Construction Agent, in each case pursuant to a Deed, Bill of Sale or Ground Lease, as the case may be, and grant the Agent a lien on such Property by execution of 2 7 the required Security Documents, (d) the Agent, the Lessee and the Lessor shall execute and deliver a Lease Supplement relating to such Property and (e) the Term shall commence with respect to such Property. 3.3. CONSTRUCTION OF IMPROVEMENTS; LEASE OR DISPOSITION OF PROPERTY. Construction Advances will be made with respect to particular Improvements to be constructed and with respect to ongoing Work regarding the Equipment and construction of particular Improvements, in each case, pursuant to the terms and conditions of this Agreement, the Agency Agreement or Section 11.1(c) of the Lease. The Construction Agent (or, respecting Section 11.1(c) of the Lease, the Lessee) will act as a construction agent on behalf of the Lessor respecting the Work regarding the Equipment, the construction of such Improvements (or, respecting Section 11.1(c) of the Lease, the Modifications) and the expenditures of the Construction Advances related to the foregoing. The Construction Agent shall promptly notify the Lessor upon Completion of the Improvements and the Lessee shall commence to pay Basic Rent as of the Rent Commencement Date. The Lessee shall promptly notify the Lessor upon completion of each Modification. SECTION 4. THE CLOSINGS. 4.1. INITIAL CLOSING DATE. All documents and instruments required to be delivered on the Initial Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC, Charlotte, North Carolina, or at such other location as may be determined by the Lessor, the Agent and the Lessee. 4.2. INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION ADVANCES; CONSTRUCTION ADVANCES. The Construction Agent (or, respecting Section 11.1(c) of the Lease, the Lessee) shall deliver to the Agent a requisition (a "Requisition"), in the form attached hereto as EXHIBIT A or in such other form as is satisfactory to the Agent, in its reasonable discretion, in connection with (a) the Transaction Expenses and other fees, expenses and disbursements payable, pursuant to Section 7.1, by the Lessor and (b) each Acquisition Advance pursuant to Section 5.3 and (c) each Construction Advance pursuant to Section 5.4. 3 8 SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS. 5.1. GENERAL. (a) To the extent funds have been advanced to the Lessor as Loans by the Lenders and to the Lessor as Holder Advances by the Holders, the Lessor will use such funds from time to time in accordance with the terms and conditions of this Agreement and the other Operative Agreements (i) at the direction of the Construction Agent to acquire the Properties in accordance with the terms of this Agreement, the Agency Agreement and the other Operative Agreements, (ii) to make Advances to the Construction Agent to permit the acquisition, testing, engineering, installation, development, construction, modification, design, and renovation, as applicable, of the Properties (or components thereof) in accordance with the terms of the Agency Agreement and the other Operative Agreements, (iii) to make Advances to the Lessee to fund Modifications pursuant to Section 11.1(c) of the Lease and (iv) to pay Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Sections 7.1(a) and 7.1(b). (b) In lieu of the payment of interest on the Loans and Holder Yield on the Holder Advances on any Scheduled Interest Payment Date with respect to any Property during the period prior to the Rent Commencement Date with respect to such Property, (i) each Lender's Loan shall automatically be increased by the amount of interest accrued and unpaid on such Loan for such period (except to the extent that at any time such increase would cause such Lender's Loan to exceed such Lender's Available Commitment, in which case the Lessee shall pay such excess amount to such Lender in immediately available funds on the date such Lender's Available Commitment was exceeded), and (ii) each Holder's Holder Advance shall automatically be increased by the amount of Holder Yield accrued and unpaid on such Holder Advance for such period (except to the extent that at any time such increase would cause the Holder Advance of such Holder to exceed such Holder's Available Holder Commitment, in which case the Lessee shall pay such excess amount to such Holder in immediately available funds on the date the Available Holder Commitment of such Holder was exceeded). Such increases in a Lender's Loan and a Holder's Holder Advance shall occur without any disbursement of funds by any Person. 5.2. PROCEDURES FOR FUNDING. (a) The Construction Agent (or, respecting Section 11.1(c) of the Lease, the Lessee) shall designate the date for Advances hereunder in accordance with the terms and provisions hereof; provided, however, it is understood and agreed that no more than two (2) Advances (excluding any conversion and/or continuation of any Loans or Holder Advances) may be requested during any calendar month. Not less than (i) three (3) Business Days prior to the Initial Closing Date and (ii) three (3) Business Days prior to 4 9 the date on which any Acquisition Advance or Construction Advance is to be made, the Construction Agent shall deliver to the Agent, (A) with respect to the Initial Closing Date and each Acquisition Advance, a Requisition as described in Section 4.2 hereof (including without limitation a legal description of the Land, a schedule of the Improvements, if any, and a schedule of the Equipment, if any, acquired or to be acquired on such date, and a schedule of the Work, if any, to be performed, each of the foregoing in a form reasonably acceptable to the Agent) and (B) with respect to each Construction Advance, a Requisition identifying (among other things) the Property to which such Construction Advance relates. (b) Each Requisition shall: (i) be irrevocable, (ii) request funds in an amount that is not in excess of the total aggregate of the Available Commitments plus the Available Holder Commitments at such time, and (iii) request that the Holders make Holder Advances and that the Lenders make Loans to the Lessor for the payment of Transaction Expenses, Property Acquisition Costs (in the case of an Acquisition Advance) or other Property Costs (in the case of a Construction Advance) that have previously been incurred or are to be incurred on the date of such Advance to the extent such were not subject to a prior Requisition, in each case as specified in the Requisition. (c) Subject to the satisfaction of the conditions precedent set forth in Sections 5.3 or 5.4, as applicable, on each Property Closing Date or the date on which the Construction Advance is to be made, as applicable, (i) the Lenders shall make Loans based on their respective Lender Commitments to the Lessor in an aggregate amount equal to ninety-seven percent (97%) of the Requested Funds specified in any Requisition (ratably between the Tranche A Lenders and the Tranche B Lenders with the Tranche A Lenders funding eighty-five percent (85%) of the Requested Funds and the Tranche B Lenders funding twelve percent (12%) of the Requested Funds), up to an aggregate principal amount equal to the aggregate of the Available Commitments, (ii) each Holder shall make a Holder Advance based on its Holder Commitment in an amount such that the aggregate of all Holder Advances at such time shall be three percent (3%) of the balance of the Requested Funds specified in such Requisition, up to the aggregate advanced amount equal to the aggregate of the Available Holder Commitments; and (iii) the total amount of such Loans and Holder Advances made on such date shall (x) be used by the Lessor to pay Property Costs and/or Transaction Expenses within three (3) Business Days of the receipt by the Lessor of such Advance or (y) be advanced by the Lessor on the date of such Advance to the Construction Agent or the Lessee to pay Property Costs, as applicable. Notwithstanding that the Operative Agreements state that Advances shall be directed to the Lessor, each Advance shall in fact be directed to the Agent (for the benefit of the Lessor) and applied by the Agent (for the benefit of the Lessor) pursuant to the requirements imposed on the Lessor under the Operative Agreements. (d) With respect to an Advance obtained by the Lessor to pay for Property Costs and/or Transaction Expenses or other costs payable under Section 7.1 hereof and not expended by the Lessor for such purpose on the date of such Advance, such amounts 5 10 shall be held by the Lessor (or the Agent on behalf of the Lessor) until the applicable closing date or, if such closing date does not occur within three (3) Business Days of the date of the Lessor's receipt of such Advance, shall be applied regarding the applicable Advance to repay the Lenders and the Holders and, subject to the terms hereof, and of the Credit Agreement and the Trust Agreement, shall remain available for future Advances. Any such amounts held by the Lessor (or the Agent on behalf of the Lessor) shall be subject to the lien of the Security Agreement. (e) All Operative Agreements which are to be delivered to the Lessor, the Agent, the Lenders or the Holders shall be delivered to the Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders, and such items (except for Notes, Certificates and chattel paper originals, with respect to which in each case there shall be only one original) shall be delivered with originals sufficient for the Lessor, the Agent, each Lender and each Holder. All other items which are to be delivered to the Lessor, the Agent, the Lenders or the Holders shall be delivered to the Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders, and such other items shall be held by the Agent. To the extent any such other items are requested in writing from time to time by the Lessor, any Lender or any Holder, the Agent shall provide a copy of such item to the party requesting it. (f) Notwithstanding the completion of any closing under this Agreement pursuant to Sections 5.3 or 5.4, each condition precedent in connection with any such closing may be subsequently enforced by the Agent (unless such has been expressly waived in writing by the Agent). 5.3. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE OF FUNDS FOR THE ACQUISITION OF A PROPERTY. The obligations (i) on the Initial Closing Date of the Lessor, the Agent, the Lenders and the Holders to enter into the transactions contemplated by this Agreement, including without limitation the obligation to execute and deliver the applicable Operative Agreements to which each is a party on the Initial Closing Date, (ii) on the Initial Closing Date of the Holders to make Holder Advances, and of the Lenders to make Loans in order to pay Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Section 7.1(a) of this Agreement and (iii) on a Property Closing Date for the purpose of providing funds to the Lessor necessary to pay the Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Section 7.1(b) of this Agreement and to acquire or ground lease a Property (an "Acquisition Advance"), in each case (with regard to the foregoing Sections 5.3(i), (ii) and (iii)) are subject to the satisfaction or waiver of the following conditions precedent on or prior to the Initial Closing Date or the applicable Property Closing Date, as the case may be (To the extent such conditions precedent require the delivery of any agreement, certificate, instrument, memorandum, legal or other opinion, appraisal, commitment, title insurance commitment, lien report or any other document of any kind or type, such shall be in form and substance satisfactory to the Agent, in its reasonable discretion. Notwithstanding the foregoing, the 6 11 obligations of each party shall not be subject to any conditions contained in this Section 5.3 which are required to be performed by such party.): (a) the correctness of the representations and warranties of the parties to this Agreement contained herein, in each of the other Operative Agreements and each certificate delivered pursuant to any Operative Agreement (including without limitation the Incorporated Representations and Warranties) on each such date, except to the extent the facts upon which such representation and warranty are based may be changed as a result of transactions or occurrences permitted or contemplated hereby or such representation or warranty relates solely to a prior date; (b) the performance by the parties to this Agreement of their respective agreements contained herein and in the other Operative Agreements to be performed by them on or prior to each such date; (c) the Agent shall have received a fully executed counterpart copy of the Requisition, appropriately completed; (d) title to each such Property shall conform to the representations and warranties set forth in Section 6.3(l) hereof; (e) the Construction Agent shall have delivered to the Agent a good standing certificate for the Construction Agent in the state where each such Property is located (as of the applicable Property Closing Date), the Deed with respect to the Land and existing Improvements (if any), a copy of the Ground Lease (if any), and a copy of the Bill of Sale with respect to the Equipment (if any), respecting such of the foregoing as are being acquired or ground leased on each such date with the proceeds of the Loans and Holder Advances or which have been previously acquired or ground leased with the proceeds of the Loans and Holder Advances and such Land, existing Improvements (if any) and Equipment (if any) shall be located in an Approved State; (f) there shall not have occurred and be continuing any Default or Event of Default under any of the Operative Agreements and no Default or Event of Default under any of the Operative Agreements will have occurred and be continuing after giving effect to the Advance requested by each such Requisition; (g) the Construction Agent shall have delivered to the Agent title insurance commitments to issue policies respecting each such Property in favor of the Lessor and the Agent through an agent or agency selected by the Construction Agent and from a title insurance company acceptable to the Agent, with such title exceptions thereto as are acceptable to the Agent; (h) the Construction Agent shall have delivered to the Agent an environmental site assessment respecting each such Property prepared by an independent recognized professional selected by the Construction Agent and acceptable to the Agent; 7 12 (i) the Construction Agent shall have delivered to the Agent a survey (with a flood hazard certification) respecting each such Property prepared by an independent recognized professional acceptable to the Agent; (j) unless such an opinion has previously been delivered with respect to a particular state, the Construction Agent shall have caused to be delivered to the Agent a legal opinion in the form attached hereto as EXHIBIT B or in such other form as is acceptable to the Agent with respect to local law real property issues respecting the state in which each such Property is located addressed to the Lessor, the Agent, the Lenders and the Holders from counsel located in the state where each such Property is located, and prepared by counsel selected by the Construction Agent and acceptable to the Agent; (k) the Agent shall be satisfied that the acquisition, ground leasing and/or holding of each such Property and the execution of the Mortgage Instrument and the other Security Documents will not materially and adversely affect the rights of the Lessor, the Agent, the Holders or the Lenders under or with respect to the Operative Agreements; (l) the Construction Agent shall have delivered to the Agent invoices for, or other reasonably satisfactory evidence of, the various Transaction Expenses and other fees, expenses and disbursements referenced in Sections 7.1(a) or 7.1(b) of this Agreement, as appropriate; (m) the Construction Agent shall have caused to be delivered to the Agent a Mortgage Instrument (substantially in such form as necessary to conform to applicable state law), Lessor Financing Statements and Lender Financing Statements respecting each such Property, all fully executed and in recordable form; (n) the Lessee shall have delivered to the Agent with respect to each such Property a Lease Supplement and a memorandum (or short form lease) regarding the Lease and such Lease Supplement (such memorandum or short form lease to be substantially in the form attached to the Lease as EXHIBIT B or in such other form as is acceptable to the Agent, with modifications as necessary to conform to applicable state law, and in form suitable for recording); (o) with respect to each Acquisition Advance, the sum of the Available Commitment plus the Available Holder Commitment (after deducting the Unfunded Amount, if any, and after giving effect to the Acquisition Advance) will be sufficient to pay all amounts payable therefrom; (p) if any such Property is subject to a Ground Lease, the Construction Agent shall have caused a lease memorandum (or short form lease) to be delivered to the Agent for such Ground Lease and, if requested by the Agent, a landlord waiver and a mortgagee waiver (in each case, in such form as is acceptable to the Agent); 8 13 (q) counsel (acceptable to the Agent) for the ground lessor of each such Property subject to a Ground Lease shall have issued to the Lessor, the Agent, the Lenders and the Holders, its opinion; (r) the Construction Agent shall have delivered to the Agent a preliminary Construction Budget for each such Property, if applicable; (s) the Construction Agent shall have provided evidence to the Agent of insurance with respect to each such Property as provided in the Lease; (t) subject to Section 5.5 of this Agreement, the Construction Agent shall have caused an Appraisal regarding each such Property to be provided to the Agent from an appraiser satisfactory to the Agent; (u) [intentionally omitted]; (v) the Construction Agent shall cause (i) Uniform Commercial Code lien searches, tax lien searches and judgment lien searches regarding the Lessee to be conducted (and copies thereof to be delivered to the Agent) in such jurisdictions as determined by the Agent by a nationally recognized search company selected by the Construction Agent and acceptable to the Agent and (ii) the liens referenced in such lien searches which are objectionable to the Agent to be either removed or otherwise handled in a manner satisfactory to the Agent; (w) all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Agreements and/or documents related thereto shall have been paid or provisions for such payment shall have been made to the satisfaction of the Agent; (x) [intentionally omitted]; (y) in the opinion of the Agent and its counsel, the transactions contemplated by the Operative Agreements do not and will not subject the Lessor, the Lenders, the Agent or the Holders to any materially adverse regulatory prohibitions, constraints, penalties; (z) each of the Operative Agreements to be entered into on such date shall have been duly authorized, executed and delivered by the parties thereto, and shall be in full force and effect, and the Agent shall have received a fully executed copy of each of the Operative Agreements; (aa) as of the Initial Closing Date only, the Agent shall have received an Officer's Certificate, dated as of the Initial Closing Date, of the Lessee in the form attached hereto as EXHIBIT D or in such other form as is acceptable to the Agent stating that (i) each and every representation and warranty of each Credit Party contained in the 9 14 Operative Agreements to which it is a party is true and correct on and as of the Initial Closing Date; (ii) no Default or Event of Default has occurred and is continuing under any Operative Agreement; (iii) each Operative Agreement to which any Credit Party is a party is in full force and effect with respect to it; and (iv) each Credit Party has duly performed and complied with all covenants, agreements and conditions contained herein or in any Operative Agreement required to be performed or complied with by it on or prior to the Initial Closing Date; (bb) as of the Initial Closing Date only, the Agent shall have received (i) a certificate of the Secretary or an Assistant Secretary of each Credit Party, dated as of the Initial Closing Date, in the form attached hereto as EXHIBIT E or in such other form as is acceptable to the Agent attaching and certifying as to (1) the resolutions of the Board of Directors of such Credit Party duly authorizing the execution, delivery and performance by such Credit Party of each of the Operative Agreements to which it is or will be a party, (2) the articles of incorporation or other such similar organizational documents of such Credit Party certified as of a recent date by the Secretary of State of its state of incorporation and its by-laws and (3) the incumbency and signature of persons authorized to execute and deliver on behalf of such Credit Party the Operative Agreements to which it is or will be a party and (ii) a good standing certificate (or local equivalent) from the appropriate office of the respective states where such Credit Party is incorporated and where the principal place of business of such Credit Party is located as to its good standing in each such state; (cc) since the date of the most recent audited Financial Statements (as such term is defined in the Lessee Credit Agreement) of the Lessee, there shall not have occurred any event, condition or state of facts which shall or could reasonably be expected to have a Material Adverse Effect, other than as specifically contemplated by the Operative Agreements; (dd) as of the Initial Closing Date only, the Agent shall have received an Officer's Certificate of the Lessor dated as of the Initial Closing Date in the form attached hereto as EXHIBIT F or in such other form as is acceptable to the Agent, stating that (i) each and every representation and warranty of the Lessor contained in the Operative Agreements to which it is a party is true and correct on and as of the Initial Closing Date, (ii) each Operative Agreement to which the Lessor is a party is in full force and effect with respect to it and (iii) the Lessor has duly performed and complied with all covenants, agreements and conditions contained herein or in any Operative Agreement required to be performed or complied with by it on or prior to the Initial Closing Date; (ee) as of the Initial Closing Date only, the Agent shall have received (i) a certificate of the Secretary, an Assistant Secretary, Trust Officer or Vice President of the Trust Company in the form attached hereto as EXHIBIT G or in such other form as is acceptable to the Agent, attaching and certifying as to (A) the signing resolutions duly authorizing the execution, delivery and performance by the Lessor of each of the Operative Agreements to which it is or will be a party, (B) its articles of association or 10 15 other equivalent charter documents and its by-laws, as the case may be, certified as of a recent date by an appropriate officer of the Trust Company and (C) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Agreements to which it is a party and (ii) a good standing certificate from the Office of the Comptroller of the Currency; (ff) as of the Initial Closing Date only, counsel for the Lessor acceptable to the Agent shall have issued to the Lessee, the Holders, the Lenders and the Agent its opinion in the form attached hereto as EXHIBIT H or in such other form as is reasonably acceptable to the Agent; and (gg) as of the Initial Closing Date only, the Construction Agent shall have caused to be delivered to the Agent a legal opinion in the form attached hereto as EXHIBIT I or in such other form as is reasonably acceptable to the Agent, addressed to the Lessor, the Agent, the Lenders and the Holders, prepared by counsel acceptable to the Agent; (hh) as of the Initial Closing Date only, the Construction Agent shall cause (i) tax lien searches and judgment lien searches regarding each Credit Party to be conducted by a nationally recognized search company acceptable to the Agent (and copies thereof to be delivered to the Agent) in such jurisdictions as determined by the Agent and (ii) the liens referenced in such lien searches which are objectionable to the Agent to be either removed or otherwise handled in a manner satisfactory to the Agent; and (ii) as of the Property Closing Date, with respect to each Permitted Facility which is an improvement to any medical office or acute care facility (but does not constitute the entire medical office or acute care facility), the Construction Agent shall cause to be in place all access easements, utility easements, parking easements and any and all other easements and/or other documents as required by the Agent in its reasonable discretion. 5.4. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE ACQUISITION ADVANCE. The obligations of the Holders to make Holder Advances, and the Lenders to make Loans in connection with all requests for Advances subsequent to the acquisition of a Property including without limitation amounts respecting Section 11.1(c) of the Lease (and to pay the Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Section 7.1 of this Agreement in connection therewith) are subject to the satisfaction or waiver of the following conditions precedent (To the extent such conditions precedent require the delivery of any agreement, certificate, instrument, memorandum, legal or other opinion, appraisal, commitment, title insurance commitment, lien report or any other document of any kind or type, such shall be in form and substance satisfactory to the Agent, in its reasonable discretion. 11 16 Notwithstanding the foregoing, the obligations of each party shall not be subject to any conditions contained in this Section 5.4 which are required to be performed by such party.): (a) the correctness on such date of the representations and warranties of the parties to this Agreement contained herein, in each of the other Operative Agreements and each certificate delivered pursuant to any Operative Agreement (including without limitation the Incorporated Representations and Warranties on each such date, except to the extent the facts upon which any such representations and warranties are based may be changed as a result of transactions or occurrences permitted or contemplated hereby or any such representations or warranties relate solely to a prior date); (b) the performance by the parties to this Agreement of their respective agreements contained herein and in the other Operative Agreements to be performed by them on or prior to each such date; (c) the Agent shall have received a fully executed counterpart of the Requisition, appropriately completed; (d) based upon the applicable Construction Budget which shall satisfy the requirements of this Agreement, the Available Commitments and the Available Holder Commitment (after deducting the Unfunded Amount) will be sufficient to complete the Improvements in the reasonable judgment of the Agent; (e) there shall not have occurred and be continuing any Default or Event of Default under any of the Operative Agreements and no Default or Event of Default under any of the Operative Agreements will have occurred and be continuing after giving effect to the Construction Advance requested by the applicable Requisition; (f) the title insurance policy delivered in connection with the requirements of Section 5.3(g) shall provide for (or shall be endorsed to provide for) insurance in an amount at least equal to the maximum total Property Cost indicated by the Construction Budget referred to in subparagraph (d) above and there shall be no title change or exception objectionable to the Agent; (g) the Construction Agent shall have delivered to the Agent copies of the Plans and Specifications for the applicable Improvements or, respecting Section 11.1(c) of the Lease, the Lessee shall have delivered to the Agent documentation describing each applicable Modification; (h) the Construction Agent shall have delivered to the Agent invoices for, or other reasonably satisfactory evidence of, any Transaction Expenses and other fees, expenses and disbursements referenced in Section 7.1(b) that are to be paid with the Advance; (i) [intentionally omitted]; 12 17 (j) the Construction Agent or the Lessee, as the case may be, shall have delivered, or caused to be delivered to the Agent, invoices, Bills of Sale or other documents acceptable to the Agent, in each case with regard to any Equipment or other components of such Property then being acquired with the proceeds of the Loans and Holder Advances and naming the Lessor as purchaser and transferee; (k) all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Agreements shall have been paid or provisions for such payment shall have been made to the satisfaction of the Agent; (l) since the date of the most recent audited Financial Statements (as such term is defined in the Lessee Credit Agreement) of the Lessee, there shall not have occurred any event, condition or state of facts which shall or could reasonably be expected to have a Material Adverse Effect, other than as specifically contemplated by the Operative Agreements; (m) [intentionally omitted]; and (n) in the opinion of the Agent and its counsel, the transactions contemplated by the Operative Agreements do not and will not subject the Lessor, the Lenders, the Agent or the Holders to any materially adverse regulatory prohibitions, constraints, penalties or fines. 5.5. ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE AND ON CONSTRUCTION PERIOD TERMINATION DATE. On or prior to the Completion Date for each Property, the Construction Agent shall deliver to the Agent an Officer's Certificate in the form attached hereto as EXHIBIT J or in such other form as is reasonably acceptable to the Agent specifying (a) the address for such Property, (b) the Completion Date for such Property, (c) the aggregate Property Cost for such Property, (d) detailed, itemized documentation supporting the asserted Property Cost figures and (e) that all representations and warranties of the Construction Agent and Lessee in each of the Operative Agreements and each certificate delivered pursuant thereto (including without limitation the Incorporated Representations and Warranties) are true and correct as of the Completion Date. The Agent shall have the right to contest the information contained in such Officer's Certificate. Furthermore, on or prior to the Completion Date for each Property, the Construction Agent shall deliver or cause to be delivered to the Agent (unless previously delivered to the Agent) originals of the following, each of which shall be in form and substance acceptable to the Agent, in its reasonable discretion: (u) a title insurance endorsement regarding the title insurance policy delivered in connection with the requirements of Section 5.3(g), but only to the extent such endorsement is necessary to provide for insurance in an amount at least equal to the maximum total Property Cost and, if endorsed, the endorsement shall not include a title change or exception objectionable to the Agent; (v) an as-built survey for such Property, (w) insurance certificates respecting such Property as required hereunder and under the Lease Agreement, (x) a 13 18 memorandum (or short form) of the Lease and such Lease Supplement (in form suitable for recording), (y) if requested by the Agent, amendments to the Lessor Financing Statements executed by the appropriate parties and (z) an Appraisal regarding such Property provided, however, such an Appraisal shall not be required if, as of such Completion Date, the Agent has previously received Appraisal(s) pursuant to Section 5.3(t) for Properties that are then subject to the Lease and that have an aggregate value (as established by such Appraisal(s)) of at least $7,000,000. In addition, on the Completion Date for such Property the Construction Agent covenants and agrees that the recording fees, documentary stamp taxes or similar amounts required to be paid in connection with the related Mortgage Instrument shall be paid in an amount required by applicable law, subject, however, to the obligations of the Lenders and the Holders to fund such costs to the extent required pursuant to Section 7.1. 5.6. THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET MODIFICATIONS. The Construction Agent covenants and agrees to deliver to the Agent each month notification of any modification to any Construction Budget regarding any Property if such modification increases the total cost to construct such Property; provided no Construction Budget may be increased unless (a) the title insurance policies referenced in Section 5.3(g) are also modified or endorsed, if necessary, to provide for insurance in an amount that satisfies the requirements of Section 5.4(f) of this Agreement and (b) after giving effect to any such amendment, the Construction Budget remains in compliance with the requirements of Section 5.4(d) of this Agreement. 5.7. RESTRICTIONS ON LIENS. On each Property Closing Date, the Construction Agent shall cause each Property acquired by the Lessor on such date to be free and clear of all Liens except those referenced in Sections 6.3(q)(i) and 6.3(q)(ii). On each date a Property is either sold to a third party in accordance with the terms of the Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement, retained by the Lessor, the Lessee shall cause such Property to be free and clear of all Liens (other than Lessor Liens and such other Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to such Property, to the extent such title commitment has been approved by the Agent). 5.8 PUNCH LIST ITEMS. Lessee shall cause all punch list items respecting each Property to be completed in a good and workmanlike manner within one hundred twenty (120) days of the Completion Date for such Property. 5.9 JOINDER AGREEMENT REQUIREMENTS. Each Wholly-Owned Entity formed or acquired by the Lessee or another Wholly-Owned Entity subsequent to the Initial Closing Date shall become a Guarantor and shall satisfy the following conditions within thirty (30) days after such formation or acquisition of such Wholly- 14 19 Owned Entity (provided, to the extent such Wholly-Owned Entity does not have assets with a gross value (determined in accordance with GAAP) in excess of $100,000 when so formed or acquired but later obtains assets, including but not limited to investments, loans or other distributions from the Construction Agent, the Lessee or any Subsidiary thereof in excess of $100,000, then such Wholly-Owned Entity shall satisfy the following conditions within thirty (30) days after obtaining such assets): (a) such Wholly-Owned Entity shall execute and deliver to the Agent a Joinder Agreement in the form attached hereto as EXHIBIT M; (b) such Wholly-Owned Entity shall have delivered to the Agent (x) an Officer's Certificate of such Wholly-Owned Entity in the form attached hereto as EXHIBIT D, (y) a certificate of the Secretary or an Assistant Secretary of such Wholly-Owned Entity in the form attached hereto as EXHIBIT E and (z) good standing certificates (or local equivalent) from the respective states where such Wholly-Owned Entity is incorporated and where the principal place of business of such Wholly-Owned Entity is located as to its good standing in each such state; (c) such Wholly-Owned Entity shall have delivered to the Agent an opinion of counsel (acceptable to the Agent) in the form attached hereto as EXHIBIT I; and (d) the Agent shall have received such other documents, certificates and information as the Agent shall have reasonably requested. SECTION 6. REPRESENTATIONS AND WARRANTIES. 6.1. [INTENTIONALLY OMITTED] 6.2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. Effective as of the Initial Closing Date and the date of each Advance, the Trust Company in its individual capacity and as the Borrower, as indicated, represents and warrants to each of the other parties hereto as follows, provided, that the representations in the following paragraphs (h), (j) and (k) are made solely in its capacity as the Borrower: (a) It is a national banking association and is duly organized and validly existing and in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Trust Agreement and (assuming due authorization, execution and delivery of the Trust Agreement by the Holders) has the corporate and trust power and authority to act as the Owner Trustee and to enter into and perform the obligations under each of the other Operative Agreements to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party and each other agreement, instrument and document to be executed and delivered by it on or before such Closing Date in connection with or as contemplated by each such 15 20 Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party; (b) The execution, delivery and performance of each Operative Agreement to which it is or will be a party, either in its individual capacity or (assuming due authorization, execution and delivery of the Trust Agreement by the Holders) as the Owner Trustee, as the case may be, has been duly authorized by all necessary action on its part and neither the execution and delivery thereof, nor the consummation of the transactions contemplated thereby, nor compliance by it with any of the terms and provisions thereof (i) does or will require any approval or consent of any trustee or holders of any of its indebtedness or obligations, (ii) does or will contravene any Legal Requirement relating to its banking or trust powers, (iii) does or will contravene or result in any breach of or constitute any default under, or result in the creation of any Lien upon any of its property under, (A) its charter or by-laws, or (B) any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement or other agreement or instrument to which it is a party or by which it or its properties may be bound or affected, which contravention, breach, default or Lien under clause (B) would materially and adversely affect its ability, in its individual capacity or as the Owner Trustee, to perform its obligations under the Operative Agreements to which it is a party or (iv) does or will require any Governmental Action by any Governmental Authority regulating its banking or trust powers; (c) The Trust Agreement and, assuming the Trust Agreement is the legal, valid and binding obligation of the Holders, each other Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party have been, or on or before such Closing Date will be, duly executed and delivered by the Trust Company or the Owner Trustee, as the case may be, and the Trust Agreement and each such other Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is a party constitutes, or upon execution and delivery will constitute, a legal, valid and binding obligation enforceable against the Trust Company or the Owner Trustee, as the case may be, in accordance with the terms thereof; (d) There is no action or proceeding pending or, to its knowledge, threatened to which it is or will be a party, either in its individual capacity or as the Owner Trustee, before any Governmental Authority that, if adversely determined, would materially and adversely affect its ability, in its individual capacity or as the Owner Trustee, to perform its obligations under the Operative Agreements to which it is a party or would question the validity or enforceability of any of the Operative Agreements to which it is or will become a party; (e) It has not assigned or transferred any of its right, title or interest in or under the Lease, the Agency Agreement or its interest in any Property or any portion thereof, except in accordance with the Operative Agreements; 16 21 (f) No Default of Event of Default under the Operative Agreements attributable to it has occurred and is continuing; (g) Except as otherwise contemplated in the Operative Agreements, the proceeds of the Loans and Holder Advances shall not be applied by the Owner Trustee for any purpose other than (i) the purchase and/or lease of the Properties, the acquisition, installation and testing of the Equipment, the construction of Improvements and the payment of Transaction Expenses and the fees, expenses and other disbursements referenced in Sections 7.1(a) and 7.1(b) of this Agreement, in each case which accrue prior to the Rent Commencement Date with respect to a particular Property and (ii) Modifications in accordance with Section 11.1(c) of the Lease; (h) Neither the Owner Trustee nor any Person authorized by the Owner Trustee to act on its behalf has offered or sold any interest in the Trust Estate or the Notes, or in any similar security relating to a Property, or in any security the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person other than, in the case of the Notes, the Agent, and neither the Owner Trustee nor any Person authorized by the Owner Trustee to act on its behalf will take any action which would subject, as a direct result of such action alone, the issuance or sale of any interest in the Trust Estate or the Notes to the provisions of Section 5 of the Securities Act or require the qualification of any Operative Agreement under the Trust Indenture Act of 1939, as amended; (i) The Owner Trustee's principal place of business, chief executive office and office where the documents, accounts and records relating to the transactions contemplated by this Agreement and each other Operative Agreement are kept are located at 79 South Main Street, Salt Lake City, Utah 84111; (j) The Owner Trustee is not engaged principally in, and does not have as one (1) of its important activities, the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States), and no part of the proceeds of the Loans or the Holder Advances will be used by it to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the provisions of Regulations G, T, U, or X of the Board of Governors of the Federal Reserve System of the United States; (k) The Owner Trustee is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act; (l) Each Property is free and clear of all Lessor Liens attributable to the Owner Trustee in its individual capacity; and 17 22 (m) The Owner Trustee, in its trust capacity, is a party to no documents, instruments or agreements other than the Operative Agreements to which it is a party and any other documents delivered by the Owner Trustee in connection with the Operative Agreements. 6.3. REPRESENTATIONS AND WARRANTIES OF EACH CREDIT PARTY. Effective as of the Initial Closing Date, the date of each Advance, the date each Wholly-Owned Entity delivers a Joinder Agreement and the Rent Commencement Date, each Credit Party represents and warrants to each of the other parties hereto that: (a) The Incorporated Representations and Warranties are true and correct (unless such relate solely to an earlier point in time) and the Lessee has delivered to the Agent the financial statements and other reports referred to in Article IV of the Lessee Credit Agreement; (b) The execution and delivery by each Credit Party of this Agreement and the other applicable Operative Agreements as of such date and the performance by each Credit Party of its respective obligations under this Agreement and the other applicable Operative Agreements are within the corporate powers of each Credit Party, have been duly authorized by all necessary corporate action on the part of each Credit Party (including without limitation any necessary shareholder action), have been duly executed and delivered, have received all necessary governmental approval, and do not (i) violate any Legal Requirement which is binding on any Credit Party or any Subsidiary of any Credit Party, (ii)contravene or conflict with, or result in a breach of, any provision of the Articles of Incorporation, By-Laws or other such similar organizational documents of any Credit Party or any Subsidiary of any Credit Party or of any agreement, indenture, instrument or other document which is binding on any Credit Party or any Subsidiary of any Credit Party or (iii) result in, or require, the creation or imposition of any Lien (other than pursuant to the terms of the Operative Agreements) on any asset of any Credit Party or any of Subsidiary of any Credit Party; (c) This Agreement and the other applicable Operative Agreements executed prior to and as of such date by any Credit Party constitute the legal, valid and binding obligation of such Credit Party, as applicable, enforceable against such Credit Party, as applicable, in accordance with their terms, except as enforceability may be limited by bankruptcy or general principles of equity. Each Credit Party has executed the various Operative Agreements required to be executed by such Credit Party as of such date; (d) Except as described in EXHIBIT K, there are no actions, suits or proceedings pending or, to our knowledge, threatened against any Credit Party in any court or before any Governmental Authority (nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority to set aside, restrain, enjoin or prevent the full performance of any Operative Agreement or any 18 23 transaction contemplated thereby) that (i) concern any Credit Party or any Property or the Lessee's interest therein, that in any such case have or could reasonable be expected to have a Material Adverse Effect or (ii) question the validity or enforceability of any Operative Agreement or any transaction described in the Operative Agreements; (e) No Governmental Action by any Governmental Authority or other authorization, registration, consent, approval, waiver, notice or other action by, to or of any other Person pursuant to any Legal Requirement, contract, indenture, instrument or agreement or for any other reason is required to authorize or is required in connection with (i) the execution, delivery or performance of any Operative Agreement, (ii) the legality, validity, binding effect or enforceability of any Operative Agreement, (iii) the acquisition, ownership, construction, completion, occupancy, operation, leasing or subleasing of any Property or (iv) any Advance, in each case, except those which have been obtained and are in full force and effect or will be obtained prior to the time such are required; (f) Upon the execution and delivery of each Lease Supplement to the Lease, (i) the Lessee will have unconditionally accepted the Property subject to the Lease Supplement and will have a valid and subsisting leasehold interest in such Property, subject only to the Permitted Liens, and (ii) no offset will exist with respect to any Rent or other sums payable under the Lease; (g) Except as otherwise contemplated by the Operative Agreements, the Construction Agent shall not use the proceeds of any Holder Advance or Loan for any purpose other than (i) the purchase and/or lease of the Properties, the acquisition, installation and testing of the Equipment, the construction of Improvements and the payment of Transaction Expenses and the fees, expenses and other disbursements referenced in Sections 7.1(a) and 7.1(b) of this Agreement, in each case which accrue prior to the Rent Commencement Date with respect to a particular Property and (ii) in accordance with Section 11.1(c) of the Lease; (h) All information heretofore or contemporaneously herewith furnished by any Credit Party or any Subsidiary of any Credit Party to the Agent, the Owner Trustee, any Lender or any Holder for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all information hereafter furnished by or on behalf of any Credit Party or any Subsidiary of any Credit Party to the Agent, the Owner Trustee, any Lender or any Holder pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and such information, taken as a whole, does not and will not omit to state any material fact necessary to make such information, taken as a whole, not misleading; (i) The principal place of business, chief executive office and office of the Construction Agent and the Lessee where the documents, accounts and records relating to the transactions contemplated by this Agreement and each other Operative Agreement are kept are located at 105 Westwood Place, Suite 400, Brentwood, Williamson County, 19 24 Tennessee 37027. The states of incorporation/formation and the principal place of business of each Guarantor are located in the states set forth on EXHIBIT N; (j) The representations and warranties of each Credit Party set forth in any of the Operative Agreements are true and correct in all material respects on and as of each such date as if made on and as of such date, except to the extent the facts on which any such representation or warranty are based may be changed as result of transactions or occurrences permitted or contemplated hereby or any such representation or warranty relates solely to a prior date. Each Credit Party is in all material respects in compliance with its obligations under the Operative Agreements and there exists no Default or Event of Default under any of the Operative Agreements which is continuing and which has not been cured within any cure period expressly granted under the terms of the applicable Operative Agreement or otherwise waived in accordance with the applicable Operative Agreement. No Default or Event of Default will occur under any of the Operative Agreements as a result of, or after giving effect to, the Advance requested by the Requisition on the date of each Advance; (k) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property then being financed consists of (i) unimproved Land or (ii) Land and existing Improvements thereon which Improvements are either suitable for occupancy at the time of acquisition or ground leasing or will be renovated and/or modified in accordance with the terms of this Agreement. Each Property then being financed is located at the location set forth on the applicable Requisition, each of which is in one (1) of the Approved States; (l) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, the Lessor has good and marketable fee simple title to each Property, or, if any Property is the subject of a Ground Lease, the Lessor will have a valid ground leasehold interest enforceable against the ground lessor of such Property in accordance with the terms of such Ground Lease, subject only to (i) such Liens referenced in Sections 6.3(q)(i) and 6.3(q)(ii) on the applicable Property Closing Date and (ii) subject to Section 5.7, Permitted Liens after the applicable Property Closing Date; (m) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, no portion of any Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, or if any such Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, then flood insurance has been obtained for such Property in accordance with Section 14.2(b) of the Lease and in accordance with the National Flood Insurance Act of 1968, as amended; (n) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property complies with all Insurance 20 25 Requirements and all standards of Lessee or any other Credit Party with respect to similar properties (in similar markets) owned or operated by Lessee or any other Credit Party; (o) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property complies with all Legal Requirements as of such date (including without limitation all zoning and land use laws and Environmental Laws), except to the extent that failure to comply therewith, individually or in the aggregate, shall not and could not reasonably be expected to have a Material Adverse Effect; (p) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, all utility services and facilities necessary for the construction and operation of the Improvements and the installation and operation of the Equipment regarding each Property (including without limitation gas, electrical, water and sewage services and facilities) are available directly or indirectly at the applicable Land or will be constructed prior to the Completion Date for such Property; (q) (i) The Security Documents create, as security for the Obligations (as such term is defined in the Security Agreement), valid and enforceable security interests in, and Liens on, all of the Collateral, in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements, and such security interests and Liens are subject to no other Liens other than Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to the applicable Property, to the extent such title commitment has been approved by the Agent. Upon recordation of the Mortgage Instrument in the real estate recording office in the applicable Approved State identified by the Construction Agent or the Lessee, the Lien created by the Mortgage Instrument in the real property described therein shall be a perfected first priority mortgage Lien on such real property in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements. To the extent that the security interests in the portion of the Collateral comprised of personal property can be perfected by filing in the filing offices in the applicable Approved States or elsewhere identified by the Construction Agent or the Lessee, upon filing of the Lender Financing Statements in such filing offices, the security interests created by the Security Agreement shall be perfected first priority security interests in such personal property in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements; (ii) The Lease Agreement creates, as security for the obligations of the Lessee under the Lease Agreement, valid and enforceable security interests in, and Liens on, each Property leased thereunder, in favor of the Lessor, and such security interests and Liens are subject to no other Liens other than Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to the applicable Property, to the extent such title commitment has been approved by the Agent. Upon recordation of the memorandum of the Lease Agreement and the memorandum of a 21 26 Ground Lease (or, in either case, a short form lease) in the real estate recording office in the applicable Approved State identified by the Construction Agent or the Lessee, the Lien created by the Lease Agreement in the real property described therein shall be a perfected first priority mortgage Lien on such real property in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements. To the extent that the security interests in the portion of any Property comprised of personal property can be perfected by the filing in the filing offices in the applicable Approved State or elsewhere identified by the Construction Agent or the Lessee upon filing of the Lessor Financing Statements in such filing offices, a security interest created by the Lease Agreement shall be perfected first priority security interests in such personal property in favor of the Lessor, which rights pursuant to the Lessor Financing Statements are assigned to the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements; (r) [intentionally omitted]; (s) The Plans and Specifications for each Property will be prepared prior to the commencement of construction in accordance with all applicable Legal Requirements (including without limitation all applicable Environmental Laws and building, planning, zoning and fire codes), except to the extent the failure to comply therewith, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect. Upon completion of the Improvements for each Property in accordance with the applicable Plans and Specifications, such Improvements will be within any building restriction lines and will not encroach in any manner onto any adjoining land (except as permitted by express written easements, which have been approved by the Agent); (t) As of the Rent Commencement Date only, each Property shall be operational; (u) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, acquisition, installation and testing of the Equipment (if any) and construction of the Improvements (if any) to such date shall have been performed in a good and workmanlike manner, substantially in accordance with the applicable Plans and Specifications; (v) As of each Property Closing Date only, each Property has been acquired or (to the extent the consent of the Agent is required) ground leased pursuant to a Ground Lease at a price that is not in excess of fair market value or fair market rental value, as the case may be; and (w) As of the Initial Closing Date, each Wholly-Owned Entity (formed prior to or on such date) shall have executed this Agreement in its capacity as a Guarantor. 22 27 SECTION 6B. GUARANTY 6B.1. GUARANTY OF PAYMENT AND PERFORMANCE. Subject to Section 6B.7, each Guarantor hereby, jointly and severally, unconditionally guarantees to each Financing Party the prompt payment and performance of the Company Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) or when such is otherwise to be performed; provided, notwithstanding the foregoing, the obligations of the Guarantors under this Section 6B shall not constitute a direct guaranty of the indebtedness of the Lessor evidenced by the Notes but rather a guaranty of the Company Obligations arising under the Operative Agreements. This Section 6B is a guaranty of payment and performance and not of collection and is a continuing guaranty and shall apply to all Company Obligations whenever arising. All rights granted to the Financing Parties under this Section 6B shall be subject to the provisions of Section 8.2(h) and 8.6. 6B.2. OBLIGATIONS UNCONDITIONAL. Each Guarantor agrees that the obligations of the Guarantors hereunder are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Operative Agreements, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Company Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety, guarantor or co-obligor, it being the intent of this Section 6B.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that this Section 6B may be enforced by the Financing Parties without the necessity at any time of resorting to or exhausting any other security or collateral and without the necessity at any time of having recourse to the Notes, the Certificates or any other of the Operative Agreements or any collateral, if any, hereafter securing the Company Obligations or otherwise and each Guarantor hereby waives the right to require the Financing Parties to proceed against the Construction Agent, the Lessee or any other Person (including without limitation a co-guarantor) or to require the Financing Parties to pursue any other remedy or enforce any other right. Each Guarantor further agrees that it hereby waives any and all right of subrogation, indemnity, reimbursement or contribution against the Lessee and the Construction Agent or any other Guarantor of the Company Obligations for amounts paid under this Section 6B until such time as the Loans, Holder Advances, accrued but unpaid interest, accrued but unpaid Holder Yield and all other amounts owing under the Operative Agreements have been paid in full. Without limiting the generality of the waiver provisions of this Section 6B, each Guarantor hereby waives any rights to require the Financing Parties to proceed against the Construction Agent, the Lessee or any co-guarantor or to require Lessor to pursue any other remedy or enforce any other right, including without limitation, any and all rights under N.C. Gen. Stat. ss.ss. 26-7 through 26-9. Each Guarantor further agrees that nothing contained herein shall prevent the Financing Parties from suing on any Operative Agreement or foreclosing any security interest in or Lien on any collateral, if any, securing the Company Obligations or from exercising any other rights available to it under any Operative Agreement, or any other instrument of security, if any, and the exercise of any of the 23 28 aforesaid rights and the completion of any foreclosure proceedings shall not constitute a discharge of any Guarantor's obligations hereunder; it being the purpose and intent of each Guarantor that its obligations hereunder shall be absolute, independent and unconditional under any and all circumstances; provided that any amounts due under this Section 6B which are paid to or for the benefit of any Financing Party shall reduce the Company Obligations by a corresponding amount (unless required to be rescinded at a later date). Neither any Guarantor's obligations under this Section 6B nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by an impairment, modification, change, release or limitation of the liability of the Construction Agent or the Lessee or by reason of the bankruptcy or insolvency of the Construction Agent or the Lessee. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Company Obligations and notice of or proof of reliance by any Financing Party upon this Section 6B or acceptance of this Section 6B. The Company Obligations shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Section 6B. All dealings between the Construction Agent, the Lessee and any of the Guarantors, on the one hand, and the Financing Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Section 6B. 6B.3. MODIFICATIONS. Each Guarantor agrees that (a) all or any part of the security now or hereafter held for the Company Obligations, if any, may be exchanged, compromised or surrendered from time to time; (b) no Financing Party shall have any obligation to protect, perfect, secure or insure any such security interests, liens or encumbrances now or hereafter held, if any, for the Company Obligations or the properties subject thereto; (c) the time or place of payment of the Company Obligations may be changed or extended, in whole or in part, to a time certain or otherwise, and may be renewed or accelerated, in whole or in part; (d) the Construction Agent, the Lessee and any other party liable for payment under the Operative Agreements may be granted indulgences generally; (e) any of the provisions of the Notes, the Certificates or any of the other Operative Agreements may be modified, amended or waived; (f) any party (including any co-guarantor) liable for the payment thereof may be granted indulgences or be released; and (g) any deposit balance for the credit of the Construction Agent, the Lessee or any other party liable for the payment of the Company Obligations or liable upon any security therefor may be released, in whole or in part, at, before or after the stated, extended or accelerated maturity of the Company Obligations, all without notice to or further assent by such Guarantor, which shall remain bound thereon, notwithstanding any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release. 6B.4. WAIVER OF RIGHTS. Each Guarantor expressly waives to the fullest extent permitted by applicable law: (a) notice of acceptance of this Section 6B by any Financing Party and of all extensions of credit or other Advances to the Construction Agent and the Lessee by the Lenders pursuant to the terms of the Operative Agreements; (b) presentment and demand for payment or performance of any of the Company Obligations; (c) protest and notice of dishonor or of default with respect to the Company 24 29 Obligations or with respect to any security therefor; (d) notice of any Financing Party obtaining, amending, substituting for, releasing, waiving or modifying any security interest, lien or encumbrance, if any, hereafter securing the Company Obligations, or any Financing Party's subordinating, compromising, discharging or releasing such security interests, liens or encumbrances, if any; and (e) all other notices to which such Guarantor might otherwise be entitled. Notwithstanding anything to the contrary herein, (i) each Guarantor's payments hereunder shall be due five (5) Business Days after written demand by the Agent for such payment (unless the Company Obligations are automatically accelerated pursuant to the applicable provisions of the Operative Agreements in which case the Guarantors' payments shall be automatically due) and (ii) any modification of the Operative Agreements which has the effect of increasing the Company Obligations shall not be enforceable against a Guarantor unless such Guarantor executes the document evidencing such modification or otherwise reaffirms its guaranty in writing in connection with such modification. 6B.5. REINSTATEMENT. The obligations of the Guarantors under this Section 6B shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Company Obligations is rescinded or must be otherwise restored by any holder of any of the Company Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify each Financing Party on demand for all reasonable costs and expenses (including, without limitation, reasonable fees of counsel) incurred by any Financing Party in connection with such rescission or restoration, including without limitation any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 6B.6. REMEDIES. The Guarantors agree that, as between the Guarantors, on the one hand, and each Financing Party, on the other hand, the Company Obligations may be declared to be forthwith due and payable as provided in the applicable provisions of the Operative Agreements (and shall be deemed to have become automatically due and payable in the circumstances provided therein) notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing such Company Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or such Company Obligations being deemed to have become automatically due and payable), such Company Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors in accordance with the applicable provisions of the Operative Agreements. 6B.7. LIMITATION OF GUARANTY. Notwithstanding any provision to the contrary contained herein or in any of the other Operative Agreements, to the extent the obligations of any Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including without limitation because of any applicable 25 30 state or federal law relating to fraudulent conveyances or transfers) then the obligations of such Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including without limitation the Bankruptcy Code). Subject to Section 6B.5, upon the satisfaction of the Company Obligations in full, regardless of the source of payment, the Guarantors' obligations hereunder shall be deemed satisfied, discharged and terminated other than indemnifications set forth herein that expressly survive. 6B.8. PAYMENT OF AMOUNTS TO THE AGENT. Each Financing Party hereby instructs each Guarantor, and each Guarantor hereby acknowledges and agrees, that until such time as the Loans and the Holder Advances are paid in full and the Liens evidenced by the Security Agreement and the Mortgage Instruments have been released any and all Rent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person shall instead be paid directly to the Agent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) or as the Agent may direct from time to time for allocation and distribution in accordance with the procedures set forth in Section 8.7 hereof. 6B.9. RELEASE OF GUARANTORS. Each Financing Party hereby agrees that (a) the Agent shall be permitted to release any Guarantor from its guaranty obligations under this Section 6B without the consent of any other Financing Party if the release is granted in connection with a disposition by the applicable Credit Party of all the shares of stock or partnership or other equity interest in such Guarantor and such disposition is permitted pursuant to the applicable provisions of the Operative Agreements and the Lessee Credit Agreement and (b) the Agent shall be permitted to release any Guarantor from its guaranty obligations under this Section 6B.9 without the consent of any other Financing Party if the release is requested by the Construction Agent or the Lessee in connection with a dissolution of the Guarantor, subject to the Construction Agent or the Lessee providing to the Agent written representations to the effect that such Guarantor has no business operations and no assets. SECTION 7. PAYMENT OF CERTAIN EXPENSES. 7.1. TRANSACTION EXPENSES. (a) The Lessor agrees on the Initial Closing Date, to pay, or cause to be paid, all Transaction Expenses arising from the Initial Closing Date, including without limitation all reasonable fees, expenses and disbursements of the various legal counsels for the Lessor and the Agent in connection with the transactions contemplated by the Operative Agreements and incurred in connection with such Initial Closing Date, the initial fees and expenses of the Owner Trustee due and payable on such Initial Closing 26 31 Date, all fees, taxes and expenses for the recording, registration and filing of documents and all other reasonable fees, expenses and disbursements incurred in connection with such Initial Closing Date; provided, however, the Lessor shall pay such amounts described in this Section 7.1(a) only if (i) such amounts are properly described in a Requisition delivered on or before the Initial Closing Date, and (ii) funds are made available by the Lenders and the Holders in connection with such Requisition in an amount sufficient to allow such payment. On the Initial Closing Date after delivery and receipt of the Requisition referenced in Section 4.2(a) hereof and satisfaction of the other conditions precedent for such date, the Holders shall make Holder Advances and the Lenders shall make Loans to the Lessor to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in this Section 7.1(a). The Lessee agrees to timely pay all amounts referred to in this Section 7.1(a) to the extent not paid by the Lessor. (b) Assuming no Default or Event of Default shall have occurred and be continuing and only for the period prior to the Rent Commencement Date, the Lessor agrees on each Property Closing Date, on the date of any Construction Advance and on the Completion Date to pay, or cause to be paid, all Transaction Expenses including without limitation all reasonable fees, expenses and disbursements of the various legal counsels for the Lessor and the Agent in connection with the transactions contemplated by the Operative Agreements and billed in connection with such Advance or such Completion Date, all amounts described in Section 7.1(a) of this Agreement which have not been previously paid, the annual fees and reasonable out-of-pocket expenses of the Owner Trustee, all fees, expenses and disbursements incurred with respect to the various items referenced in Sections 5.3, 5.4 and/or 5.5 (including without limitation any premiums for title insurance policies and charges for any updates to such policies) and all other reasonable fees, expenses and disbursements in connection with such Advance or such Completion Date including without limitation all expenses relating to and all fees, taxes and expenses for the recording, registration and filing of documents and during the Commitment Period, all fees, expenses and costs referenced in Sections 7.3(a), 7.3(b), 7.3(d) and 7.4; provided, however, the Lessor shall pay such amounts described in this Section 7.1(b) only if (i) such amounts are properly described in a Requisition delivered on the applicable date and (ii) funds are made available by the Lenders and the Holders in connection with such Requisition in an amount sufficient to allow such payment. On each Property Closing Date, on the date of any Construction Advance or any Completion Date, after delivery of the applicable Requisition and satisfaction of the other conditions precedent for such date, the Holders shall make a Holder Advance and the Lenders shall make Loans to the Lessor to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in this Section 7.1(b). The Lessee agrees to timely pay all amounts referred to in this Section 7.1(b) to the extent not paid by the Lessor. 7.2. [INTENTIONALLY OMITTED] 27 32 7.3. CERTAIN FEES AND EXPENSES. The Lessee agrees to pay or cause to be paid (a) the initial and annual Owner Trustee's fee and all reasonable expenses of the Owner Trustee and any co-trustees (including without limitation reasonable counsel fees and expenses) or any successor owner trustee and/or co-trustee, for acting as the owner trustee under the Trust Agreement, (b) all reasonable costs and expenses incurred by the Credit Parties, the Agent, the Lenders, the Holders or the Lessor in entering into any Lease Supplement and any future amendments, modifications, supplements, restatements and/or replacements with respect to any of the Operative Agreements, whether or not such Lease Supplement, amendments, modifications, supplements, restatements and/or replacements are ultimately entered into, or giving or withholding of waivers of consents hereto or thereto, which have been requested by the Credit Parties, the Agent, the Lenders, the Holders or the Lessor, (c) all reasonable costs and expenses incurred by the Credit Parties, the Agent, the Lenders, the Holders or the Lessor in connection with any exercise of remedies under any Operative Agreement or any purchase of any Property by any Credit Party or any third party and (d) all reasonable costs and expenses incurred by the Credit Parties, the Agent, the Lenders, the Holders or the Lessor in connection with any transfer or conveyance of any Property, whether or not such transfer or conveyance is ultimately accomplished. 7.4. FACILITY FEE. During the Commitment Period, the Lessee agrees to pay or to cause to be paid to the Agent for the account of (a) the Lenders, respectively, a facility fee (the "Lender Facility Fee") equal to the product of the average daily Available Commitment multiplied by a rate equal to the Applicable Percentage for the Lender Facility Fee and (b) the Holders, respectively, a facility fee (the "Holder Facility Fee") equal to the product of the average daily Available Holder Commitments multiplied by a rate equal to the Applicable Percentage for the Holder Facility Fee. Such Facility Fees shall be calculated on the basis of a year of three hundred sixty (360) days for the actual days elapsed and shall be payable quarterly in arrears on each Facility Fee Payment Date. If all or a portion of any such Facility Fee shall not be paid when due, such overdue amount shall bear interest, payable by the Lessee on demand, at a rate per annum equal to the ABR plus two percent (2%) from the date of such non-payment until such amount is paid in full (as well as before judgment). SECTION 8. OTHER COVENANTS AND AGREEMENTS. 8.1. COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE. The Holders, the Lenders, the Lessor (at the direction of the Majority Secured Parties) and the Agent shall, at the expense of and to the extent reasonably requested by the Construction Agent or the Lessee (but without assuming additional liabilities on account thereof and only to the extent such is acceptable to the Holders, the Lenders, the Lessor (at the direction of the Majority Secured Parties) and the Agent in their reasonable discretion), cooperate with the Construction Agent or the Lessee in connection with the Construction Agent or the Lessee 28 33 satisfying its covenant obligations contained in the Operative Agreements including without limitation at any time and from time to time, promptly and duly executing and delivering any and all such further instruments, documents and financing statements (and continuation statements related thereto). 8.2. COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS. Each of the Owner Trustee and the Holders hereby agrees that so long as this Agreement is in effect: (a) Neither the Owner Trustee (in its trust capacity or in its individual capacity) nor any Holder will create or permit to exist at any time, and each of them will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens on the Properties attributable to it; provided, however, that the Owner Trustee and the Holders shall not be required to so discharge any such Lessor Lien while the same is being contested in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not materially and adversely affect the rights of the Lessee under the Lease and the other Operative Agreements or involve any material danger of impairment of the Liens of the Security Documents or of the sale, forfeiture or loss of, and shall not interfere with the use or disposition of, any Property or title thereto or any interest therein or the payment of Rent; (b) Without prejudice to any right under the Trust Agreement of the Owner Trustee to resign (subject to requirement set forth in the Trust Agreement that such resignation shall not be effective until a successor shall have agreed to accept such appointment), or the Holders' rights under the Trust Agreement to remove the institution acting as the Owner Trustee (after consent to such removal by the Agent as provided in the Trust Agreement), each of the Owner Trustee and the Holders hereby agrees with the Lessee and the Agent (i) not to terminate or revoke the trust created by the Trust Agreement except as permitted by Article VIII of the Trust Agreement, (ii) not to amend, supplement, terminate or revoke or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of any such party without the prior written consent of such party and (iii) to comply with all of the terms of the Trust Agreement, the nonperformance of which would adversely affect such party; (c) The Owner Trustee or any successor may resign or be removed by the Holders as the Owner Trustee, a successor Owner Trustee may be appointed and a corporation may become the Owner Trustee under the Trust Agreement, only in accordance with the provisions of Article IX of the Trust Agreement and, with respect to such appointment, with the consent of the Lessee, which consent shall not be unreasonably withheld or delayed; (d) The Owner Trustee, in its capacity as the Owner Trustee under the Trust Agreement, and not in its individual capacity, shall not contract for, create, incur or 29 34 assume any Indebtedness, or enter into any business or other activity or enter into any contracts or agreements, other than pursuant to or under the Operative Agreements; (e) The Holders will not instruct the Owner Trustee to take any action in violation of the terms of any Operative Agreement; (f) Neither any Holder nor the Owner Trustee shall (i) commence any case, proceeding or other action with respect to the Owner Trustee under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, arrangement, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seek appointment of a receiver, trustee, custodian or other similar official with respect to the Owner Trustee or for all or any substantial benefit of the creditors of the Owner Trustee; and neither any Holder nor the Owner Trustee shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in this paragraph; (g) The Owner Trustee shall give prompt notice to the Lessee, the Holders and the Agent if the Owner Trustee's principal place of business or chief executive office, or the office where the records concerning the accounts or contract rights relating to any Property are kept, shall cease to be located at 79 South Main Street, Salt Lake City, Utah 84111, or if it shall change its name; and (h) The Owner Trustee shall take or refrain from taking such actions and grant or refrain from granting such approvals with respect to the Operative Agreements and/or relating to any Property in each case as directed in writing by the Agent (until such time as the Loans are paid in full, and then by the Majority Holders) or, in connection with Sections 8.5 and 9.2 hereof, the Lessee; provided, however, that notwithstanding the foregoing provisions of this subparagraph (h) the Owner Trustee, the Agent, the Lenders and the Holders each acknowledge, covenant and agree that neither the Owner Trustee nor the Agent shall act or refrain from acting, regarding each Unanimous Vote Matter until such party has received the approval of each Lender and each Holder. 8.3. CREDIT PARTY COVENANTS, CONSENT AND ACKNOWLEDGMENT. (a) Each Credit Party acknowledges and agrees that the Owner Trustee, pursuant to the terms and conditions of the Security Agreement and the Mortgage Instruments, shall create Liens in favor of the Agent respecting the various personal property, fixtures and real property described therein to secure the Owner Trustee's obligations under this Agreement and under the other Operative Agreements. Each Credit Party hereby irrevocably consents to the creation, perfection and maintenance of such Liens. Each Credit Party shall, to the extent reasonably requested by any of the other parties hereto, cooperate with the other parties in connection with their covenants herein or in the other Operative Agreements and shall from time to time duly execute and deliver any and all such future instruments, documents and financing statements (and continuation statements related thereto) as any other party hereto may reasonably request. 30 35 (b) The Lessor hereby instructs each Credit Party, and each Credit Party hereby acknowledges and agrees, that until such time as the Loans and the Holder Advances are paid in full and the Liens evidenced by the Security Agreement and the Mortgage Instruments have been released (i) any and all Rent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person shall instead be paid directly to the Agent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) or as the Agent may direct from time to time for allocation and distribution in accordance with the procedures set forth in Section 8.7 hereof, (ii) all rights of the Lessor under the Lease shall be exercised by the Agent and (iii) each Credit Party shall cause all notices, certificates, financial statements, communications and other information which are delivered, or are required to be delivered, to the Lessor, to also to be delivered at the same time to the Agent. (c) No Credit Party shall consent to or permit any amendment, supplement or other modification of the terms or provisions of any Operative Agreement except in accordance with Section 12.5 of this Agreement. (d) The Lessee hereby covenants and agrees to cause an Appraisal or reappraisal (in form and substance satisfactory to the Agent and from an appraiser selected by the Agent) to be issued respecting any Property as requested by the Agent (i) at each and every time as such shall be required to satisfy any regulatory requirements imposed on the Agent, the Lessor, the Trust Company, any Lender and/or any Holder and (ii) after the occurrence of an Event of Default. (e) Each Credit Party hereby covenants and agrees that, except for amounts payable as Basic Rent, any and all payment obligations owing from time to time under the Operative Agreements by any Person to the Agent, any Lender, any Holder or any other Person shall (without further action) be deemed to be Supplemental Rent obligations payable by the Lessee and guaranteed by the other Credit Parties. Without limitation, such obligations of the Lessee shall include without limitation arrangement fees, administrative fees, facility fees, breakage costs, indemnities, trustee fees and transaction expenses incurred by the parties hereto in connection with the transactions contemplated by the Operative Agreements. (f) At any time the Lessor or the Agent is entitled under the Operative Agreements to possession of a Property or any component thereof, each of the Construction Agent and the Lessee hereby covenants and agrees, at its own cost and expense, to assemble and make the same available to the Agent (on behalf of the Lessor). (g) The Lessee hereby covenants and agrees that Equipment respecting any individual Property (exclusive of fixtures which are integral and necessary for the structure and/or mechanical operation of such Property) shall at no time constitute in 31 36 excess of fifteen percent (15%) of the aggregate Advances respecting such Property funded at such time under the Operative Agreements. (h) The Lessee hereby covenants and agrees that (i) as of Completion (A) the Property Cost for each individual parcel of the Property shall be no less than $750,000 and (B) each parcel of the Property shall be a Permitted Facility and (ii) the aggregate Property Cost for all Properties at any time shall not exceed $35,000,000. (i) The Lessee hereby covenants and agrees that it shall give prompt notice to the Agent if the Lessee's principal place of business or chief executive office, or the office where the records concerning the accounts or contract rights relating to any Property are kept, shall cease to be located at 105 Westwood Place, Suite 400, Brentwood, Williamson County, Tennessee or if it shall change its name. (j) The Lessee hereby covenants and agrees that the aggregate Property Cost of Properties purchased for any reason by the Lessee pursuant to the Purchase Option of Lessee and/or sold for any reason to any Person pursuant to the Sale Option of Lessee prior to the Expiration Date shall not exceed the lesser of (i) thirty-three percent (33%) of the aggregate Property Cost (up to and including the date any such Election Date is specified by Lessee) for all Properties then subject to the Lease and all other properties which were previously Properties subject to the Lease and (ii) Twelve Million Dollars ($12,000,000). To the extent any such purchase pursuant to the Purchase Option and/or sale pursuant to the Sale Option shall occur prior to the Construction Period Termination Date, then the aggregate amount paid to the Agent (for the benefit of the Financing Parties with respect to any such Purchase Option and/or Sale Option) shall remain available for future Advances until the Construction Period Termination Date; provided in no event shall any Lender be obligated to lend more than its Lender Commitment and in no event shall any Holder be obligated to advance more than its Holder Commitment. (k) The Lessee shall furnish to the Agent at such times as required under the Lessee Credit Agreement the financial statements and other information required to be delivered pursuant to Section 5.1 and Section 5.2 of the Lessee Credit Agreement. (l) The Lessee hereby covenants and agrees that the rights of the Lessee under this Agreement and the Lease shall not impair or in any way diminish the obligations of the Construction Agent and/or the rights of the Lessor under the Agency Agreement. (m) The Lessee shall, on or before the first day of each fiscal quarter of the Lessee, furnish to the Agent a written notice setting forth the Lessee's calculation, in reasonable detail, of the ratio of Consolidated Adjusted Rate to Annualized Consolidated EBITDAR for the immediately preceding fiscal quarter of the Lessee. (n) Each Credit Party shall promptly notify the Agent, or cause the Agent to be promptly notified, upon such Credit Party gaining knowledge of the occurrence of any Default or Event of Default which is continuing at such time. In any event, such notice 32 37 shall be provided to the Agent within ten (10) days of when such Credit Party gains such knowledge. (o) Until all of the obligations under the Operative Agreements have been finally and indefeasibly paid and satisfied in full and the Commitments and the Holder Commitments terminated unless consent has been obtained from the Majority Secured Parties, each Credit Party will: (i) except as permitted by the express provisions of the Lessee Credit Agreement, preserve and maintain its separate legal existence and all rights, franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation (or partnership, limited liability company or other such similar entity, as the case may be) and authorized to do business in each jurisdiction in which the failure to do so qualify would have a Material Adverse Effect; (ii) pay and perform all obligations of the Credit Parties under the Operative Agreements and pay and perform (A) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (B) all other indebtedness, obligations and liabilities in accordance with customary trade practices, which if not paid would have a Material Adverse Effect; provided that any Credit Party may in each case contest any item described in this Section 8.3(n)(ii) in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP; (iii) to the extent failure to do so would have a Material Adverse Effect, (A) observe and remain in compliance with all applicable Laws and maintain in full force and effect all Governmental Actions, in each case applicable to the conduct of its business; (B) keep in full force and effect all licenses, certifications or accreditations necessary for any Facility to carry on its business; and (C) not permit the termination of any insurance reimbursement program available to any Facility; and (iv) provided that the Agent, the Lenders and the Holders use reasonable efforts to minimize disruption to the business of Credit Parties, permit representatives of the Agent or any Lender or Holder, from time to time, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including without limitation management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. (p) Lessee shall take all action necessary to assure that Lessee's computer based systems are able to operate and effectively process data including dates on and after 33 38 January 1, 2000. At the request of the Agent, Lessee shall provide Agent assurance acceptable to Agent of Lessee's Year 2000 compatibility. (q) Lessee shall perform any and all obligations of Lessor under, and cause Lessee to otherwise remain in full compliance with, the terms and provisions of each Ground Lease, if any. (r) Each Credit Party hereby covenants and agrees to cause each of its Wholly-Owned Entities formed after the Initial Closing Date to execute a Joinder Agreement and to observe the terms of Section 5.9 of this Agreement, all within thirty (30) days of the formation or acquisition of each such Wholly-Owned Entity. (s) Concurrently with the delivery of the financial statements required pursuant to Section 28.1 of the Lease, the Lessee shall deliver a Compliance Certificate with respect to the period covered by the financial statements then being delivered, together with an Interest Rate Calculation Worksheet (in the form attached to the Compliance Certificate) and a Covenant Compliance Worksheet (in the form attached to the Compliance Certificate) reflecting the computation of the financial covenants incorporated pursuant to Section 28.1 of the Lease as of the last day of the period covered by such financial statements. 8.4. SHARING OF CERTAIN PAYMENTS. Except for Excepted Payments, the parties hereto acknowledge and agree that all payments due and owing by any Credit Party to the Lessor under the Lease or any of the other Operative Agreements shall be made by such Credit Party directly to the Agent as more particularly provided in Section 8.3 hereof. The Lessor, the Holders, the Agent, the Lenders and the Credit Parties acknowledge the terms of Section 8.7 of this Agreement regarding the allocation of payments and other amounts made or received from time to time under the Operative Agreements and agree, that all such payments and amounts are to be allocated as provided in Section 8.7 of this Agreement. 8.5. GRANT OF EASEMENTS, ETC. The Agent, the Lenders and the Holders hereby agree that, so long as no Event of Default shall have occurred and be continuing, the Owner Trustee shall, from time to time at the request of the Lessee (and with the prior consent of the Agent), in connection with the transactions contemplated by the Agency Agreement, the Lease or the other Operative Agreements, (i) grant easements and other rights in the nature of easements with respect to any Property, (ii) release existing easements or other rights in the nature of easements which are for the benefit of any Property, (iii) execute and deliver to any Person any instrument appropriate to confirm or effect such grants or releases, and (iv) execute and deliver to any Person such other documents or materials in connection with the acquisition, development, construction, testing or operation of any Property, including without limitation reciprocal easement agreements, construction contracts, operating agreements, development agreements, plats, replats or subdivision 34 39 documents; provided, that each of the agreements referred to in this Section 8.5 shall be of the type normally executed by the Lessee in the ordinary course of the Lessee's business and shall be on commercially reasonable terms so as not to diminish the value of any Property in any material respect. 8.6. APPOINTMENT BY THE AGENT, THE LENDERS, THE HOLDERS AND THE OWNER TRUSTEE. The Holders hereby appoint the Agent to act as collateral agent for the Holders in connection with the Lien granted by the Security Documents to secure the Holder Amount. The Lenders and the Holders acknowledge and agree and direct that the rights and remedies of the beneficiaries of the Lien of the Security Documents shall be exercised by the Agent on behalf of the Lenders and the Holders as directed from time to time by the Majority Secured Parties or, pursuant to Sections 8.2(h) and 12.5, all of the Lenders and the Holders, as the case may be; provided, in all cases, the Agent shall allocate payments and other amounts received in accordance with Section 8.7 of this Agreement. The Agent is further appointed to provide notices under the Operative Agreements on behalf of the Owner Trustee (as determined by the Agent, in its reasonable discretion), to receive notices under the Operative Agreements on behalf of the Owner Trustee and (subject to Sections 8.5 and 9.2) to take such other action under the Operative Agreements on behalf of the Owner Trustee as the Agent shall determine in its reasonable discretion from time to time. The Agent hereby accepts such appointments. For purposes hereof, the provisions of Section 7 of the Credit Agreement, together with such other terms and provisions of the Credit Agreement and the other Operative Agreements as required for the full interpretation and operation of Section 7 of the Credit Agreement are hereby incorporated by reference as if restated herein for the mutual benefit of the Agent and each Holder as if each Holder were a Lender thereunder. Outstanding Holder Advances and outstanding Loans shall each be taken into account for purposes of determining Majority Secured Parties. Further, the Agent shall be entitled to take such action on behalf of the Owner Trustee as is delegated to the Agent under any Operative Agreement (whether express or implied) as may be reasonably incidental thereto. The parties hereto hereby agree to the provisions contained in this Section 8.6. Any appointment of a successor agent under Section 7.9 of the Credit Agreement shall also be effective as an appointment of a successor agent for purposes of this Section 8.6. 8.7. COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS. (a) Each Credit Party has agreed pursuant to the terms of this Agreement to pay to (i) the Agent any and all Rent (excluding Excepted Payments) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person and (ii) each Person as appropriate the Excepted Payments. Promptly after receipt, the Agent shall apply and allocate, in accordance with the terms of this Section 8.7, such amounts received from any Credit Party and all other payments, receipts and other consideration of any kind whatsoever received by the Agent pursuant to the Security Agreement or otherwise received by the Agent, the Holders or any of the Lenders in connection with the Collateral, the Security Documents or any of the other Operative Agreements. Ratable distributions among the Lenders and the Holders under this Section 8.7 shall be made based on (in the case of the Lenders) the ratio of the 35 40 outstanding Loans to the aggregate Property Cost and (in the case of the Holders) the ratio of the outstanding Holder Advances to the aggregate Property Cost. Ratable distributions among the Tranche A Lenders under this Section 8.7 shall be made based on the ratio of the individual Tranche A Lender's Commitment for Tranche A Loans to the aggregate of all the Tranche A Lenders' Commitments for Tranche A Loans. Ratable distributions among the Tranche B Lenders under this Section 8.7 shall be made based on the ratio of the individual Tranche B Lender's Commitment for Tranche B Loans to the aggregate of all the Tranche B Lenders' Commitments for Tranche B Loans. Ratable distributions among the Lenders (in situations where the Tranche A Lenders are not differentiated from the Tranche B Lenders) shall be made based on the ratio of the individual Lender's Commitment to the aggregate of all the Lenders' Commitments. Ratable distributions among the Holders under this Section 8.7 shall be based on the ratio of the individual Holder's Holder Commitment to the aggregate of all the Holders' Holder Commitments. (b) Payments and other amounts received by the Agent from time to time in accordance with the terms of subparagraph (a) shall be applied and allocated as follows: (i) Any such payment or amount identified as or deemed to be Basic Rent shall be applied and allocated by the Agent first, ratably to the Lenders and the Holders for application and allocation to the payment of interest on the Loans and thereafter the principal of the Loans which is due and payable on such date and to the payment of accrued Holder Yield with respect to the Holder Advances and thereafter the portion of the Holder Advances which is due on such date; and second, if no Default or Event of Default is in effect, any excess shall be paid to such Person or Persons as the Lessee may designate; provided, that if a Default or Event of Default is in effect, such excess (if any) shall instead be held by the Agent until the earlier of (I) the first date thereafter on which no Default or Event of Default shall be in effect (in which case such payments or returns shall then be made to such other Person or Persons as the Lessee may designate) and (II) the Maturity Date or the Expiration Date, as the case may be (or, if earlier, the date of any Acceleration), in which case such amounts shall be applied and allocated in the manner contemplated by Section 8.7(b)(iv). (ii) If on any date the Agent or the Lessor shall receive an amount (if any) in respect of (A) any Casualty or Condemnation pursuant to Sections 15.1(a) or 15.1(g) of the Lease (excluding any payments in respect thereof which are payable to the Lessee in accordance with the Lease), or (B) the Termination Value in connection with the delivery of a Termination Notice pursuant to Article XVI of the Lease, or (C) the Termination Value in connection with the exercise of the Purchase Option under Section 20.1 of the Lease or the exercise of the option of the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of the Lease, or (D) any payment required to be made or elected to be made by the Construction Agent to the Lessor pursuant to the terms of the Agency Agreement, then in each case, the Lessor shall be required to pay such amount received (1) if 36 41 no Acceleration has occurred, to prepay the principal balance of the Loans and the Holder Advances, on a pro rata basis, a portion of such amount to be distributed to the Lenders and the Holders or (2) if an Acceleration has occurred, to apply and allocate the proceeds respecting Sections 8.7(b)(ii)(A) through 8.7(b)(ii)(D) in accordance with Section 8.7(b)(iii) hereof. (iii) Subject to Section 8.7(c), an amount equal to any payment identified as proceeds of the sale or other disposition (or lease upon the exercise of remedies) of the Properties or any portion thereof, whether pursuant to Article XXII of the Lease or the exercise of remedies under the Security Documents or otherwise, the execution of remedies set forth in the Lease and any payment in respect of excess wear and tear pursuant to Section 22.3 of the Lease (whether such payment relates to a period before or after the Construction Period Termination Date) shall be applied and allocated by the Agent first, ratably to the payment of the principal and interest of the Tranche B Loans then outstanding, second, ratably to the payment to the Holders of the outstanding principal balance of all Holder Advances plus all outstanding Holder Yield with respect to such outstanding Holder Advances, third, to the extent such amount exceeds the maximum amount to be returned pursuant to the foregoing provisions of this paragraph (iii), ratably to the payment of the principal and interest of the Tranche A Loans then outstanding, fourth, to any and all other amounts owing under the Operative Agreements to the Lenders under the Tranche B Loans, fifth, to any and all other amounts owing under the Operative Agreements to the Holders, sixth, to any and all other amounts owing under the Operative Agreements to the Lenders under the Tranche A Loans, and seventh, to the extent moneys remain after application and allocation pursuant to clauses first through sixth above, to the Owner Trustee for application and allocation to any and all other amounts owing to the Holders or the Owner Trustee and as the Holders shall determine; provided, where no Event of Default shall exist and be continuing and a prepayment is made for any reason with respect to less than the full amount of the outstanding principal amount of the Loans and the outstanding Holder Advances, the proceeds shall be applied and allocated ratably to the Lenders and to the Holders. (iv) Subject to Section 8.7(c), an amount equal to (A) any such payment identified as a payment pursuant to Section 22.1(b) of the Lease (or otherwise) of the Maximum Residual Guarantee Amount (and any such lesser amount as may be required by Section 22.1(b) of the Lease) in respect of the Properties, (B) any other amount payable upon any exercise of remedies after the occurrence of an Event of Default not covered by Sections 8.7(b)(i) or 8.7(b)(iii) above (including without limitation any amount received in connection with an Acceleration which does not represent proceeds from the sale or liquidation of the Properties) and (C) any other amount payable by any Guarantor pursuant to Section 6B (including without limitation from collateral securing obligations of one or more of the Credit Parties under the Operative Agreements and the obligations of one or more of the Credit Parties under the Lessee Credit 37 42 Agreement and the transactions related thereto) shall be applied and allocated by the Agent first, ratably, to the payment of the principal and interest balance of Tranche A Loans then outstanding, second, ratably to the payment of the principal and interest balance of the Tranche B Loans then outstanding, third, ratably to the payment of the principal balance of all Holder Advances plus all outstanding Holder Yield with respect to such outstanding Holder Advances, fourth, to the payment of any other amounts owing to the Lenders hereunder or under any of the other Operative Agreement, and fifth, to the extent moneys remain after application and allocation pursuant to clauses first through fourth above, to the Owner Trustee for application and allocation to Holder Advances and Holder Yield and any other amounts owing to the Holders or the Owner Trustee as the Holders shall determine. (v) An amount equal to any such payment identified as Supplemental Rent shall be applied and allocated by the Agent to the payment of any amounts then owing to the Agent, the Lenders, the Holders and the other parties to the Operative Agreements (or any of them) (other than any such amounts payable pursuant to the preceding provisions of this Section 8.7(b)) as shall be determined by the Agent in its reasonable discretion; provided, however, that Supplemental Rent received upon the exercise of remedies after the occurrence and continuance of an Event of Default in lieu of or in substitution of the Maximum Residual Guarantee Amount or as a partial payment thereon shall be applied and allocated as set forth in Section 8.7(b)(iv). (vi) The Agent in its reasonable judgment shall identify the nature of each payment or amount received by the Agent and apply and allocate each such amount in the manner specified above. (c) Upon the termination of the Commitments and the payment in full of the Loans and all other amounts owing by the Owner Trustee hereunder or under any Credit Document and the payment in full of all amounts owing to the Holders and the Owner Trustee under the Trust Agreement, any moneys remaining with the Agent shall be returned to the Owner Trustee or such other Person or Persons as the Holders may designate for application and allocation to any and all other amounts owing to the Holders or the Owner Trustee and as the Holders shall determine. In the event of an Acceleration it is agreed that, prior to the application and allocation of amounts received by the Agent in the order described in Section 8.7(b) above, any such amounts shall first be applied and allocated to the payment of (i) any and all sums advanced by the Agent in order to preserve the Collateral or to preserve its Lien thereon, (ii) the expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing or realizing on the Collateral, or of any exercise by the Agent of its rights under the Security Documents, together with reasonable attorneys' fees and expenses and court costs and (iii) any and all other amounts reasonably owed to the Agent under or in connection with the transactions contemplated by the Operative Agreements (including without limitation any accrued and unpaid administration fees). 38 43 8.8. RELEASE OF PROPERTIES, ETC. If the Lessee shall at any time purchase any Property pursuant to the Lease, or the Construction Agent shall purchase any Property pursuant to the Agency Agreement, or if any Property shall be sold in accordance with Article XXII of the Lease, then, upon satisfaction by the Owner Trustee of its obligation to prepay the Loans, Holder Advances and all other amounts owing to the Lenders and the Holders under the Operative Agreements, the Agent is hereby authorized and directed to release such Properties from the Liens created by the Security Documents to the extent of its interest therein. In addition, upon the termination of the Commitments and the Holder Commitments and the payment in full of the Loans, the Holder Advances and all other amounts owing by the Owner Trustee hereunder or under any other Operative Agreement the Agent is hereby authorized and directed to release all of the Properties from the Liens created by the Security Documents to the extent of its interest therein. Upon request of the Owner Trustee following any such release, the Agent shall, at the sole cost and expense of the Lessee, execute and deliver to the Owner Trustee and the Lessee such documents as the Owner Trustee or the Lessee shall reasonably request to evidence such release. SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT. 9.1. THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT RIGHTS. Notwithstanding anything to the contrary contained in the Credit Agreement, the Agent, the Lenders, the Holders, the Credit Parties and the Owner Trustee hereby agree that, prior to the occurrence and continuation of any Default or Event of Default, the Construction Agent or the Lessee, as the case may be, shall have the following rights: (a) the right to designate an account to which amounts funded under the Operative Agreements shall be credited pursuant to Section 2.3(a) of the Credit Agreement; (b) the right to terminate or reduce the Commitments pursuant to Section 2.5(a) of the Credit Agreement; (c) the right to exercise the conversion and continuation options pursuant to Section 2.7 of the Credit Agreement; (d) the right to approve any successor agent pursuant to Section 7.9 of the Credit Agreement; (e) the right to consent to any assignment by a Lender to which the Lessor has the right to consent pursuant to Section 9.8 of the Credit Agreement; and 39 44 (f) without limiting the foregoing clauses (a) through (e), and in addition thereto, provided, that no Event of Default then exists, the Construction Agent or the Lessee, as the case may be, shall have the right to exercise any other right of the Owner Trustee under the Credit Agreement upon not less than five (5) Business Days' prior written notice from the Construction Agent or the Lessee, as the case may be, to the Owner Trustee and the Agent. 9.2. THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT RIGHTS. Notwithstanding anything to the contrary contained in the Trust Agreement, the Credit Parties, the Owner Trustee and the Holders hereby agree that, prior to the occurrence and continuation of any Default or Event of Default, the Construction Agent or the Lessee, as the case may be, shall have the following rights: (a) the right to exercise the conversion and continuation options pursuant to Section 3.8 of the Trust Agreement and the right to terminate or reduce the Holder Commitments pursuant to Section 3.9 of the Trust Agreement; (b) no removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to Section 9.1 of the Trust Agreement shall be made without the prior written consent (not to be unreasonably withheld or delayed) of the Lessee; and (c) the Holders and the Owner Trustee shall not amend, supplement or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of the Construction Agent or the Lessee, as the case may be, without the prior written consent (not to be unreasonably withheld or delayed) of the Construction Agent or the Lessee, as the case may be. SECTION 10. TRANSFER OF INTEREST. 10.1. RESTRICTIONS ON TRANSFER. Each Lender may participate, assign or transfer all or a portion of its interest hereunder and under the other Operative Agreements in accordance with Sections 9.7 and 9.8 of the Credit Agreement; provided, each participant, assignee or transferee must obtain the same ratable interest in Tranche A Loans, Tranche B Loans and the Lessee Credit Agreement. The Holders may, directly or indirectly, assign, convey or otherwise transfer any of their right, title or interest in or to the Trust Estate or the Trust Agreement with the prior written consent of the Agent and the Lessee (which consent shall not be unreasonably withheld or delayed) and in accordance with the terms of Section 11.8(b) of the Trust Agreement. The Owner Trustee may, subject to the rights of the Lessee under the Lease and the other Operative Agreements and to the Lien of the applicable Security Documents but only with the prior written consent of the Agent (which consent may be withheld by the Agent in its sole discretion) and (provided, no Default or Event of Default has occurred and is continuing) with the consent of the Lessee, directly or indirectly, 40 45 assign, convey, appoint an agent with respect to enforcement of, or otherwise transfer any of its right, title or interest in or to any Property, the Lease, the Trust Agreement and the other Operative Agreements (including without limitation any right to indemnification thereunder), or any other document relating to a Property or any interest in a Property as provided in the Trust Agreement and the Lease. The provisions of the immediately preceding sentence shall not apply to the obligations of the Owner Trustee to transfer Property to the Lessee or a third party purchaser pursuant to Article XXII of the Lease upon payment for such Property in accordance with the terms and conditions of the Lease. No Credit Party may assign any of the Operative Agreements or any of their respective rights or obligations thereunder or with respect to any Property in whole or in part to any Person without the prior written consent of the Agent, the Lenders, the Holders and the Lessor. 10.2. EFFECT OF TRANSFER. From and after any transfer effected in accordance with this Section 10, the transferor shall be released, to the extent of such transfer, from its liability hereunder and under the other documents to which it is a party in respect of obligations to be performed on or after the date of such transfer; provided, however, that any transferor shall remain liable hereunder and under such other documents to the extent that the transferee shall not have assumed the obligations of the transferor thereunder. Upon any transfer by the Owner Trustee, a Holder or a Lender as above provided, any such transferee shall assume the obligations of the Owner Trustee, the Holder or the Lender, as the case may be, and shall be deemed an "Owner Trustee", "Holder", or "Lender", as the case may be, for all purposes of such documents and each reference herein to the transferor shall thereafter be deemed a reference to such transferee for all purposes, except as provided in the preceding sentence. Notwithstanding any transfer of all or a portion of the transferor's interest as provided in this Section 10, the transferor shall be entitled to all benefits accrued and all rights vested prior to such transfer including without limitation rights to indemnification under any such document. SECTION 11. INDEMNIFICATION. 11.1. GENERAL INDEMNITY. Whether or not any of the transactions contemplated hereby shall be consummated, the Indemnity Provider hereby assumes liability for and agrees to defend, indemnify and hold harmless each Indemnified Person on an After Tax Basis from and against any Claims, which may be imposed on, incurred by or asserted against an Indemnified Person by any third party, including without limitation Claims arising from the negligence of an Indemnified Person (but not to the extent such Claims arise from the gross negligence or willful misconduct of such Indemnified Person itself, as determined by a court of competent jurisdiction or pursuant to arbitration as set forth in Section 12.8, as opposed to gross negligence or willful misconduct imputed to such Indemnified Person with regard to the acts or omissions of any Person which is not an agent or employee of such Indemnified Person; provided, no Indemnified Person shall be responsible for the acts or omissions of the Construction Agent regardless of any agency status) 41 46 in any way relating to or arising or alleged to arise out of the execution, delivery, performance or enforcement of this Agreement, the Lease or any other Operative Agreement or on or with respect to any Property or any component thereof, including without limitation Claims in any way relating to or arising or alleged to arise out of (a) the financing, refinancing, purchase, acceptance, rejection, ownership, design, construction, refurbishment, development, delivery, acceptance, nondelivery, leasing, subleasing, possession, use, operation, maintenance repair, modification, transportation, condition, sale, return, repossession (whether by summary proceedings or otherwise), or any other disposition of any Property or any part thereof, including without limitation the acquisition, holding or disposition of any interest in the Property, lease or agreement comprising a portion of any thereof; (b) any latent or other defects in any Property or any portion thereof whether or not discoverable by an Indemnified Person or the Indemnity Provider; (c) a violation of Environmental Laws, Environmental Claims or other loss of or damage to any property or the environment relating to the Property, the Lease, the Agency Agreement or the Indemnity Provider; (d) the Operative Agreements, or any transaction contemplated thereby; (e) any breach by the Indemnity Provider of any of its representations or warranties under the Operative Agreements to which the Indemnity Provider is a party or failure by the Indemnity Provider to perform or observe any covenant or agreement to be performed by it under any of the Operative Agreements; (f) the transactions contemplated hereby or by any other Operative Agreement, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA; and (g) personal injury, death or property damage, including without limitation Claims based on strict or absolute liability in tort. Without limiting the generality of the foregoing, Environmental Claims shall include without limitation amounts paid in settlement of claims, all consultant and expert fees and expenses of any Indemnified Person incurred in connection with any investigation of site conditions, any abatement, cleanup, remediation, removal or restoration work, or liability for any damages or injuries of any Person or to land, air, water or other natural resources. If a written Claim is made against any Indemnified Person or if any proceeding shall be commenced against such Indemnified Person (including without limitation a written notice of such proceeding), for any Claim, such Indemnified Person shall promptly notify the Indemnity Provider in writing and shall not take action with respect to such Claim without the consent of the Indemnity Provider for thirty (30) days after the receipt of such notice by the Indemnity Provider; provided, however, that in the case of any such Claim, if action shall be required by law or regulation to be taken prior to the end of such period of thirty (30) days, such Indemnified Person shall endeavor to, in such notice to the Indemnity Provider, inform the Indemnity Provider of such shorter period, and no action shall be taken with respect to such Claim without the consent of the Indemnity Provider before seven (7) days before the end of such shorter period; provided, further, that the failure of such Indemnified Person to give the notices referred to in this sentence shall not diminish the Indemnity Provider's obligation hereunder except to the extent such failure precludes in all respects the Indemnity Provider from contesting such Claim. If, within thirty (30) days of receipt of such notice from the Indemnified Person (or such shorter period as the Indemnified Person has notified the Indemnity Provider is required by law or regulation for the Indemnified Person to respond to such Claim), the Indemnity Provider shall request in writing that such Indemnified Person respond to such Claim, the Indemnified Person 42 47 shall, at the expense of the Indemnity Provider, in good faith conduct and control such action (including without limitation by pursuit of appeals) (provided, however, that (A) if such Claim, in the Indemnity Provider's reasonable discretion, can be pursued by the Indemnity Provider on behalf of or in the name of such Indemnified Person, the Indemnified Person, at the Indemnity Provider's request, shall allow the Indemnity Provider to conduct and control the response to such Claim and (B) in the case of any Claim (and notwithstanding the provisions of the foregoing subsection (A)), the Indemnified Person may request the Indemnity Provider to conduct and control the response to such Claim (with counsel to be selected by the Indemnity Provider and consented to by such Indemnified Person, such consent not to be unreasonably withheld; provided, however, that any Indemnified Person may retain separate counsel at the expense of the Indemnity Provider in the event of a conflict of interest between such Indemnified Person and the Indemnity Provider)) by, in the sole discretion of the Person conducting and controlling the response to such Claim (1) resisting payment thereof, (2) not paying the same except under protest, if protest is necessary and proper, (3) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings, or (4) taking such other action as is reasonably requested by the Indemnity Provider from time to time. The party controlling the response to any Claim shall consult in good faith with the non-controlling party and shall keep the non-controlling party reasonably informed as to the conduct of the response to such Claim; provided, that all decisions ultimately shall be made in the discretion of the controlling party. The parties agree that an Indemnified Person may at any time decline to take further action with respect to the response to such Claim and may settle such Claim if such Indemnified Person shall waive its rights to any indemnity from the Indemnity Provider that otherwise would be payable in respect of such Claim (and any future Claim, the pursuit of which is precluded by reason of such resolution of such Claim) and shall pay to the Indemnity Provider any amount previously paid or advanced by the Indemnity Provider pursuant to this Section 11.1 by way of indemnification or advance for the payment of an amount regarding such Claim. Notwithstanding the foregoing provisions of this Section 11.1, an Indemnified Person shall not be required to take any action and no Indemnity Provider shall be permitted to respond to any Claim in its own name or that of the Indemnified Person unless (A) the Indemnity Provider shall have agreed to pay and shall pay to such Indemnified Person on demand and on an After Tax Basis all reasonable costs, losses and expenses that such Indemnified Person actually incurs in connection with such Claim, including without limitation all reasonable legal, accounting and investigatory fees and disbursements and, if the Indemnified Person has informed the Indemnity Provider that it intends to contest such Claim (whether or not the control of the contest is then assumed by the Indemnity Provider), the Indemnity Provider shall have agreed that the Claim is an indemnifiable Claim hereunder, (B) in the case of a Claim that must be pursued in the name of an Indemnified Person (or an Affiliate thereof), the amount of the potential indemnity (taking into account all similar or logically related Claims that have been or could be raised for which the Indemnity Provider may be liable to pay an indemnity under this Section 11.1) exceeds $25,000 (or such lesser amount as may be subsequently agreed between the Indemnity Provider and the Indemnified Person), (C) the Indemnified Person shall have 43 48 reasonably determined that the action to be taken will not result in any material danger of sale, forfeiture or loss of the Property, or any part thereof or interest therein, will not interfere with the payment of Rent, and will not result in risk of criminal liability, (D) if such Claim shall involve the payment of any amount prior to the resolution of such Claim, the Indemnity Provider shall provide to the Indemnified Person an interest-free advance in an amount equal to the amount that the Indemnified Person is required to pay (with no additional net after-tax cost to such Indemnified Person) prior to the date such payment is due, (E) in the case of a Claim that must be pursued in the name of an Indemnified Person (or an Affiliate thereof), the Indemnity Provider shall have provided to such Indemnified Person an opinion of independent counsel selected by the Indemnified Person and reasonably satisfactory to the Indemnity Provider stating that a reasonable basis exists to contest such Claim (or, in the case of an appeal of an adverse determination, an opinion of such counsel to the effect that the position asserted in such appeal will more likely than not prevail) and (F) no Event of Default shall have occurred and be continuing. In no event shall an Indemnified Person be required to appeal an adverse judicial determination to the United States Supreme Court. In addition, an Indemnified Person shall not be required to contest any Claim in its name (or that of an Affiliate) if the subject matter thereof shall be of a continuing nature and shall have previously been decided adversely by a court of competent jurisdiction pursuant to the contest provisions of this Section 11.1, unless there shall have been a change in law (or interpretation thereof) and the Indemnified Person shall have received, at the Indemnity Provider's expense, an opinion of independent counsel selected by the Indemnified Person and reasonably acceptable to the Indemnity Provider stating that as a result of such change in law (or interpretation thereof), it is more likely than not that the Indemnified Person will prevail in such contest. In no event shall the Indemnity Provider be permitted to adjust or settle any Claim without the consent of the Indemnified Person to the extent any such adjustment or settlement involves, or is reasonably likely to involve, any performance by or adverse admission by or with respect to the Indemnified Person. 11.2. GENERAL TAX INDEMNITY. (a) The Indemnity Provider shall pay and assume liability for, and does hereby agree to indemnify, protect and defend each Property and all Indemnified Persons, and hold them harmless against, all Impositions on an After Tax Basis, and all payments pursuant to the Operative Agreements shall be made free and clear of and without deduction for any and all present and future Impositions. (b) Notwithstanding anything to the contrary in Section 11.2(a) hereof, the following shall be excluded from the indemnity required by Section 11.2(a): (i) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on a Indemnified Person (other than the Lessor, the Owner Trustee and/or the Trust) by the United States federal government that are based on or measured by the net income (including without limitation taxes based on capital gains and minimum taxes) of such Person; provided, that this clause (i) shall not be interpreted to prevent a 44 49 payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (ii) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on any Indemnified Person (other than the Lessor) by any state or local jurisdiction or taxing authority within any state or local jurisdiction and that are based upon or measured by the net income (including without limitation taxes based on capital gains and minimum taxes) of such Person; provided that such Taxes shall not be excluded under this subparagraph (ii) to the extent the location, possession or use of any Property in, the location or the operation of the Lessee in, or the Lessee's making payments under the Operative Agreements from, the jurisdiction imposing such Taxes been the sole connection between such Indemnified Person and the jurisdiction imposing such Taxes; provided, further, that this clause (ii) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (iii) any Tax to the extent it relates to any act, event or omission that occurs after the termination of the Lease and redelivery or sale of the property in accordance with the terms of the Lease (but not any Tax that relates to such termination, redelivery or sale and/or to any period prior to such termination, redelivery or sale); and (iv) any Taxes which are imposed on an Indemnified Person as a result of the gross negligence or willful misconduct of such Indemnified Person itself, as determined by a court of competent jurisdiction (as opposed to gross negligence or willful misconduct imputed to such Indemnified Person with regard to the acts or omissions of any Person which is not an agent or employee of such Indemnified Person; provided, no Indemnified Person shall be responsible for the acts or omissions of the Construction Agent regardless of any agency status), but not Taxes imposed as a result of ordinary negligence of such Indemnified Person; (c) (i) Subject to the terms of Section 11.2(e), the Indemnity Provider shall pay or cause to be paid all Impositions directly to the taxing authorities where feasible and otherwise to the Indemnified Person, as appropriate, and the Indemnity Provider shall at its own expense, upon such Indemnified Person's reasonable request, furnish to such Indemnified Person copies of official receipts or other satisfactory proof evidencing such payment. (ii) In the case of Impositions for which no contest is conducted pursuant to Section 11.2(e) and which the Indemnity Provider pays directly to the taxing authorities, the Indemnity Provider shall pay such Impositions prior to the latest time permitted by the relevant taxing authority for timely payment. In the case of Impositions for which the Indemnity Provider reimburses an Indemnified Person, the Indemnity Provider shall do so within thirty (30) days after receipt by 45 50 the Indemnity Provider of demand by such Indemnified Person describing in reasonable detail the nature of the Imposition and the basis for the demand (including without limitation the computation of the amount payable), accompanied by receipts or other reasonable evidence of such demand. In the case of Impositions for which a contest is conducted pursuant to Section 11.2(e), the Indemnity Provider shall pay such Impositions or reimburse such Indemnified Person for such Impositions, to the extent not previously paid or reimbursed pursuant to subsection (a), prior to the latest time permitted by the relevant taxing authority for timely payment after conclusion of all contests under Section 11.2(e). (iii) At the Indemnity Provider's request, the amount of any indemnification payment by the Indemnity Provider pursuant to subsection (a) shall be verified and certified by an independent public accounting firm mutually acceptable to the Indemnity Provider and the Indemnified Person. The fees and expenses of such independent public accounting firm shall be paid by the Indemnity Provider unless such verification shall result in an adjustment in the Indemnity Provider's favor of fifteen percent (15%) or more of the payment as computed by the Indemnified Person, in which case such fee shall be paid by the Indemnified Person. (d) The Indemnity Provider shall be responsible for preparing and filing any real and personal property or ad valorem tax returns in respect of each Property and any other tax returns requested by the Owner Trustee respecting the transactions described in the Operative Agreements. In case any other report or tax return shall be required to be made with respect to any obligations of the Indemnity Provider under or arising out of subsection (a) and of which the Indemnity Provider has knowledge or should have knowledge, the Indemnity Provider, at its sole cost and expense, shall notify the relevant Indemnified Person of such requirement and (except if such Indemnified Person notifies the Indemnity Provider that such Indemnified Person intends to file such report or return) (A) to the extent required or permitted by and consistent with Legal Requirements, make and file in Indemnity Provider's name such return, statement or report; and (B) in the case of any other such return, statement or report required to be made in the name of such Indemnified Person, advise such Indemnified Person of such fact and prepare such return, statement or report for filing by such Indemnified Person or, where such return, statement or report shall be required to reflect items in addition to any obligations of the Indemnity Provider under or arising out of subsection (a), provide such Indemnified Person at the Indemnity Provider's expense with information sufficient to permit such return, statement or report to be properly made with respect to any obligations of the Indemnity Provider under or arising out of subsection (a). Such Indemnified Person shall, upon the Indemnity Provider's request and at the Indemnity Provider's expense, provide any data maintained by such Indemnified Person (and not otherwise available to or within the control of the Indemnity Provider) with respect to each Property which the Indemnity Provider may reasonably require to prepare any required tax returns or reports. 46 51 (e) If a written Claim is made against any Indemnified Person or if any proceeding shall be commenced against such Indemnified Person (including without limitation a written notice of such proceeding), for any Impositions, the provisions in Section 11.1 relating to notification and rights to contest shall apply; provided, however, if such contest involves a Tax other than a Tax on net income and can be pursued independently from any other proceeding involving a tax liability of such Indemnified Person, the Indemnified Person, at the Indemnity Provider's request, shall allow the Indemnity Provider (and the Indemnity Provider shall be obligated) to conduct and control such contest. 11.3 INCREASED COSTS, ILLEGALITY, ETC. Without limiting the rights of the Lessee under Section 11.6 of the Participation Agreement: (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request hereafter adopted, promulgated or made by any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Financing Party of agreeing to make or making, funding or maintaining Advances, then the Lessee shall from time to time, upon demand by such Financing Party (with a copy of such demand to the Agent but subject to the terms of Section 11.6 of the Participation Agreement, as the case may be), pay to the Agent for the account of such Financing Party additional amounts sufficient to compensate such Financing Party for such increased cost. A certificate as to the amount of such increased cost, submitted to the Lessee and the Agent by such Financing Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Financing Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law, but in each case promulgated or made after the date hereof) affects or would affect the amount of capital required or expected to be maintained by such Financing Party or any corporation controlling such Financing Party and that the amount of such capital is increased by or based upon the existence of such Financing Party's commitment to make Advances and other commitments of this type or upon the Advances, then, upon demand by such Financing Party (with a copy of such demand to the Agent but subject to the terms Section 11.6 of the Participation Agreement), the Lessee shall pay to the Agent for the account of such Financing Party, from time to time as specified by such Financing Party, additional amounts sufficient to compensate such Financing Party or such corporation in the light of such circumstances, to the extent that such Financing Party reasonably determines such increase in capital to be allocable to the existence of such Financing Party's commitment to make such Advances. A certificate as to such amounts submitted to the Lessee and the Agent by such Financing Party shall be conclusive and binding for all purposes, absent manifest error. 47 52 (c) Without limiting the effect of the foregoing, the Lessee shall pay to each Financing Party on the last day of the Interest Period therefor so long as such Financing Party is maintaining reserves against "Eurocurrency liabilities" under Regulation D an additional amount (determined by such Financing Party and notified to the Lessee through the Agent) equal to the product of the following for each Eurodollar Loan or Eurodollar Holder Advance, as the case may be, for each day during such Interest Period: (i) the principal amount of such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, outstanding on such day; and (ii) the remainder of (x) a fraction the numerator of which is the rate (expressed as a decimal) at which interest accrues on such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, for such Interest Period as provided in the Credit Agreement or the Trust Agreement, as the case may be (less the Applicable Percentage), and the denominator of which is one (1) minus the effective rate (expressed as a decimal) at which such reserve requirements are imposed on such Financing Party on such day minus (y) such numerator; and (iii) 1/360. (d) Without affecting its rights under Sections 11.3(a), 11.3(b) or 11.3(c) or any other provision of any Operative Agreement, each Financing Party agrees that if there is any increase in any cost to or reduction in any amount receivable by such Financing Party with respect to which the Lessee would be obligated to compensate such Financing Party pursuant to Sections 11.3(a) or 11.3(b), such Financing Party shall use reasonable efforts to select an alternative office for Advances which would not result in any such increase in any cost to or reduction in any amount receivable by such Financing Party; provided, however, that no Financing Party shall be obligated to select an alternative office for Advances if such Financing Party determines that (i) as a result of such selection such Financing Party would be in violation of any applicable law, regulation, treaty, or guideline, or would incur additional costs or expenses or (ii) such selection would be inadvisable for regulatory reasons or materially inconsistent with the interests of such Financing Party. (e) With reference to the obligations of the Lessee set forth in Sections 11.3(a) through 11.3(d), the Lessee shall not have any obligation to pay to any Financing Party amounts owing under such Sections for any period which is more than one (1) year prior to the date upon which the request for payment therefor is delivered to the Lessee. (f) Notwithstanding any other provision of this Agreement, if any Financing Party shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Financing Party to perform its obligations hereunder to make or maintain Eurodollar Loans or Eurodollar Holder 48 53 Advances, as the case may be, then (i) each Eurodollar Loan or Eurodollar Holder Advance, as the case may be, will automatically, at the earlier of the end of the Interest Period for such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, or the date required by law, convert into an ABR Loan or an ABR Holder Advance, as the case may be, and (iii) the obligation of the Financing Parties to make, convert or continue Eurodollar Loans or Eurodollar Holder Advances, as the case may be, shall be suspended until the Agent shall notify the Lessee that such Financing Party has determined that the circumstances causing such suspension no longer exist. 11.4 FUNDING/CONTRIBUTION INDEMNITY. Subject to the provisions of Section 11.6 of the Participation Agreement, the Lessee agrees to indemnify each Financing Party and to hold each Financing Party harmless from any loss or reasonable expense which such Financing Party may sustain or incur as a consequence of (a) any default in connection with the drawing of funds for any Advance, (b) any default in making any prepayment after a notice thereof has been given in accordance with the provisions of the Operative Agreements or (c) the making of a voluntary or involuntary prepayment of Eurodollar Loans or Eurodollar Holder Advances, as the case may be, on a day which is not the last day of an Interest Period with respect thereto. Such indemnification shall be in an amount equal to the excess, if any, of (x) the amount of interest or Holder Yield, as the case may be, which would have accrued on the amount so prepaid, or not so borrowed, accepted, converted or continued for the period from the date of such prepayment or of such failure to borrow, accept, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, accept, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable Eurodollar Rate plus the Applicable Percentage for such Loan or Holder Advance, as the case may be, for such Interest Period over (y) the amount of interest (as determined by such Financing Party in its reasonable discretion) which would have accrued to such Financing Party on such amount by (i) (in the case of the Lenders) re-employing such funds in loans of the same type and amount during the period from the date of prepayment or failure to borrow to the last day of the then applicable Interest Period (or, in the case of a failure to borrow, the Interest Period that would have commenced on the date of such failure) and (ii) (in the case of the Holders) placing such amount on deposit for a comparable period with leading banks in the relevant interest rate market. This covenant shall survive the termination of the Operative Agreements and the payment of all other amounts payable hereunder. 11.5 WITHHOLDING TAXES. (a) So long as the applicable Lender or Holder shall have complied with the provisions of Section 11.5(c) hereof, any and all payments under any Note, Certificate or other Operative Agreement shall be made, in accordance with the terms hereof and thereof, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (other than taxes imposed on net income or profits of, or any branch or franchise taxes applicable to, the Agent, any Lender or any Holder) (y) by the jurisdiction under the laws of which the Agent, such Lender or such Holder, as the case may be, is organized or 49 54 any political subdivision thereof and (z) in the case of each Lender and Holder, by the jurisdiction in which any lending office of such Lender or any office of such Holder from which Holder Advances are made is located or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Non-Excluded Taxes"). If any obligor shall be required by law to deduct any Non-Excluded Taxes from or in respect of any sum payable under any Operative Agreement or under any Note or Certificate to the Agent, any Lender or any Holder, so long as the applicable Lender or Holder shall have complied with the provisions of Section 11.5(c) hereof, (i) the sum shall be payable by the Lessee and shall be increased as may be necessary so that after making all required deductions (including without limitation deductions applicable to additional sums payable under this Section), the Agent or such Lender or such Holder, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Lessee will make such deductions and (iii) the Lessee will pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. If and to the extent that the Agent or any Lender or any Holder subsequently shall be refunded or otherwise recover all or any part of such deduction, it shall refund to the Lessee the amount so recovered. (b) So long as the applicable Lender or Holder shall have complied with the provisions of Section 11.5(c), the Lessee will indemnify the Agent, each Lender and each Holder for the full amount of Non-Excluded Taxes (including without limitation any Non-Excluded Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Agent or such Lender or such Holder, as the case may be, and any liability (including without limitation penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within thirty (30) days from the date the Agent or any Lender or any Holder, as the case may be, makes written demand therefor and delivers to the Lessee the original receipt of Non-Excluded Taxes paid by it or an invoice from the relevant taxing authority regarding such Non-Excluded Taxes. Within thirty (30) days after the date of any payment of Non-Excluded Taxes pursuant to this Section, the Lessee will furnish to the Agent or the relevant Lender or the relevant Holder, as the case may be, the original or a certified copy of a receipt or other relevant documentation evidencing payment thereof; provided, that demand therefor must be made on the Lessee within one hundred twenty (120) days after the Agent's or relevant Lender's or relevant Holder's actual knowledge that such Lender or Holder is entitled to such payment. If and to the extent that any Lender or Holder subsequently shall be refunded or otherwise recover all or any part of such payment of taxes, it shall refund to the Lessee the amount so recovered. (c) If any Lender or Holder is a "foreign corporation, partnership or trust" within the meaning of the Code, and such Lender or Holder is entitled to an exemption (or is exempt) from United States withholding tax under Section 1441 or 1442 of the Code, such Lender or Holder will deliver to the Agent and the Lessee: 50 55 (i) if such Lender or Holder is entitled to claim an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 before the payment of any interest to such Lender or Holder Yield to such Holder in the first calendar year, and before the payment of any interest to such Lender or Holder Yield to such Holder in each third succeeding calendar year, during which interest may be paid to such Lender or Holder Yield may be paid to such Holder under any Operative Agreement; (ii) if such Lender or Holder is entitled to claim that interest (in the case of Lenders) or Holder Yield (in the case of Holders) paid under the Operative Agreements is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender or Holder, two (2) properly completed and executed copies of IRS Form 4224 before the payment of any interest to such Lender or Holder Yield to such Holder is due in the first taxable year of such Lender or Holder, and in each succeeding taxable year of such Lender or Holder, during which interest may be paid to such Lender or Holder Yield may be paid to such Holder under the Operative Agreements, and IRS Form W-9; and (iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Each Lender and Holder as of the Initial Closing Date, and each assignee under any (x) Assignment and Acceptance (as of the date thereof) or (y) assignment by any Holder of an interest under the Trust Agreement and any Certificate, that is a "foreign corporation, partnership or trust" as described herein must be eligible to claim a complete exemption and must provide applicable forms to the Lessee as required by this Section 11.5. Each such Lender and Holder will promptly notify the Agent and the Lessee of any changes in circumstances that would modify or render invalid any claimed exemption or reduction. (d) If any Lender or Holder is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender or any payment of Holder Yield to such Holder an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required under subsection (c) above are not executed, completed and/or delivered to the Agent, then the Agent may withhold from any interest payment to such Lender or any payment of Holder Yield to such Holder, as the case may be, not providing such forms or other documentation an amount equivalent to the applicable withholding tax. For purposes of this Section, a distribution hereunder by the Agent to or for the account of any Lender or Holder shall be deemed a payment by the Lessee. (e) If the Internal Revenue Service or any other Governmental Authority, domestic or foreign, asserts a claim that the Agent did not properly withhold tax from 51 56 amounts paid to or for the account of any Lender or Holder (whether because the appropriate form was not delivered or was not properly executed, completed and/or delivered, because such Lender or Holder failed to notify the Agent of a change in circumstances that rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), such Lender or Holder shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including without limitation penalties and interest, and including without limitation any taxes imposed by any jurisdiction on the amounts payable to the Agent under this subsection (e), together with all costs, expenses and reasonably attorneys' fees incurred or paid in connection therewith. (f) If at any time the Lessee requests any Lender or Holder to deliver any forms other than documentation pursuant to subsection (c) above, then the Lessee shall, upon demand of such Lender or Holder, reimburse such Lender or Holder for any reasonable costs or expenses incurred by such Lender or Holder in the preparation or delivery of such forms or other documentation. (g) Each Lender and Holder agrees that, if the Lessee is required to pay additional amounts to or for the account of any Lender or Holder pursuant to subsections (a) or (b) above, then such Lender or Holder will, to the extent permitted by law, endeavor in good faith to designate another lending office for its Eurodollar Loans (in the case of Lenders) or office for its Eurodollar Holder Advances (in the case of Holders), but only if such designation would make it lawful for such Lender or Holder to continue to make or maintain Eurodollar Loans or Eurodollar Holder Advances hereunder; provided that such designation is made on such terms that such Lender or Holder, in its good faith determination, suffers no increased cost or economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of this Section. 11.6 REPLACEMENT OF LENDERS AND HOLDERS. The Lessee may, at any time and so long as no Default or Event of Default has then occurred and is continuing, replace any Lender or Holder (a) that has requested additional amounts from the Lessee under Section 11.3 or 11.5 or (b) the obligation of which to make or maintain Eurodollar Loans or Eurodollar Holder Advances has been suspended under Section 11.3(f) by written notice to the Agent and such Lender or such Holder, as the case may be, given not more than thirty (30) days after any such event. Within sixty (60) days of such notice, the Lessee shall give written notice to the Agent and such Lender or such Holder, as the case may be, identifying one or more Persons each of which qualifies as an Eligible Assignee and shall be reasonably acceptable to the Agent (each, a "Replacement Financing Party," and collectively, the "Replacement Financing Parties") to replace such Lender or Holder (the "Replaced Financing Party"), provided that (i) the second notice from the Lessee to the Replaced Financing Party and the Agent provided for hereinabove shall specify an effective date for such replacement (the "Replacement Effective Date"), which shall be at least five (5) Business Days after such notice is given, (ii) as of the relevant Replacement Effective Date, each Replacement Financing Party 52 57 shall enter into an Assignment and Acceptance with the Replaced Financing Party (if such Replaced Financing Party is a Lender) (but shall not be required to pay the processing fee otherwise payable to the Agent with regard thereto) or shall enter into an assignment and acceptance with the Replaced Financing Party, in form and substance satisfactory to the signatories (if such Replaced Financing Party is a Holder), pursuant to which such Replacement Financing Parties collectively shall acquire, in such proportion among them as they may agree with the Lessee and the Agent, all (but not less than all) of the Commitments, Holder Commitments, outstanding Loans and outstanding Holder Advances of the Replaced Financing Party, and, in connection therewith, shall pay to the Replaced Financing Party, as the purchase price in respect thereof, an amount equal to the sum as of the Replacement Effective Date (without duplication) of (x) the unpaid principal amount of and all accrued but unpaid interest on all outstanding Loans of the Replaced Financing Party, (y) the unpaid amount of Holder Advances and all accrued but unpaid Holder Yield on Holder Advances of the Replaced Financing Party and (z) the Replaced Financing Party's ratable share of all accrued but unpaid fees owing to the Replaced Financing Party hereunder and (iii) all other obligations of the Lessee owing to the Replaced Financing Party (other than those specifically described in clause (ii) above in respect of which the assignment purchase price has been, or is concurrently being, paid), including without limitation amounts payable under Section 11.4 as a result of the actions required to be taken under this Section, shall be paid in full by the Lessee to the Replaced Financing Party on or prior to the Replacement Effective Date. 11.7 EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC. WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION PROVISIONS OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY, AND INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES, COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT LIMITATION ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY. 53 58 SECTION 12. MISCELLANEOUS. 12.1. SURVIVAL OF AGREEMENTS. The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Agreements, and the parties' obligations under any and all thereof, shall survive the execution and delivery of this Agreement, the transfer of any Property to the Owner Trustee, the acquisition of any Property (or any of its components), the construction of any Improvements, the Completion of any Property, any disposition of any interest of the Owner Trustee in any Property or any interest of the Holders in the Trust Estate, the payment of the Notes and any disposition thereof and shall be and continue in effect notwithstanding any investigation made by any party and the fact that any party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Agreements. Except as otherwise expressly set forth herein or in other Operative Agreements, the indemnities of the parties provided for in the Operative Agreements shall survive the expiration or termination of any thereof. 12.2. NO BROKER, ETC. Each of the parties hereto represents to the others that it has not retained or employed any broker, finder or financial adviser to act on its behalf in connection with this Agreement, nor has it authorized any broker, finder or financial adviser retained or employed by any other Person so to act. Any party who is in breach of this representation shall indemnify and hold the other parties harmless from and against any liability arising out of such breach of this representation. 12.3. NOTICES. All notices required or permitted to be given under any Operative Agreement shall be in writing. Notices may be served by certified or registered mail, postage paid with return receipt requested; by private courier, prepaid; by telex, facsimile, or other telecommunication device capable of transmitting or creating a written record; or personally. Mailed notices shall be deemed delivered five (5) days after mailing, properly addressed. Couriered notices shall be deemed delivered when delivered as addressed, or if the addressee refuses delivery, when presented for delivery notwithstanding such refusal. Telex or telecommunicated notices shall be deemed delivered when receipt is either confirmed by confirming transmission equipment or acknowledged by the addressee or its office. Personal delivery shall be effective when accomplished. Unless a party changes its address by giving notice to the other party as provided herein, notices shall be delivered to the parties at the following addresses: If to the Construction Agent or the Lessee, to such entity at the following addresses: 54 59 Province Healthcare Company 105 Westwood Place, Suite 400 Brentwood, Tennessee 37027 Attention: Vice President - Finance Telephone: (615) 370-1377 Telecopy: (615) 370-1259 with a copy (which shall not constitute notice) to: Waller Lansden Dortch & Davis PLLC Nashville City Center 511 Union Street, Suite 2100 Nashville, Tennessee 37219-1760 Attention: Ralph Davis Telephone: (615) 252-2481 Telecopy: (615) 244-6804 If to any Guarantor, to such entity in care of the Lessee at the above-referenced address. If to the Owner Trustee, to it at the following address: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Val T. Orton Vice President Telephone: (801) 246-5300 Telecopy: (801) 246-5053 If to the Holders, to each such Holder at the address set forth for such Holder on Schedule I of the Trust Agreement. If to the Agent, to it at the following address: First Union National Bank c/o First Union Capital Markets Group DC-6 301 South College Street Charlotte, North Carolina 28288-0166 Attention: Ms. Jane O. Hurley Capital Markets Services Telephone: (704) 383-3812 Telecopy: (704) 383-7989 55 60 with a copy (which shall not constitute notice) to: First Union National Bank 150 Fourth Avenue North 2nd Floor Nashville, Tennessee 37219 Attention: Carolyn Hannon Telephone: (615) 251-9374 Telecopy: (615) 251-9247 with a copy (which shall not constitute notice) to: First Union National Bank One First Union Center, 5th Floor 301 South College Street Charlotte, North Carolina 28288-0735 Attention: Valerie Cline Telephone: (704) 383-6237 Telecopy: (704) 383-9144 If to any Lender, to it at the address set forth for such Lender in Schedule 1.1 of the Credit Agreement. From time to time any party may designate additional parties and/or another address for notice purposes by notice to each of the other parties hereto. Each notice hereunder shall be effective upon receipt or refusal thereof. 12.4. COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one (1) and the same instrument. 12.5. TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE MATTERS. Each Operative Agreement may be terminated, amended, supplemented, waived or modified only by an instrument in writing signed by, subject to Article VIII of the Trust Agreement regarding termination of the Trust Agreement, the Majority Secured Parties and each Credit Party (to the extent such Credit Party is a party to such Operative Agreement). In addition, (a) the Unanimous Vote Matters shall require the consent of each Lender and each Holder and (b) any provision of any Operative Agreement incorporated by reference or otherwise referenced in a second Operative Agreement shall remain, respecting such second Operative Agreement, in its original form without regard to any such termination, amendment, supplement, waiver or modification in the first Operative Agreement except if such has been agreed to by an instrument in writing signed by, subject to Article VIII of the Trust Agreement regarding 56 61 termination of the Trust Agreement, the Majority Secured Parties and each Credit Party (to the extent such Credit Party is a party to such Operative Agreement). Notwithstanding the foregoing, no such termination, amendment, supplement, waiver or modification shall, without the consent of the Agent and, to the extent affected thereby, each Lender and each Holder (collectively, the "Unanimous Vote Matters") (i) reduce the amount of any Note or any Certificate, extend the scheduled date of maturity of any Note, extend the scheduled Expiration Date, extend any payment date of any Note or Certificate, reduce the stated rate of interest payable on any Note, reduce the stated Holder Yield payable on any Certificate (other than as a result of waiving the applicability of any post-default increase in interest rates or Holder Yields), modify the priority of any Lien in favor of the Agent under any Security Document, subordinate any obligation owed to any Lender or Holder, reduce any Lender Facility Fees or any Holder Facility Fees payable under the Participation Agreement, extend the scheduled date of payment of any Lender Facility Fees or any Holder Facility Fees or increase the amount or extend the expiration date of any Lender's Commitment or the Holder Commitment of any Holder, or (ii) terminate, amend, supplement, waive or modify any provision of this Section 12.5 or reduce the percentages specified in the definitions of Majority Lenders, Majority Holders or Majority Secured Parties, or consent to the assignment or transfer by the Owner Trustee of any of its rights and obligations under any Credit Document or release a material portion of the Collateral (except in accordance with Section 8.8) or release any Credit Party from its obligations under any Operative Agreement or otherwise alter any payment obligations of any Credit Party to the Lessor or any Financing Party under the Operative Agreements, or (iii) terminate, amend, supplement, waive or modify any provision of Section 7 of the Credit Agreement, or (iv) permit Advances for Work in excess of the Construction Budget, or (v) eliminate the automatic option under Section 5.3(b) of the Agency Agreement requiring that the Construction Agent pay certain liquidated damages in exchange for the conveyance of a Property to the Construction Agent. Any such termination, amendment, supplement, waiver or modification shall apply equally to each of the Lenders and the Holders and shall be binding upon all the parties to this Agreement. In the case of any waiver, each party to this Agreement shall be restored to its former position and rights under the Operative Agreements, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. If at a time when the conditions precedent set forth in the Operative Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied, any Lender shall fail to fulfill its obligations to make such Loan (any such Lender, a "Defaulting Lender") then, for so long as such failure shall continue, the Defaulting Lender shall (unless the Lessee and the Majority Lenders, determined as if the Defaulting Lender were not a "Lender", shall otherwise consent in writing) be deemed for all purposes relating to terminations, amendments, supplements, waivers or modifications under the Operative Agreements to have no Loans, shall not be treated as a "Lender" when performing the computation of Majority Lenders or Majority Secured Parties, and shall have no rights under this Section 12.5; provided that any action taken pursuant to the second paragraph of this Section 12.5 shall not be effective as against the Defaulting Lender. 57 62 If at a time when the conditions precedent set forth in the Operative Agreements to any Holder Advance are, in the opinion of the Majority Holders, satisfied, any Holder shall fail to fulfill its obligations to make such Holder Advance (any such Holder, a "Defaulting Holder") then, for so long as such failure shall continue, the Defaulting Holder shall (unless the Lessee and the Majority Holders, determined as if the Defaulting Holder were not a "Holder", shall otherwise consent in writing) be deemed for all purposes relating to terminations, amendments, supplements, waivers or modifications under the Operative Agreements to have no Holder Advances, shall not be treated as a "Holder" when performing the computation of Majority Holders or Majority Secured Parties, and shall have no rights under this Section 12.5; provided that any action taken pursuant to the second paragraph of this Section 12.5 shall not be effective as against the Defaulting Holder. 12.6. HEADINGS, ETC. The Table of Contents and headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. 12.7. PARTIES IN INTEREST. Except as expressly provided herein, none of the provisions of this Agreement are intended for the benefit of any Person except the parties hereto. 12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE; ARBITRATION. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to this Agreement or any other Operative Agreement may be brought in the courts of the State of North Carolina in Mecklenburg County or of the United States for the Western District of North Carolina and, by execution and delivery of this Agreement, each of the parties to this Agreement hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the parties to this Agreement further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 12.3, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of any party to serve process in any other manner permitted by Law or to commence legal proceedings or to otherwise proceed against any party in any other jurisdiction. 58 63 (b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN. (c) Each of the parties to this Agreement hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Operative Agreement brought in the courts referred to in subsection (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) Notwithstanding the provisions of Section 12.8(a) or of any other Operative Agreement to the contrary, upon demand of any party to this Agreement and/or any other Operative Agreement, whether made before or within three (3) months after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to this Agreement and/or any other Operative Agreement between or among parties to this Agreement and/or any other Operative Agreement ("Disputes") shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include without limitation tort claims, counterclaims, disputes as to whether a matter is subject to arbitration, claims brought as class actions, claims arising from agreements executed in the future, or claims arising out of or connected with the transaction reflected by this Agreement and/or any other Operative Agreement. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA") and Title 9 of the United States Code. All arbitration hearings shall be conducted in Charlotte, North Carolina. A hearing shall begin within ninety (90) days of demand for arbitration and all hearings shall be concluded within one hundred twenty (120) days of demand for arbitration. These time limitations may not be extended unless a party shows cause for extension and then no more than a total extension of sixty (60) days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys selected from the Commercial Financial Disputes Arbitration Panel of the AAA. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted or if such person is not available to serve, the single arbitrator may be a licensed attorney. Notwithstanding the foregoing, this arbitration provision does not apply to disputes under or related to swap agreements. Notwithstanding the immediately preceding binding arbitration provisions, the parties to this Agreement and/or any other Operative Agreement agree to preserve, 59 64 without diminution, certain remedies that the Agent on behalf of the Lenders and the Holders may employ or exercise freely, independently or in connection with an arbitration proceeding or after an arbitration action is brought. The Agent on behalf of the Lenders and the Holders shall have the right to proceed in any court of proper jurisdiction or by self-help to exercise or prosecute the following remedies, as applicable (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted under any Operative Agreement or under applicable Law or by judicial foreclosure and sale, including without limitation a proceeding to confirm the sale; (ii) all rights of self-help including without limitation peaceful occupation of real property and collection of rents, set-off and peaceful possession of personal property; (iii) obtaining provisional or ancillary remedies including without limitation injunctive relief, sequestration, garnishment, attachment, appointment of receiver and filing an involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. The parties to this Agreement and/or any other Operative Agreement agree that they shall not have a remedy of special, punitive or exemplary damages against any other party in any Dispute and hereby waive any right or claim to special, punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. By execution and delivery of this Agreement and/or any other Operative Agreement, each of the parties hereto and/or thereto accepts, for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction relating to any arbitration proceedings conducted under the Arbitration Rules in Charlotte, North Carolina and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Agreement and/or any other Operative Agreement from which no appeal has been taken or is available. 12.9. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 12.10. LIABILITY LIMITED. (a) The Lenders, the Agent, the Credit Parties, the Owner Trustee and the Holders each acknowledge and agree that the Owner Trustee is (except as otherwise expressly provided herein or therein) entering into this Agreement and the other Operative Agreements to which it is a party (other than the Trust Agreement and to the 60 65 extent otherwise provided in Section 6.2 of this Agreement), solely in its capacity as trustee under the Trust Agreement and not in its individual capacity and that the Trust Company shall not be liable or accountable under any circumstances whatsoever in its individual capacity for or on account of any statements, representations, warranties, covenants or obligations stated to be those of the Owner Trustee, except for its own gross negligence or willful misconduct and as otherwise expressly provided herein or in the other Operative Agreements. (b) Anything to the contrary contained in this Agreement, the Credit Agreement, the Notes or in any other Operative Agreement notwithstanding, no Exculpated Person shall be personally liable in any respect for any liability or obligation arising hereunder or in any other Operative Agreement including without limitation the payment of the principal of, or interest on, the Notes, or for monetary damages for the breach of performance of any of the covenants contained in the Credit Agreement, the Notes, this Agreement, the Security Agreement or any of the other Operative Agreements. The Lenders, the Holders and the Agent agree that, in the event any remedies under any Operative Agreement are pursued, neither the Lenders, the Holders nor the Agent shall have any recourse against any Exculpated Person, for any deficiency, loss or Claim for monetary damages or otherwise resulting therefrom and recourse shall be had solely and exclusively against the Trust Estate (excluding Excepted Payments) and the Credit Parties (with respect to the Credit Parties' obligations under the Operative Agreements); but nothing contained herein shall be taken to prevent recourse against or the enforcement of remedies against the Trust Estate (excluding Excepted Payments) in respect of any and all liabilities, obligations and undertakings contained herein and/or in any other Operative Agreement. Notwithstanding the provisions of this Section, nothing in any Operative Agreement shall: (i) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Notes and/or the Certificates arising under any Operative Agreement or secured by any Operative Agreement, but the same shall continue until paid or discharged; (ii) relieve any Exculpated Person from liability and responsibility for (but only to the extent of the damages arising by reason of): active waste knowingly committed by any Exculpated Person with respect to any Property, any fraud, gross negligence or willful misconduct on the part of any Exculpated Person; (iii) relieve any Exculpated Person from liability and responsibility for (but only to the extent of the moneys misappropriated, misapplied or not turned over) (A) except for Excepted Payments, misappropriation or misapplication by the Lessor (i.e., application in a manner contrary to any of the Operative Agreements) of any insurance proceeds or condemnation award paid or delivered to the Lessor by any Person other than the Agent, (B) except for Excepted Payments, any deposits or any escrows or amounts owed by the Construction Agent under the Agency Agreement held by the Lessor or (C) except for Excepted Payments, any rent or other income received by the Lessor from any Credit Party that is not turned over to the Agent; or (iv) affect or in any way limit the Agent's rights and remedies under any Operative Agreement with respect to the Rents and rights and powers of the Agent under the Operative Agreements or to obtain a judgment against the Lessee's interest in the Properties or the Agent's rights and powers to obtain a judgment against the Lessor or any Credit Party (provided, that no deficiency judgment or other 61 66 money judgment shall be enforced against any Exculpated Person except to the extent of the Lessor's interest in the Trust Estate (excluding Excepted Payments) or to the extent the Lessor may be liable as otherwise contemplated in clauses (ii) and (iii) of this Section 12.10(b)). 12.11. RIGHTS OF THE CREDIT PARTIES. If at any time all obligations (i) of the Owner Trustee under the Credit Agreement, the Security Documents and the other Operative Agreements and (ii) of the Credit Parties under the Operative Agreements have in each case been satisfied or discharged in full, then the Credit Parties shall be entitled to (a) terminate the Lease and the guaranty obligations under Section 6B and (b) receive all amounts then held under the Operative Agreements and all proceeds with respect to any of the Properties. Upon the termination of the Lease and Section 6B pursuant to the foregoing clause (a), the Lessor shall transfer to the Lessee (or its designee) all of its right, title and interest free and clear of the Lien of the Lease, the Lien of the Security Documents and all Lessor Liens in and to any Properties then subject to the Lease and any amounts or proceeds referred to in the foregoing clause (b) shall be paid over to the Lessee. 12.12. FURTHER ASSURANCES. The parties hereto shall promptly cause to be taken, executed, acknowledged or delivered, at the sole expense of the Lessee, all such further acts, conveyances, documents and assurances as the other parties may from time to time reasonably request in order to carry out and effectuate the intent and purposes of this Participation Agreement, the other Operative Agreements and the transactions contemplated hereby and thereby (including without limitation the preparation, execution and filing of any and all Uniform Commercial Code financing statements, filings of Mortgage Instruments and other filings or registrations which the parties hereto may from time to time request to be filed or effected). The Lessee, at its own expense and without need of any prior request from any other party, shall take such action as may be necessary (including without limitation any action specified in the preceding sentence), or (if the Owner Trustee shall so request) as so requested, in order to maintain and protect all security interests provided for hereunder or under any other Operative Agreement. 12.13. CALCULATIONS UNDER OPERATIVE AGREEMENTS. The parties hereto agree that all calculations and numerical determinations to be made under the Operative Agreements by the Owner Trustee shall be made by the Agent and that such calculations and determinations shall be conclusive and binding on the parties hereto in the absence of manifest error. 12.14. CONFIDENTIALITY. Each Financing Party severally agrees to use reasonable efforts to keep confidential all non-public information pertaining to any Credit Party or any of its Subsidiaries which is provided to it by any Credit Party or any of its Subsidiaries and which an officer of any Credit 62 67 Party or any of its Subsidiaries has requested in writing be kept confidential, and shall not intentionally disclose such information to any Person except: (a) to the extent such information is public when received by such Person or becomes public thereafter due to the act or omission of any party other than such Person; (b) to the extent such information is independently obtained from a source other than any Credit Party or any of its Subsidiaries and such information from such source is not, to such Person's knowledge, subject to an obligation of confidentiality or, if such information is subject to an obligation of confidentiality, that disclosure of such information is permitted; (c) to counsel, auditors or accountants retained by any such Person or any Affiliates of any such Person (if such Affiliates are permitted to receive such information pursuant to clause (f) or (g) below), provided they agree to keep such information confidential as if such Person or Affiliate were party to this Agreement and to financial institution regulators, including examiners of any Financing Party or any Affiliate thereof in the course of examinations of such Persons; (d) in connection with any litigation or the enforcement or preservation of the rights of any Financing Party under the Operative Agreements; (e) to the extent required by any applicable statute, rule or regulation or court order (including without limitation, by way of subpoena) or pursuant to the request of any regulatory or Governmental Authority having jurisdiction over any such Person; provided, however, that such Person shall endeavor (if not otherwise prohibited by Law) to notify the Lessee prior to any disclosure made pursuant to this clause (e), except that no such Person shall be subject to any liability whatsoever for any failure to so notify the Lessee; (f) any Financing Party may disclose such information to another Financing Party or to any Affiliate of a Financing Party that is a direct or indirect owner of any Financing Party; (g) any Financing Party may disclose such information to an Affiliate of any Financing Party to the extent required in connection with the transactions contemplated hereby or to the extent such Affiliate is involved in, or provides advice or assistance to such Person with respect to, such transactions (provided, in each case that such Affiliate has agreed in writing to maintain confidentiality as if it were such Financing Party (as the case may be)); or (h) to the extent disclosure to any other financial institution or other Person is appropriate in connection with any proposed or actual (i) assignment or grant of a participation by any of the Lenders of interests in the Credit Agreement or any Note to such other financial institution (who will in turn be required by the Agent to agree in 63 68 writing to maintain confidentiality as if it were a Lender originally party to this Agreement) or (ii) assignment by any Holder of interests in the Trust Agreement to another Person (who will in turn be required by the transferring Holder to agree in writing to maintain confidentiality as if it were a Holder originally party to this Agreement). Subject to the terms of Sections 12.14(a), (b), (d) and (e) under the terms of any one or more of which circumstances disclosure shall be permitted, each Financing Party severally agrees to use reasonable efforts to keep confidential all non-public information pertaining to the financing structure described in the unrecorded Operative Agreements. 12.15. FINANCIAL REPORTING/TAX CHARACTERIZATION. Lessee agrees to obtain advice from its own accountants and tax counsel regarding the financial reporting treatment and the tax characterization of the transactions described in the Operative Agreements. Lessee further agrees that Lessee shall not rely upon any statement of any Financing Party or any of their respective Affiliates and/or Subsidiaries regarding any such financial reporting treatment and/or tax characterization. 12.16. SET-OFF. In addition to any rights now or hereafter granted under applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Lenders, the Holders, their respective Affiliates and any assignee or participant of a Lender or a Holder in accordance with the applicable provisions of the Operative Agreements are hereby authorized by the Credit Parties at any time or from time to time, without notice to the Credit Parties or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, time or demand, including without limitation indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by the Lenders, the Holders, their respective Affiliates or any assignee or participant of a Lender or a Holder in accordance with the applicable provisions of the Operative Agreements to or for the credit or the account of any Credit Party against and on account of the obligations of any Credit Party under the Operative Agreements irrespective of whether or not (a) the Lenders or the Holders shall have made any demand under any Operative Agreement or (b) the Agent shall have declared any or all of the obligations of any Credit Party under the Operative Agreements to be due and payable and although such obligations shall be contingent or unmatured. NOTWITHSTANDING THE FOREGOING, NEITHER THE AGENT NOR ANY OTHER FINANCING PARTY SHALL EXERCISE, OR ATTEMPT TO EXERCISE, ANY RIGHT OF SETOFF, BANKER'S LIEN, OR THE LIKE, AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF ANY CREDIT PARTY HELD BY THE AGENT OR ANY OTHER FINANCING PARTY, WITHOUT THE PRIOR WRITTEN CONSENT OF THE MAJORITY SECURED PARTIES, AND ANY FINANCING PARTY VIOLATING THIS PROVISION SHALL INDEMNIFY THE AGENT AND THE OTHER FINANCING PARTIES FROM ANY AND ALL COSTS, EXPENSES, LIABILITIES AND DAMAGES RESULTING THEREFROM. The contractual restriction on the exercise of setoff rights provided in the 64 69 foregoing sentence is solely for the benefit of the Agent and the Financing Parties and may not be enforced by any Credit Party. [signature pages follow] 65 70 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. PROVINCE HEALTHCARE COMPANY, as the Construction Agent and as the Lessee By: /s/ CHRISTOPHER T. HANNON --------------------------------------- Name: Christopher T. Hannon ------------------------------------- Title: Vice President - Finance ------------------------------------ BLYTHE-PROVINCE, INC., a Tennessee corporation, as a Guarantor BRIM EQUIPMENT SERVICES, INC., an Oregon corporation, as a Guarantor BRIM FIFTH AVENUE, INC., an Oregon corporation, as a Guarantor BRIM HEALTHCARE, INC., an Oregon corporation, as a Guarantor BRIM HOSPITALS, INC., an Oregon corporation, as a Guarantor BRIM OUTPATIENT SERVICES, INC. an Oregon corporation, as a Guarantor BRIM PAVILION, INC., an Oregon corporation, as a Guarantor BRIM SERVICES GROUP, INC., an Oregon corporation, as a Guarantor CARE HEALTH COMPANY, INC., a Washington corporation, as a Guarantor MEXIA-PRINCIPAL, INC., a Texas corporation, as a Guarantor PALESTINE-PRINCIPAL G.P., INC., a Texas corporation, as a Guarantor PALESTINE-PRINCIPAL, INC., a Tennessee corporation, as a Guarantor PHC-EUNICE, INC., a Louisiana corporation, as a Guarantor PHC-LAKE HAVASU, INC., an Arizona corporation, as a Guarantor [Signature pages continued] 71 PHC OF DELAWARE, INC., a Delaware corporation, as a Guarantor PRINCIPAL HOSPITAL COMPANY OF NEVADA, INC., a Nevada corporation, as a Guarantor PRINCIPAL KNOX COMPANY, a Delaware corporation, as a Guarantor PRINCIPAL-NEEDLES, INC., a Tennessee corporation, as a Guarantor By: /s/ CHRISTOPHER T. HANNON --------------------------------------- Name: Christopher T. Hannon --------------------------------------- Title: Assistant Treasurer of each of the foregoing Guarantors MEXIA PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP, a Texas limited partnership, as a Guarantor By: Mexia-Principal, Inc., a Texas corporation, its General Partner By: /s/ CHRISTOPHER T. HANNON ---------------------------------------- Name: Christopher T. Hannon --------------------------------------- Title: Assistant Treasurer ------------------------------------- PALESTINE PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP, a Texas limited partnership, as a Guarantor By: Palestine-Principal G.P., Inc., a Texas corporation, its General Partner By: /s/ CHRISTOPHER T. HANNON ---------------------------------------- Name: Christopher T. Hannon --------------------------------------- Title: Assistant Treasurer ------------------------------------- [Signature pages continued] 72 INTEGRATED HEALTH MANAGEMENT, LLC, a California limited liability company, as a Guarantor By: Brim Healthcare, Inc., as Member By: /s/ CHRISTOPHER T. HANNON ---------------------------------------- Name: Christopher T. Hannon --------------------------------------- Title: Assistant Treasurer ------------------------------------- [Signature pages continued] 73 FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, as the Owner Trustee and as the Lessor By: /s/ C. SCOTT NIELSON ---------------------------------------- Name: C. Scott Nielson --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 74 FIRST UNION NATIONAL BANK, as a Holder, as a Lender and as the Agent By: /s/ JOSEPH H. TOWELL ---------------------------------------- Name: Joseph H. Towell --------------------------------------- Title: Senior Vice President ------------------------------------- [Signature pages continued] 75 NATIONSBANK OF TENNESSEE, N.A., as a Holder and as a Lender By: /s/ ELIZABETH L. KNOX ---------------------------------------- Name: Elizabeth L. Knox --------------------------------------- Title: Senior Vice President ------------------------------------- [Signature pages continued] 76 KEY CORPORATE CAPITAL, INC., as a Lender By: /s/ CHARLIE SHOOP ---------------------------------------- Name: Charlie Shoop --------------------------------------- Title: AVP ------------------------------------- [Signature pages continued] 77 CORESTATES BANK, N.A., as a Lender By: /s/ ELIZABETH D. MORRIS ---------------------------------------- Name: Elizabeth D. Morris --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 78 BANQUE PARIBAS, as a Holder and as a Lender By: /s/ ROGER MAY ---------------------------------------- Name: Roger May --------------------------------------- Title: AVP ------------------------------------- By: /s/ LARRY ROBINSON ---------------------------------------- Name: Larry Robinson --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 79 MELLON BANK, N.A., as a Lender By: /s/ MARSHA WICKER ---------------------------------------- Name: Marsha Wicker --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 80 NATIONAL CITY BANK OF KENTUCKY, as a Lender By: /s/ RODERIC M. BROWN ---------------------------------------- Name: Roderic M. Brown --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 81 AMSOUTH BANK, as a Lender By: /s/ CATHY M. WIND ---------------------------------------- Name: Cathy M. Wind --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 82 FIRST AMERICAN NATIONAL BANK, as a Lender By: /s/ SANDY HAMRICK ---------------------------------------- Name: Sandy Hamrick --------------------------------------- Title: Senior Vice President ------------------------------------- [Signature pages continued] 83 FLEET NATIONAL BANK, as a Lender By: /s/ MARYANN S. SMITH ---------------------------------------- Name: MaryAnn S. Smith --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 84 LEHMAN COMMERCIAL PAPER INC., as a Lender By: /s/ MICHELE SWANSON ---------------------------------------- Name: Michele Swanson --------------------------------------- Title: Authorized Signatory ------------------------------------- [Signature pages continued] 85 CREDIT LYONNAIS NEW YORK BRANCH, as a Lender By: /s/ JOHN OBERLE ---------------------------------------- Name: John Oberle --------------------------------------- Title: Vice President ------------------------------------- [Signature pages continued] 86 UNION BANK OF CALIFORNIA, N.A., as a Lender By: /s/ ALBERT W. KELLEY ---------------------------------------- Name: Albert W. Kelley --------------------------------------- Title: Vice President ------------------------------------- 87 EXHIBIT A REQUISITION FORM (Pursuant to Sections 4.2, 5.2, 5.3 and 5.4 of the Participation Agreement) Province Healthcare Company, a Delaware corporation (the "Company") hereby certifies as true and correct and delivers the following Requisition to First Union National Bank, as the agent for the Lenders (hereinafter defined) and respecting the Security Documents, as the agent for the Lenders and the Holders (hereinafter defined), to the extent of their interests (the "Agent"): Reference is made herein to that certain Participation Agreement dated as of March 30, 1998 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Participation Agreement") among the Company, in its capacity as the Lessee and as the Construction Agent, First Security Bank, National Association, as the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders"), and the Agent. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth therefor in the Participation Agreement. Check one: ____ INITIAL CLOSING DATE: _________________ (three (3) Business Days prior notice required for Advance) ____ PROPERTY CLOSING DATE:_________________ (three (3) Business Days prior notice required for Advance) ____ CONSTRUCTION ADVANCE DATE:_____________ (three (3) Business Days prior notice required for Advance) 1. Transaction Expenses and other fees, expenses and disbursements under Sections 7.1(a) or 7.1(b) of the Participation Agreement and any and all other amounts contemplated to be financed under the Participation Agreement including without limitation any Work, broker's fees, taxes, recording fees and the like (with supporting invoices or closing statement attached): A-1 88
Party to Whom Amount Owed Amount is Owed (in U.S. Dollars) -------------- -------------- -------------- -------------- -------------- --------------
2. Description of Land (which shall be a legal description of the Land in connection with an Advance to pay Property Acquisition Costs): See attached Schedule 1 3. Description of Improvements: See attached Schedule 2 4. Description of Equipment: See attached Schedule 3 5. Description of Work: See attached Schedule 4 6. Aggregate Loans and Holder Advances requested since the Initial Closing Date with respect to each Property for which Advances are requested under this Requisition (listed on a Property by Property basis), including without limitation all amounts requested under this Requisition: [IDENTIFY ON A PROPERTY BY PROPERTY BASIS] $______________ [Property] In connection with this Requisition, the Company hereby requests that the Lenders make Loans to the Lessor in the amount of $______________ and that the Holders make Holder Advances to the Lessor in the amount of $________________. The Company hereby certifies (i) that the foregoing amounts requested do not exceed the total aggregate of the Available Commitments plus the Available Holder Commitments and (ii) each of the provisions of the Participation Agreement applicable to the Loans and Holder Advances requested hereunder have been complied with as of the date of this Requisition. The Company has caused this Requisition to the executed by its duly authorized officer as of this _____ day of __________, ______. PROVINCE HEALTHCARE COMPANY By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------ A-2 89 Schedule 1 Description of Land (Legal Description and Street Address) A-3 90 Schedule 2 Description of Improvements A-4 91 Schedule 3 Description of Equipment
======================================= ====================== ======================== ========================== General Description Make Model Serial Number - --------------------------------------- ---------------------- ------------------------ -------------------------- - --------------------------------------- ---------------------- ------------------------ -------------------------- - --------------------------------------- ---------------------- ------------------------ -------------------------- - --------------------------------------- ---------------------- ------------------------ -------------------------- - --------------------------------------- ---------------------- ------------------------ -------------------------- - --------------------------------------- ---------------------- ------------------------ -------------------------- - --------------------------------------- ---------------------- ------------------------ --------------------------
A-5 92 Schedule 4 Work Work Performed for which the Advance is requested: - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- A-6 93 EXHIBIT B [Outside Counsel Opinion for the Lessee] (Pursuant to Section 5.3(j) of the Participation Agreement) ____________, ______ TO THOSE ON THE ATTACHED DISTRIBUTION LIST Re: Synthetic Lease Financing Provided in favor of Province Healthcare Company Dear Sirs: We have acted as special counsel to Province Healthcare Company, a Delaware corporation (the "Lessee"), and the various parties to the Participation Agreement (hereinafter defined) from time to time, as guarantors (individually, a "Guarantor" and collectively, the "Guarantors"; individually, Lessee and each Guarantor may be referred to herein as a "Credit Party" or collectively, as the "Credit Parties") in connection with certain transactions contemplated by the Participation Agreement dated as of March 30, 1998 (the "Participation Agreement"), among the Lessee, First Security Bank, National Association, as the Owner Trustee (the "Owner Trustee"), First Union National Bank, as a holder (together with the other holders, the "Holders"), First Union National Bank, as a lender (together with the other lenders, the "Lenders") and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). This opinion is delivered pursuant to Section 5.3(j) of the Participation Agreement. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings assigned thereto in Appendix A to the Participation Agreement. In connection with the foregoing, we have examined originals, or copies certified to our satisfaction, of [IDENTIFY THE APPLICABLE OPERATIVE AGREEMENTS, INCLUDING EACH MORTGAGE INSTRUMENT, RELATED UCC FIXTURE FILINGS, ADDITIONAL UCCS (HEREINAFTER DEFINED), DEEDS AND MEMORANDA OF LEASE] and such other corporate documents and records of each Credit Party, certificates of public officials and representatives of each Credit Party as to certain factual matters, and such other instruments and documents which we have deemed necessary or advisable to examine for the purpose of this opinion. With respect to such examination, we have assumed (i) the statements of fact made in all such certificates, documents and instruments are true, accurate and complete; (ii) except as to each Credit Party, the due authorization, execution and delivery of the Operative Agreements by the parties thereto; (iii) the genuineness of all signatures (except as to each Credit Party), the authenticity and completeness of all documents, certificates, instruments, records and corporate records submitted to us as originals and the conformity to the original instruments of all documents submitted to us as copies, and the B-1 94 authenticity and completeness of the originals of such copies; (iv) except as to each Credit Party, that all parties have all requisite corporate power and authority to execute, deliver and perform the Operative Agreements; and (v) except as to the Lessee, the enforceability of the Operative Agreements against all parties thereto. Based on the foregoing, and having due regard for such legal considerations as we deem relevant, and subject to the limitations and assumptions set forth herein, including without limitation the matters set forth in the last two (2) paragraphs hereof, we are of the opinion that: (a) Each Mortgage Instrument and each Memorandum of Lease are enforceable in accordance with their respective terms, except as limited by laws generally affecting the enforcement of creditors' rights, which laws will not materially prevent the realization of the benefits intended by such documents. (b) Each form of Mortgage Instrument and UCC fixture filing relating thereto, attached hereto as Schedules 1 and 2, respectively, is in proper form for filing and recording with the offices of [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon filing of each Mortgage Instrument and UCC fixture filing in [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED], the Agent will have a valid, perfected lien and security interest in that portion of the Collateral described in such Mortgage Instrument or UCC fixture filing to the extent such Collateral is comprised of real property and/or fixtures. (c) The forms of UCC financing statements relating to the Security Documents, attached hereto as Schedule 3 (the "Additional UCCs"), are in proper form for filing and recording with the offices of [IDENTIFY (I) THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED AND (II) THE SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon filing of the Additional UCCs in [IDENTIFY (I) THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED AND (II) THE SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED], the Agent will have a valid, perfected lien and security interest in that portion of the Collateral which can be perfected by filing UCC-1 financing statements under Article 9 of the UCC. (d) Each form of Deed and Memorandum of Lease is in appropriate form for filing and recording with the [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS FOR THE COUNTIES WHERE THE PROPERTIES ARE TO BE LOCATED]. (e) Each Memorandum of Lease, when filed and recorded with the [IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS FOR THE COUNTIES WHERE THE PROPERTIES ARE TO BE LOCATED], will have been filed and recorded in all public offices in the State of __________ in which filing or recording is necessary to provide constructive notice of the Lease to third Persons and to establish of record the interest of the Lessor thereunder as to the Properties described in each such Memorandum of Lease. B-2 95 (f) Title to the Properties located in the State of ___________ may be held in the name of the Owner Trustee as follows: First Security Bank, National Association, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1. (g) The execution and delivery by First Security Bank, National Association, individually or as the Owner Trustee, as the case may be, of the Operative Agreements to which it is a party and compliance by First Security Bank, National Association, individually or as the Owner Trustee, with all of the provisions thereof do not and will not contravene any law, rule or regulation of [IDENTIFY THE STATE]. (h) By reason of their participation in the transaction contemplated under the Operative Agreements, none of the Agent, the Lenders, the Holders or the Owner Trustee has to (a) qualify as a foreign corporation in [IDENTIFY THE STATE], (b) file any application or any designation for service of process in [IDENTIFY THE STATE] or (c) pay any franchise, income, sales, excise, stamp or other taxes of any kind to [IDENTIFY THE STATE]. (i) The provisions in the Operative Agreements concerning Rent, interest, fees, prepayment premiums and other similar charges do not violate the usury laws or other similar laws regulating the use or forbearance of money of [IDENTIFY THE STATE]. (j) If the transactions contemplated by the Operative Agreements are characterized as a lease transaction by a court of competent jurisdiction, the Lease and the applicable Lease Supplement shall demise to the Lessee a valid leasehold interest in the Properties described in such Lease Supplement. (k) If the transactions contemplated by the Operative Agreements are characterized as a loan transaction by a court of competent jurisdiction, the combination of the Mortgage Instruments, the Deeds, the Lease and the applicable Lease Supplements (and the other Operative Agreements incorporated therein by reference) are sufficient to create a valid, perfected lien or security interest in the Properties therein described, enforceable as a mortgage in [IDENTIFY THE STATE]. (l) Except for the payment of a privilege tax in the amount of $______ pursuant to Tennessee Code Annotated ss.67-4-409 (b), no transfer, mortgage, intangible, documentary stamp or similar taxes are presently payable to the State of Tennessee or any political subdivision thereof on account of (i) the execution and delivery of the Operative Agreements or (ii) the creation of the indebtedness and the obligations evidenced thereby under the Operative Agreements. This opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters stated herein. This opinion is based on and is limited to the laws of the State of ___________ and the federal laws of the United States of America. Insofar as the foregoing opinion relates to matters of law other than the foregoing, no opinion is hereby given. B-3 96 This opinion is for the sole benefit of the Lessee, the Construction Agent, the Guarantors, the Owner Trustee, the Holders, the Lenders, the Agent and their respective successors and assigns and may not be relied upon by any other person other than such parties and their respective successors and assigns without the express written consent of the undersigned. The opinions expressed herein are as of the date hereof and we make no undertaking to amend or supplement such opinions if facts come to our attention or changes in the current law of the jurisdictions mentioned herein occur which could affect such opinions. Very truly yours, [LESSEE'S OUTSIDE COUNSEL] B-4 97 Distribution List First Union National Bank, as the Agent, a Holder and a Lender The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Holders The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Lenders Province Healthcare Company, as the Construction Agent and the Lessee The various parties to the Participation Agreement from time to time, as the Guarantors First Security Bank, National Association, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1 B-5 98 Schedule 1 Form of Mortgage Instrument B-6 99 Schedule 2 Forms of UCC Fixture Filings B-7 100 Schedule 3 Forms of UCC Financing Statements B-8 101 EXHIBIT C [Intentionally Omitted] C-1 102 EXHIBIT D PROVINCE HEALTHCARE COMPANY OFFICER'S CERTIFICATE (Pursuant to Section 5.3(aa) of the Participation Agreement) Province Healthcare Company, a Delaware corporation (the "Company"), DOES HEREBY CERTIFY as follows: 1. Each and every representation and warranty of each Credit Party contained in the Operative Agreements to which it is a party is true and correct on and as of the date hereof. 2. No Default or Event of Default has occurred and is continuing under any Operative Agreement. 3. Each Operative Agreement to which any Credit Party is a party is in full force and effect with respect to it. 4. Each Credit Party has duly performed and complied with all covenants, agreements and conditions contained in the Participation Agreement (hereinafter defined) or in any Operative Agreement required to be performed or complied with by it on or prior to the date hereof. Capitalized terms used in this Officer's Certificate and not otherwise defined herein have the respective meanings ascribed thereto in the Participation Agreement dated as of March 30, 1998 among the Company, as the Lessee and as the Construction Agent, the various parties thereto from time to time, as guarantors (the "Guarantors"), First Security Bank, National Association, as the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders"), and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly executed and delivered as of this _____ day of __________, 1998. PROVINCE HEALTHCARE COMPANY By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ D-1 103 EXHIBIT E [NAME OF CREDIT PARTY] OFFICER'S CERTIFICATE (Pursuant to Section 5.3(bb) of the Participation Agreement) [NAME OF CREDIT PARTY], a Delaware corporation (the "Company") DOES HEREBY CERTIFY as follows: 1. Attached hereto as Schedule 1 is a true, correct and complete copy of the resolutions of the Board of Directors of the Company duly adopted by the Board of Directors of the Company on __________. Such resolutions have not been amended, modified or rescinded since their date of adoption and remain in full force and effect as of the date hereof. 2. Attached hereto as Schedule 2 is a true, correct and complete copy of the Articles of Incorporation of the Company on file in the Office of the Secretary of State of __________. Such Articles of Incorporation have not been amended, modified or rescinded since their date of adoption and remain in full force and effect as of the date hereof. 3. Attached hereto as Schedule 3 is a true, correct and complete copy of the Bylaws of the Company. Such Bylaws have not been amended, modified or rescinded since their date of adoption and remain in full force and effect as of the date hereof. 4. The persons named below now hold the offices set forth opposite their names, and the signatures opposite their names and titles are their true and correct signatures.
Name Office Signature ---- ------ --------- ------------------- ----------------------- ------------------------- ------------------- ----------------------- -------------------------
E-1 104 IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly executed and delivered as of this _____ day of ___________, 1998. [NAME OF CREDIT PARTY] By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ E-2 105 Schedule 1 BOARD RESOLUTIONS E-3 106 Schedule 2 ARTICLES OF INCORPORATION E-4 107 Schedule 3 BYLAWS E-5 108 EXHIBIT F FIRST SECURITY BANK, NATIONAL ASSOCIATION OFFICER'S CERTIFICATE (Pursuant to Section 5.3(dd) of the Participation Agreement) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually (except with respect to paragraph 1 below, to the extent any such representations and warranties are made in its individual capacity) but solely as the owner trustee under the PHC Real Estate Trust 1998-1 (the "Owner Trustee"), DOES HEREBY CERTIFY as follows: 1. Each and every representation and warranty of the Owner Trustee contained in the Operative Agreements to which it is a party is true and correct on and as of the date hereof. 2. Each Operative Agreement to which the Owner Trustee is a party is in full force and effect with respect to it. 3. The Owner Trustee has duly performed and complied with all covenants, agreements and conditions contained in the Participation Agreement (hereinafter defined) or in any Operative Agreement required to be performed or complied with by it on or prior to the date hereof. Capitalized terms used in this Officer's Certificate and not otherwise defined herein have the respective meanings ascribed thereto in the Participation Agreement dated as of March 30, 1998 among Province Healthcare Company as the Lessee and as the Construction Agent, the various parties thereto from time to time as guarantors (the "Guarantors"), the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as Lenders (the "Lenders"), and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). F-1 109 IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's Certificate to be duly executed and delivered as of this _____ day of __________, 1998. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1 By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ F-2 110 EXHIBIT G FIRST SECURITY BANK, NATIONAL ASSOCIATION OFFICER'S CERTIFICATE (Pursuant to Section 5.3(ee) of the Participation Agreement) CERTIFICATE OF ASSISTANT SECRETARY I, ______________________, duly elected and qualified Assistant Secretary of the Board of Directors of First Security Bank, National Association (the "Association"), hereby certify as follows: 1. The Association is a National Banking Association duly organized, validly existing and in good standing under the laws of the United States. With respect thereto the following is noted: A. Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., the Comptroller of the Currency charters and exercises regulatory and supervisory authority over all National Banking Associations; B. On December 9, 1881, the First National Bank of Ogden, Utah was chartered as a National Banking Association under the laws of the United States and under Charter No. 2597; C. On October 2, 1922, in connection with a consolidation of The First National Bank of Ogden, Ogden, Utah, and The Utah National Bank of Ogden, Ogden, Utah, the title was changed to "The First & Utah National Bank of Ogden"; on January 18, 1923, The First & Utah National Bank of Ogden changed its title to "First Utah National Bank of Ogden"; on January 19, 1926, the title was changed to "First National Bank of Ogden"; on February 24, 1934, the title was changed to "First Security Bank of Utah, National Association"; on June 21, 1996, the title was changed to "First Security Bank, National Association"; and D. First Security Bank, National Association, Ogden, Utah, continues to hold a valid certificate to do business as a National Banking Association. 2. The Association's Articles of Association, as amended, are in full force and effect, and a true, correct and complete copy is attached hereto as EXHIBIT A and incorporated herein by reference. Said Articles were last amended October 20, 1975, as required by law on notice at a duly called special meeting of the shareholders of the Association. G-1 111 3. The Association's By-Laws, as amended, are in full force and effect; and a true, correct and complete copy is attached hereto as EXHIBIT B and incorporated herein by reference. Said By-Laws, still in full force and effect, were adopted September 17, 1942, by resolution, after proper notice of consideration and adoption of By-Laws was given to each and every shareholder, at a regularly called meeting of the Board of Directors with a quorum present. 4. Pursuant to the authority vested in it by an Act of Congress approved December 23, 1913 and known as the Federal Reserve Act, as amended, the Federal Reserve Board (now the Board of Governors of the Federal Reserve System) has granted to the Association now known as "First Security Bank, National Association" of Ogden, Utah, the right to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with National Banks are permitted to act under the laws of the State of Utah; and under the provisions of applicable law, the authority so granted remains in full force and effect. 5. Pursuant to authority vested by Act of Congress (12 U.S.C. 92a and 12 U.S.C. 481, as amended) the Comptroller of the Currency has issued Regulation 9, as amended, dealing, in part, with the Fiduciary Powers of National Banks, said regulation providing in subparagraph 9.7 (a) (1-2): (1) The board of directors is responsible for the proper exercise of fiduciary powers by the Bank. All matters pertinent thereto, including the determination of policies, the investment and disposition of property held in fiduciary capacity, and the direction and review of the actions of all officers, employees, and committees utilized by the Bank in the exercise of its fiduciary powers, are the responsibility of the board. In discharging this responsibility, the board of directors may assign, by action duly entered in the minutes, the administration of such of the Bank's fiduciary powers as it may consider proper to assign to such director(s), officer(s), employee(s) or committee(s) as it may designate. (2) No fiduciary account shall be accepted without the prior approval of the board, or of the director(s), officer(s), or committee(s) to whom the board may have designated the performance of that responsibility. . . . 6. A Resolution relating to Exercise of Fiduciary Powers was adopted by the Board of Directors at a meeting held July 26, 1994 at which time there was a quorum present; said resolution is still in full force and effect and has not been rescinded. Said resolution is attached hereto as EXHIBIT C and incorporated herein by reference. G-2 112 7. A Resolution relating to the Designation of Officers and Employees to Exercise Fiduciary Powers was adopted by the Trust Policy Committee at a meeting held February 7, 1996 at which time a quorum was present; said resolution is still in full force and effect and has not been rescinded. Said resolution is attached hereto as EXHIBIT D and is incorporated herein by reference. 8. Attached hereto as EXHIBIT E and incorporated herein by reference, is a listing of facsimile signatures of persons authorized (herein "Authorized Signatory or Signatories") on behalf of the Association and its Trust Group to act in exercise of its fiduciary powers subject to the resolutions in Paragraphs 6 and 7, above. 9. The principal office of the First Security Bank, National Association, Trust Group and of its departments, except for the St. George, Utah, Ogden, Utah, and Provo, Utah, branch offices, is located at 79 South Main Street, Salt Lake City, Utah 84111 and all records relating to fiduciary accounts are located at such principal office of the Trust Group or in storage facilities within Salt Lake County, Utah, except for those of the Ogden, Utah, St. George, Utah, and Provo, Utah, branch offices, which are located at said office. 10. Each Authorized Signatory (i) is a duly elected or appointed, duly qualified officer or employee of the Association; (ii) holds the office or job title set forth below his or her name on the date hereof; (iii) and the facsimile signature appearing opposite the name of each such officer or employee is a true replica of his or her signature. G-3 113 IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Association this __________ day of _________________, 1998. (SEAL) --------------------------- R. James Steenblik Senior Vice President Assistant Secretary G-4 114 EXHIBIT A ARTICLES OF ASSOCIATION G-5 115 EXHIBIT B BY-LAWS G-6 116 EXHIBIT C RESOLUTION RELATING TO EXERCISE OF FIDUCIARY POWERS G-7 117 EXHIBIT D RESOLUTION RELATING TO THE DESIGNATION OF OFFICERS AND EMPLOYEES TO EXERCISE FIDUCIARY POWERS G-8 118 EXHIBIT E AUTHORIZED SIGNATORY OR SIGNATORIES G-9 119 EXHIBIT H [The Owner Trustee's Outside Counsel Opinion] (Pursuant to Section 5.3(ff) of the Participation Agreement) ___________, 1998 TO THOSE ON THE ATTACHED DISTRIBUTION LIST Re: Trust Agreement dated as of March 30, 1998 Dear Sirs: We have acted as special counsel for First Security Bank, National Association, a national banking association, in its individual capacity ("FSB") and in its capacity as trustee (the "Owner Trustee") under the Trust Agreement dated as of March 30, 1998 (the "Trust Agreement") by and among it and the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), in connection with the execution and delivery by the Owner Trustee of the Operative Agreements to which it is a party. Except as otherwise defined herein, the terms used herein shall have the meanings set forth in Appendix A to the Participation Agreement dated as of March 30, 1998 (the "Participation Agreement") by and among Province Healthcare Company (the "Lessee"), the various parties thereto from time to time, as guarantors (the "Guarantors"), First Security Bank, National Association, as the Owner Trustee, the Holders, the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders") and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or advisable for the purpose of rendering this opinion. Based upon the foregoing, we are of the opinion that: 1. FSB is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America and each of FSB and the Owner Trustee has under the laws of the State of Utah and federal banking law the power and authority to enter into and perform its obligations under the Trust Agreement and each other Operative Agreement to which it is a party. 2. The Owner Trustee is the duly appointed trustee under the Trust Agreement. H-1 120 3. The Trust Agreement has been duly authorized, executed and delivered by one (1) of the officers of FSB and, assuming due authorization, execution and delivery by the Holders, is a legal, valid and binding obligation of the Owner Trustee (and to the extent set forth therein, against FSB), enforceable against the Owner Trustee (and to the extent set forth therein, against FSB) in accordance with its terms, and the Trust Agreement creates under the laws of the State of Utah for the Holders the beneficial interest in the Trust Estate it purports to create and is a valid trust under the laws of the State of Utah. 4. The Operative Agreements to which it is party have been duly authorized, executed and delivered by FSB, and, assuming due authorization, execution and delivery by the other parties thereto, are legal, valid and binding obligations of FSB, enforceable against FSB in accordance with their respective terms. 5. The Operative Agreements to which it is party have been duly authorized, executed and delivered by the Owner Trustee, and, assuming due authorization, execution and delivery by the other parties thereto, are legal, valid and binding obligations of the Owner Trustee, enforceable against the Owner Trustee in accordance with their respective terms. The Notes and Certificates have been duly issued, executed and delivered by the Owner Trustee, pursuant to authorization contained in the Trust Agreement, and the Certificates are entitled to the benefits and security afforded by the Trust Agreement in accordance with its terms and the terms of the Trust Agreement. 6. The execution and delivery by each of FSB and the Owner Trustee of the Trust Agreement and the Operative Agreements to which it is a party, and compliance by FSB or the Owner Trustee, as the case may be, with all of the provisions thereof do not and will not contravene any Laws applicable to or binding on FSB, or as the Owner Trustee, or contravene the provisions of, or constitute a default under, its charter documents or by-laws or, to our knowledge after due inquiry, any indenture, mortgage contract or other agreement or instrument to which FSB or Owner Trustee is a party or by which it or any of its property may be bound or affected. 7. The execution and delivery of the Operative Agreements by each of FSB and the Owner Trustee and the performance by each of FSB and the Owner Trustee of their respective obligations thereunder does not require on or prior to the date hereof the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any action in respect of any Governmental Authority or any court. 8. Assuming that the trust created by the Trust Agreement is treated as a grantor trust for federal income tax purposes within the contemplation of Section 671 through 678 of the Internal Revenue Code of 1986, there are no fees, taxes, or other charges (except taxes imposed on fees payable to the Owner Trustee) payable to the State of Utah or any political subdivision thereof in connection with the execution, delivery or performance by the Owner Trustee, the Agent, the Lenders, the Lessee or the Holders, as the case may be, of the Operative Agreements or in connection with the acquisition of any Property by the Owner Trustee or in connection with the making by any Holder of its investment in the Trust or its acquisition of the beneficial H-2 121 interest in the Trust Estate or in connection with the issuance and acquisition of the Certificates, or the Notes, and neither the Owner Trustee, the Trust Estate nor the trust created by the Trust Agreement will be subject to any fee, tax or other governmental charge (except taxes on fees payable to the Owner Trustee) under the laws of the State of Utah or any political subdivision thereof on, based on or measured by, directly or indirectly, the gross receipts, net income or value of the Trust Estate by reason of the creation or continued existence of the trust under the terms of the Trust Agreement pursuant to the laws of the State of Utah or the Owner Trustee's performance of its duties under the Trust Agreement. 9. There is no fee, tax or other governmental charge under the laws of the State of Utah or any political subdivision thereof in existence on the date hereof on, based on or measured by any payments under the Certificates, Notes or the beneficial interest in the Trust Estate, by reason of the creation of the trust under the Trust Agreement pursuant to the laws of the State of Utah or the Owner Trustee's performance of its duties under the Trust Agreement within the State of Utah. 10. Upon the filing of the financing statement on form UCC-1 in the form attached hereto as Schedule 1 with the Utah Division of Corporation and Commercial Code, the Agent's security interest in the Trust Estate, for the benefit of the Lenders and the Holders, will be perfected, to the extent that such perfection is governed by Article 9 of the Uniform Commercial Code as in effect in the State of Utah (the "Utah UCC"). Your attention is directed to the Utah UCC, which provides, in part, that a filed financing statement which does not state a maturity date or which states a maturity date of more than five (5) years is effective only for a period of five (5) years from the date of filing, unless within six (6) months prior to the expiration of said period a continuation statement is filed in the same office or offices in which the original statement was filed. The continuation statement must be signed by the secured party, identify the original statement by file number and state that the original statement is still effective. Upon the timely filing of a continuation statement, the effectiveness of the original financing statement is continued for five (5) years after the last date to which the original statement was effective. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the original statement. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: A. We are attorneys admitted to practice in the State of Utah and in rendering the foregoing opinions we have not passed upon, or purported to pass upon, the laws of any jurisdictions other than the State of Utah and the federal banking law governing the banking and trust powers of FSB. In addition, without limiting the foregoing we express no opinion with respect to (i) federal securities laws, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended, (ii) the Federal Aviation Act of 1958, as amended, (iii) the Federal Communications Act of 1934, as amended, or (iv) state securities or blue sky laws. Insofar as the foregoing opinions relate to the legality, validity, binding effect and enforceability of the documents involved in these transactions, which by their terms are governed by the laws of a state other than Utah, we have H-3 122 assumed that the laws of such state (as to which we express no opinion), are in all material aspects identical to the laws of the State of Utah. B. The opinions set forth in paragraphs 3, 4, and 5 above are subject to the qualification that enforceability of the Trust Agreement and the other Operative Agreements to which FSB and the Owner Trustee are parties, in accordance with their respective terms, may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, receivership or similar laws affecting enforcement of creditors' rights generally, and (ii) general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. C. As to the documents involved in these transactions, we have assumed that each is a legal, valid and binding obligation of each party thereto, other than FSB or the Owner Trustee, and is enforceable against each such party in accordance with their respective terms. D. We have assumed that all signatures, other than those of the Owner Trustee or FSB, on documents and instruments involved in these transactions are genuine, that all documents and instruments submitted to us as originals are authentic, and that all documents and instruments submitted to us as copies conform with the originals, which facts we have not independently verified. E. We do not purport to be experts in respect of, or express any opinion concerning laws, rules or regulations applicable to the particular nature of the equipment or property involved in these transactions. F. We have made no investigation of, and we express no opinion concerning, the nature of the title to any part of the equipment or property involved in these transactions or the priority of any mortgage or security interest. G. We have assumed that the Participation Agreement and the transactions contemplated thereby are not within the prohibitions of Section 406 of the Employee Retirement Income Security Act of 1974. H. In addition to any other limitation by operation of law upon the scope, meaning, or purpose of this opinion, the opinions expressed herein speak only as of the date hereof. We have no obligation to advise the recipients of this opinion (or any third party) and make no undertaking to amend or supplement such opinions if facts come to our attention or changes in the current law of the jurisdictions mentioned herein occur which could affect such opinions the legal analysis, a legal conclusion or any information confirmation herein. I. This opinion is for the sole benefit of the Lessee, the Construction Agent, the Guarantors, the Owner Trustee, the Holders, the Lenders, the Agent and their respective successors and assigns in matters directly related to the Participation Agreement or the transaction contemplated thereunder and may not be relied upon by any other person other than such parties and their respective successors and assigns without the express written consent of H-4 123 the undersigned. The opinions expressed in this letter are limited to the matter set forth in this letter, and no other opinions should be inferred beyond the matters expressly stated. Very truly yours, RAY, QUINNEY & NEBEKER M. John Ashton H-5 124 Distribution List First Union National Bank, as the Agent, a Holder and a Lender The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Holders The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Lenders Province Healthcare Company, as the Construction Agent and the Lessee The various parties to the Participation Agreement from time to time, as the Guarantors First Security Bank, National Association, not individually, but solely as the owner Trustee under the PHC Real Estate Trust 1998-1 H-6 125 EXHIBIT I [Outside Counsel Opinion for the Lessee] (Pursuant to Section 5.3(gg) of the Participation Agreement) _____________, 1998 TO THOSE ON THE ATTACHED DISTRIBUTION LIST Re: Synthetic Lease Financing Provided in favor of Province Healthcare Company Dear Sirs: We have acted as special counsel to Province Healthcare Company, a Delaware corporation (the "Lessee"), and the various parties to the Participation Agreement (hereinafter defined) from time to time as guarantors (the "Guarantors") in connection with certain transactions contemplated by the Participation Agreement dated as of March 30, 1998 (the "Participation Agreement"), among the Lessee, the Guarantors, First Security Bank, National Association (the "Owner Trustee"), First Union National Bank as a holder (together with the other holders, the "Holders"), First Union National Bank, as a lender (together with the other lenders, the "Lenders"), and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). This opinion is delivered pursuant to Section 5.3(gg) of the Participation Agreement. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings assigned thereto in Appendix A to the Participation Agreement. In connection with the foregoing, we have examined originals, or copies certified to our satisfaction, of the Operative Agreements, and such other corporate documents and records of the Credit Parties, certificates of public officials and representatives of the Credit Parties as to certain factual matters, and such other instruments and documents which we have deemed necessary or advisable to examine for the purpose of this opinion. With respect to such examination, we have assumed (i) the statements of fact made in all such certificates, documents and instruments are true, accurate and complete; (ii) the due authorization, execution and delivery of the Operative Agreements by the parties thereto other than the Credit Parties; (iii) the genuineness of all signatures (other than the signatures of persons signing on behalf of the Credit Parties), the authenticity and completeness of all documents, certificates, instruments, records and corporate records submitted to us as originals and the conformity to the original instruments of all documents submitted to us as copies, and the authenticity and completeness of the originals of such copies; (iv) that all parties other than the Credit Parties have all requisite corporate power and authority to execute, deliver and perform the Operative Agreements; and (v) the enforceability of the Operative Agreements against all parties thereto other than the Credit Parties and respecting the opinion set forth below in section (i), First Security Bank, National Association, individually or as the Owner Trustee, as the case may be. We have further assumed I-1 126 that the laws of the States of [STATE OF LAWYER'S ADMISSION] and [GOVERNING LAW OF PARTICIPATION AGREEMENT] are substantially identical. Based on the foregoing, and having due regard for such legal considerations as we deem relevant, and subject to the limitations and assumptions set forth herein, including without limitation the matters set forth in the last two (2) paragraphs hereof, we are of the opinion that: (a) Each Credit Party is a corporation duly incorporated, a limited partnership duly formed [or a ________ duly formed], validly existing and in good standing under the laws of the state of its formation and has the power and authority to conduct its business as presently conducted and to execute, deliver and perform its obligations under the Operative Agreements to which it is a party. Each Credit Party is duly qualified to do business in all jurisdictions in which its failure to so qualify would materially impair its ability to perform its obligations under the Operative Agreements to which it is a party or its financial position or its business as now and now proposed to be conducted. (b) The execution, delivery and performance by each Credit Party of the Operative Agreements to which it is a party have been duly authorized by all necessary action on the part of each Credit Party and the Operative Agreements to which each Credit Party is a party have been duly executed and delivered by each Credit Party. (c) The Operative Agreements to which each Credit Party is a party constitute valid and binding obligations of each Credit Party enforceable against each Credit Party in accordance with the terms thereof, subject to bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). (d) The execution and delivery by each Credit Party of the Operative Agreements to which it is a party and compliance by each Credit Party with all of the provisions thereof do not and will not (i) contravene the provisions of, or result in any breach of or constitute any default under, or result in the creation of any Lien (other than Permitted Liens) upon any of its property under, its respective Articles of Incorporation, By-Laws or other formation documents or any indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales contract, bank loan or credit agreement or other agreement or instrument to which any Credit Party is a party or by which it or any of its property may be bound or affected, or (ii) contravene any Laws or any order of any Governmental Authority applicable to or binding on any Credit Party. (e) No Governmental Action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery or performance by any Credit Party of any of the Operative Agreements to which it is a party or for the acquisition, ownership, construction and completion of the Properties, except for those which have been obtained. (f) Except as set forth on Schedule 1 hereto, there are no actions, suits or proceedings pending or to our knowledge, threatened against any Credit Party in any court or before any I-2 127 Governmental Authority, that concern the Properties or any Credit Party's interest therein or that question the validity or enforceability of any Operative Agreement to which any Credit Party is a party or the overall transaction described in the Operative Agreements to which any Credit Party is a party. (g) Neither the nature of the Properties, nor any relationship between any Credit Party and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Operative Agreements to which any Credit Party is a party is such as to require any approval of stockholders of, or approval or consent of any trustee or holders of indebtedness of, any Credit Party, except for such approvals and consents which have been duly obtained and are in full force and effect. (h) The Security Documents which have been executed and delivered as of the date of this opinion create, for the benefit of the Agent, the security interests in the Collateral described therein which by their terms such Security Documents purport to create. Upon filing of the UCC-1 financing statements (attached hereto as Schedule 2) relating to the Security Documents in the recording offices of (A) the respective county clerk where the principal place of business of any Credit Party is located and (B) the Secretary of State where the principal place of business of any Credit Party is located, the Agent will have a valid, perfected lien and security interest in that portion of the Collateral which can be perfected by the filing of UCC-1 financing statement under Article 9 of the UCC in [IDENTIFY THE STATE]. (i) The Operative Agreements to which First Security Bank, National Association, individually or as to the Owner Trustee, is a party constitute valid and binding obligations of such party and are enforceable against First Security Bank, National Association, individually or as the Owner Trustee, as the case may be, in accordance with the terms thereof, subject to bankruptcy, insolvency, liquidation, reorganization, fraudulent conveyance, and similar laws affecting creditors, rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). (j) The issuance, sale and delivery of the Notes and the issuance and delivery of the Certificates under the circumstances contemplated by the Participation Agreement do not, under existing law, require registration of the Notes or the Certificates being issued on the date hereof under the Securities Act of 1933, as amended, or the qualification of the Loan Agreement under the Trust Indenture Act of 1939, as amended. This opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters stated herein. This opinion is based on and is limited to the laws of the States of __________________________________, and the federal laws of the United States of America. Insofar as the foregoing opinion relates to matters of law other than the foregoing, no opinion is hereby given. This opinion is for the sole benefit of the Lessee, the Construction Agent, the Guarantors, the Owner Trustee, the Holders, the Lenders, the Agent and their respective successors and assigns and may not be relied upon by any other person other than such parties and their respective successors and assigns without the express written consent of the undersigned. The opinions I-3 128 expressed herein are as of the date hereof and we make no undertaking to amend or supplement such opinions if facts come to our attention or changes in the current law of the jurisdictions mentioned herein occur which could affect such opinions. Very truly yours, [LESSEE'S OUTSIDE COUNSEL] I-4 129 Distribution List First Union National Bank, as the Agent, a Holder and a Lender The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Holders The various banks and other lending institutions which are parties to the Participation Agreement from time to time, as additional Lenders Province Healthcare Company, as the Construction Agent and the Lessee The various parties to the Participation Agreement from time to time, as the Guarantors First Security Bank, National Association, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1 I-5 130 Schedule 1 (Litigation) I-6 131 Schedule 2 (UCC-1 Financing Statements) I-7 132 EXHIBIT J PROVINCE HEALTHCARE COMPANY OFFICER'S CERTIFICATE (Pursuant to Section 5.5 of the Participation Agreement) PROVINCE HEALTHCARE COMPANY, a Delaware corporation (the "Company") DOES HEREBY CERTIFY as follows: 1. The address for the subject Property is ______________________________ _____________________. 2. The Completion Date for the construction of Improvements at the Property occurred on ______________. 3. The aggregate Property Cost for the Property was $___________. 4. Attached hereto as Schedule 1 is the detailed, itemized documentation supporting the asserted Property Cost figures. 5. All representations and warranties of the Company in each Operative Agreement and in each certificate delivered pursuant thereto (including without limitation the Incorporated Representations and Warranties) are true and correct as of the Completion Date. Capitalized terms used in this Officer's Certificate and not otherwise defined have the respective meanings ascribed thereto in the Participation Agreement dated as of March 30, 1998 among the Company, as the Lessee and as the Construction Agent, the parties thereto from time to time, as guarantors (the "Guarantors"), First Security Bank, National Association, as the Owner Trustee, the various banks and other lending institutions which are parties thereto from time to time, as holders (the "Holders"), the various banks and other lending institutions which are parties thereto from time to time, as lenders (the "Lenders"), and First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests. [The remainder of this page has been intentionally left blank.] J-1 133 IN WITNESS WHEREOF, the Company has caused this Officer's Certificate to be duly executed and delivered as of this ____ day of ______________, ______. PROVINCE HEALTHCARE COMPANY By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- J-2 134 Schedule I (Itemized Documentation in Support of Asserted Property Cost) J-3 135 EXHIBIT K [Description of Material Litigation] (Pursuant to Section 6.3(d) of the Participation Agreement) 1. Eastern Plumas Hospital District v. Brim Healthcare, Inc., United States District Court for the Eastern District of California. Eastern Plumas Hospital District ("EPHD"), a debtor in bankruptcy, brought an adversary proceeding against Brim Healthcare, Inc. ("Brim Healthcare") seeking a declaratory judgment and damages in the amount of $12MM for breach of contract, breach of fiduciary duty, fraud and negligence. By motion, the case was withdrawn from the Bankruptcy Court and transferred to the United States District Court. The dispute arises out of Brim Healthcare's performance of a management agreement with EPHD, which agreement was terminated on November 22, 1994, by a written Termination Agreement. The Termination Agreement contains a mutual release which, if effective, will act to bar all of EPHD's claims. The Lessee believes that it has meritorious factual and legal defenses and has filed a motion for summary judgment seeking a dismissal of the action based upon the mutual release. 2. Robert Bloodwell, M.D. v. Brim Healthcare, Inc., et al., Civil District Court for Jackson Parish, Louisiana. Plaintiff, a physician formerly employed directly by Jackson Parish Hospital, has sued the Lessee, two of its employees, and other unrelated entities claiming breach of his employment contract and seeking compensatory damages as well as earned but unpaid compensation. The Lessee was, during the relevant time frame, the manager of the hospital pursuant to a written agreement which contains an indemnity provision. Because Plaintiff was terminated by the action of the hospital's board, the Lessee has invoked its rights under the indemnity provision. The hospital has acknowledged its indemnity obligation. 3. Roderick Connor. Notice, pursuant to Article 4590i of the Texas Civil Statutes, has been received by the Lessee's Memorial Mother Frances Hospital ("Mother Frances"), informing the Lessee of the intent to initiate an action for medical malpractice against Mother Frances and others. The notice asserts that Roderick Connor, a minor, died following an appendectomy procedure due to the negligence of his treating physician and nurses. The Lessee's professional liability insurer has been placed on notice of this claim. 4. Robert Panfil v. Ojai Valley Hospital, et al. Mr. Panfil has commenced a medical malpractice action against Ojai Valley Hospital, which the Lessee manages, the Lessee and various individuals because of a post-operative infection which he claims to have received as a result of negligence on the part of hospital personnel. This matter has been reported to the Lessee's professional liability insurance carrier which has assumed the defense. 5. John Dissiere, M.D. v. General Hospital, et al. The Lessee is one defendant among others in this action alleging wrongful denial of medical staff privileges. The Lessee's interests are being defended pursuant to an indemnity agreement with General Hospital. K-1 136 6. Candyce Oliver v. Brim Healthcare Inc., et al., Case No. INC003693, Superior Court for Riverside County, California. Plaintiff, a former employee of San Gorgonio Memorial Hospital, a facility managed by the Lessee, has sued San Gorgonio Memorial Hospital, a physician practice group, one of the physicians who is a principal in the practice group, the Lessee and an employee of the Lessee. Plaintiff claims that she was wrongfully fired from her job in retaliation for her expressed intention to report what she claimed to be substandard medical care delivered by the physicians who were practicing in the San Gorgonio Memorial Hospital's emergency department. This case is still in the early stages of discovery, however, preliminary investigation suggests to the Lessee that it has numerous meritorious factual and legal defenses. The hospital's insurance carrier has agreed to defend and indemnify Lessee's employer in her capacity as CEO of the hospital. Lessee's request to the hospital that it acknowledge contractual obligations to indemnfy Lessee is pending before the hospital board. 7. Leon Berger, et ux. v. Brim Hospital, Inc., et al., United States District Court for the Central District of California, Case No. 98-0623. Plaintiff, a former employee of the Needles Desert Community Hospital, now known as Colorado River Medical Center, has sued the Lessee and two of its agents claiming that the defendants tortiously interfered with his contractual relationship with Needles Desert Community Hospital resulting in his losing his job. He has claimed an unspecified amount of damages for loss of employment, loss of economic advantage and other theories. The defendants removed the case from the state court, where plaintiff originally filed it, to the United States District Court. This case is in its very earliest states and no discovery has taken place. The Lessee believes that it has valid factual and legal defenses. The Lessee's Directors' and Officers' liability insurer has acknowledged coverage of certain claims. 8. Dr. Stephen Womack has asserted a claim against the Lessee claiming that the Lessee breached an agreement whereby Womack was to practice medicine at Memorial Mother Francis Hospital, in Palestine, Texas. He claims that he has suffered damages in the total amount of $538,630. Womack has not initiated any litigation on this claim but has threatened to do so. The Lessee believes that it has valid factual and legal defenses to any claim which Womack might subsequently file. 9. RRAC Contractors, Inc. v. Jackson Parish Hospital, et al., Second Judicial District Court, Jackson Parish, Louisiana, Case No. 26,309. Plaintiff, a heating and air conditioning contractor, has sued the Lessee's Brim Healthcare, together with a publicly owned hospital and the governmental entity which owns the hospital, to recover $55,431, which Plaintiff contends remains to be paid on a contract for the installation of an HVAC system in the hospital. Pursuant to a management agreement between the hospital and Brim Healthcare, the hospital is obligated to indemnify Brim Healthcare for this claim. Brim Healthcare invoked its right to indemnification; however, the hospital refused to acknowledge its obligation. The Lessee has retained trial defense counsel and intends to assert a cross-claim against the hospital for indemnification. 10. Monica Miller, et al. v. Powell Hospital, et al., District Court, Park County, Wyoming, Civil Action No. 20289. Plaintiff has filed a medical malpractice claim against the K-2 137 Lessee, a hospital managed by the Lessee, and various individuals claiming that she suffered damages resulting from a medication error which occurred when she was a patient in the hospital emergency room. The claim has been reported to the Lessee's malpractice insurance carrier which has acknowledged coverage. 11. De Ann Jones v. Memorial Mother France Hospital. Ms. Jones has served the hospital (operated by the Lessee) with notice, under Article 4590i of the Texas Civil Code, of her intent to initiate a medical malpractice claim. She claims to have been a patient at the hospital on January 6, 1997 for delivery of a baby under the care of Dr. Robert Blackwell and his professional practice group. She asserts that negligent medical care caused her child to be still-born. This claim has been reported to the Lessee's professional liability insurance carrier. 12. Suzann MacLeod v. Daniel Farnum, Superior Court of California for Humbolt County, Case No. DR 9700421. Ms. McLeod has sued the Lessee's Brim Hospitals, Inc. subsidiary, her treating physician and General Hospital of Eureka, California alleging otherwise unspecified acts of medical negligence and seeking an unspecified amount of unliquidated damages. This case has been reported to the Lessee's medical malpractice insurance carrier. 13. Dustin Kennedy, a minor v. Needles Desert Community Hospital, Superior Court of California for San Bernadino, Case No. BCV-3306. Through his legal guardian plaintiff, a minor, has sued his treating physician, Matthew Kidd, M.D. and the Needles Desert Community Hospital, now known as Colorado River Medical Center, which the Lessee operates pursuant to a lease agreement with the City of Needles, California. The lawsuit alleges that the plaintiff was injured by otherwise unspecified medical negligence on the part of the defendants. 14. U.S. Department of Justice Overbilling Claims. The United States has asserted three claims against Lessee hospitals concerning overbilling: (a) Parkview Regional Hospital. United States asserts that a total of $22,561.85 was overbilled for a period of time from January 1992 through December 1996 in connection with the hospital's blood chemistry CPT codes. The Government has proposed a settlement of three times that amount, plus an additional $1,403.52, for a total of $69,089.04. Officials of the Lessee are working cooperatively with both the Government as well as the prior owner to resolve this dispute. It is expected that the dispute will be resolved for significantly less than the amount demanded. (b) Memorial Mother Frances Hospital. This claim is in the process of being resolved. No money was paid by the Lessee, however, a corporate compliance agreement for future billing activity with the Government is required to be entered. The compliance agreement is currently being negotiated. (c) Colorado Plains Medical Center, Inc. On February 2, 1998, the United States asserted a claim against this facility for duplicate billing allegedly occurring between December 1, 1987 and December 31, 1991 totaling $2,052.44 for 23 claims. All amounts have been uncovered by HCGA administratively. The Government now seeks K-3 138 penalties ($5,000 - $10,000 per claim) and treble damages under the False Claims Act. The Government claims the Lessee's maximum exposure for damages and penalties is thus $235,065.51. The Government will require a corporate compliance agreement to be entered into and has offered to settle the damage claim for $3,976.70. 15. Dr. David M. Salter. Lessee has received correspondence from John Harris, Esq., an attorney practicing in Stockton, California, threatening to file a lawsuit against Lessee's hospital in Eureka, California and against North Coast Family Practice Clinic, an entity unrelated to Lessee. Dr. Salter claims that the hospital and North Coast have breached an oral agreement to purchase his medical practice. Lessee denies that it ever entered into such an agreement and believes that it would have valid legal and factual defense to any such claim. 16. Various Medical Malpractice Claims. The Lessee has been named defendant in various medical malpractice claims that are pending. All defense counsel retained by the Lessee have reported that they reasonably anticipated that any settlement or adverse verdict would be within the limits of available insurance. The Lessee, in its good faith judgment, believes that, as of the date hereof, based on the Lessee's current knowledge, none of the above-referenced litigation would result in a Material Adverse Effect. For purposes of this Schedule 4.14, the term "Lessee" shall be deemed to include Province Healthcare Company and its consolidated subsidiaries. K-4 139 EXHIBIT L FORM OF COMPLIANCE CERTIFICATE THIS CERTIFICATE is given pursuant to Section 8.3(s) of the Participation Agreement dated as of March 30, 1998 among Province Healthcare Company (the "Company"), the various parties thereto from time to time, as the guarantors, the various banks and other lending institutions parties thereto from time to time, as the lenders, the various banks and other lending institutions parties thereto from time to time, as the holders, First Security Bank, National Association, as Owner Trustee under the PHC Real Estate Trust 1998-1 and First Union National Bank, as the Agent (as amended, modified, supplemented, restated and/or replaced from time to time, the "Participation Agreement"). Capitalized terms used herein but not defined herein shall have the meanings provided in the Participation Agreement. The undersigned hereby certifies that: 1. I am the duly elected [Chief Executive Officer] [Chief Financial Officer] [Vice President-Finance] [Vice President-Controller] of the Company and am making this certification in my official capacity as such. 2. Enclosed with this Certificate are copies of the financial statements of the Company and its Subsidiaries as of _____________, and for the [________-month period] [year] then ended, required to be delivered under Section [5.1(a)] [5.1(b)] of the Lessee Credit Agreement. Such financial statements are true and accurate in all material respects and fairly present in all material respects the financial condition of the Company and its Subsidiaries on a consolidated basis as of the date indicated and the results of operations of the Company and its Subsidiaries on a consolidated basis for the period covered thereby (subject, in the case of interim statements, to the absence of footnote disclosures and normal and reasonable year-end adjustments). 3. The undersigned has reviewed the terms of the Lessee Credit Agreement and has made, or caused to be made under the supervision of the undersigned, a review in reasonable detail of the transactions and condition of the Company and its Subsidiaries during the accounting period covered by such financial statements. 4. The examination described in Paragraph 3 above did not disclose, and the undersigned has no knowledge of the existence of, any Default or Event of Default as of the date of this Certificate. [, except as set forth below. Describe here or in a separate attachment any exceptions to Paragraph 4 above by listing, in reasonable detail, the nature of the Default or Event of Default, the period during which it existed and the action that the Company has taken or proposes to take with respect thereto.] L-1 140 5. Attached to this Certificate as Attachments A and B, respectively, are a Covenant Compliance Worksheet and an Interest Rate Calculation Worksheet reflecting the computation of the financial covenants set forth in Article VI of the Lessee Credit Agreement as of the last day of the period covered by the financial statements enclosed herewith. IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the _______ day of ___________, ____. PROVINCE HEALTHCARE COMPANY [signature of CEO, CFO, V.P. Finance, or V.P.-Controller of Company] Name: -------------------------------- Title: ------------------------------- L-2 141 ATTACHMENT A Covenant Compliance Worksheet
- --------------------------------------------------------------------------------------------------------------------- RATIO OF CONSOLIDATED ADJUSTED DEBT TO ANNUALIZED NOT GREATER THAN OR EQUAL TO: CONSOLIDATED EBITDAR (SECTION 6.9 OF THE 4.5 TO 1.0 THROUGH 12/31/98 CREDIT AGREEMENT): 5.0 TO 1.0 THEREAFTER(1) - --------------------------------------------------------------------------------------------------------------------- (1) Consolidated Adjusted Debt as of the measurement date (a) Consolidated Debt as of the measurement date $__________ (b) Facility Rent Expense for two immediately $__________ preceding fiscal quarters then ending (c) Multiply line 1(b) by two $__________ (d) Multiply line 1(c) by eight $__________ (e) Consolidated Adjusted Debt: $__________ Add lines (1)(a) and (1)(d) (2) Annualized Consolidated EBITDAR for two immediately preceding fiscal quarters then ending (a) Consolidated Net Income for two immediately $__________ preceding fiscal quarters then ending (b) The sum of the following for such period: Interest Expense $__________ Taxes $__________ Depreciation $__________ Amortization $__________ Facility Rent Expense $__________ Minority Interests(2) $__________ $__________
- -------------------------- (1) The ratio shall be not greater than or equal to 5.0 to 1.0 for all periods after the completion by the Company of a subordinated debt offering of at least $75,000,000 prior to December 31, 1998. (2) To extent issuer of minority interest is obligated to pay debt service on loans from Affiliates before making distributions. L-3 142
- --------------------------------------------------------------------------------------------------------------------- RATIO OF CONSOLIDATED ADJUSTED DEBT TO ANNUALIZED NOT GREATER THAN OR EQUAL TO: CONSOLIDATED EBITDAR (SECTION 6.9 OF THE 4.5 TO 1.0 THROUGH 12/31/98 CREDIT AGREEMENT): 5.0 TO 1.0 THEREAFTER(1) - --------------------------------------------------------------------------------------------------------------------- (c) Add lines (2)(a) and (2)(b) $__________ (d) Annualized Consolidated EBITDAR: $__________ Multiply line 2(c) by two(3) (3) Ratio of Consolidated Adjusted Debt to Annualized _________ Consolidated EBITDAR: Divide line (1)(e) by line (2)(d)
(3) Do not multiply losses of an extraordinary nature, included in Consolidated Net Income in line 2(a) above, by two. L-4 143
- --------------------------------------------------------------------------------------------------------------------- RATIO OF CONSOLIDATED ADJUSTED SENIOR DEBT TO ANNUALIZED CONSOLIDATED EBITDAR (SECTION 6.10 OF THE CREDIT AGREEMENT): NOT GREATER THAN OR EQUAL TO: 4.5 TO 1.0 THROUGH 12/31/98 4.0 TO 1.0 THROUGH 3/31/00 3.50 TO 1.0 THEREAFTER(4) - --------------------------------------------------------------------------------------------------------------------- (1) Consolidated Adjusted Senior Debt $__________ (a) Consolidated Adjusted Debt (from prior page) $__________ (b) Subordinated Debt $__________ (c) Consolidated Adjusted Senior Debt: $__________ Subtract line (1)(b) from line (1)(a) (2) Annualized Consolidated EBITDAR (from prior page) $__________ (3) Ratio of Consolidated Adjusted Senior Debt to Annualized Consolidated EBITDAR: Divide Line (1)(c) by Line (2) __________
- ----------------- (4) The ratio shall be not greater than or equal to 4.0 to 1.0 for all periods after the completion by the Company of a subordinated debt offering of at least $75,000,000 prior to December 31, 1998 through the period ending March 31, 2000. L-5 144
- -------------------------------------------------------------------------------------------------------------------- ANNUALIZED JOINT VENTURE EBITDAR (SECTION 6.11 OF THE CREDIT AGREEMENT): NOT GREATER THAN: TWENTY PERCENT (20%) OF ANNUALIZED CONSOLIDATED EBITDAR - -------------------------------------------------------------------------------------------------------------------- (1) Annualized Joint Venture EBITDAR for two immediately preceding fiscal quarters then ending(5) (a) Consolidated Net Income for Non-Wholly Owned $__________ Consolidated Subsidiaries for two immediately preceding fiscal quarters then ending (b) The sum of the following for Non-Wholly Owned Consolidated Subsidiaries for such period Interest Expense $__________ Taxes $__________ Depreciation $__________ Amortization $__________ Facility Rent Expense $__________ Minority Interests(6) $__________ $__________ (c) Add lines (1)(a) and (1)(b) $__________ (d) Annualized Joint Venture EBITDAR: $__________ Multiply line (1)(c) by two(7) (2) Annualized Consolidated EBITDAR (from calculations for $__________ Section 6.9) (3) Maximum Permitted Annualized Joint Venture EBITDAR: $__________ Multiply line (2) by .2
- --------------------- (5) Exclude from line (1) calculations, EBITDAR related to the Palestine Limited Partnership. (6) To extent issuer of minority interest is obligated to pay debt service on loans from Affiliates before making distributions. (7) Do not multiply losses of an extraordinary nature, included in Consolidated Net Income in line 1(a) above, by two. L-6 145
- -------------------------------------------------------------------------------------------------------------------- MINIMUM NET WORTH (SECTION 6.12) OF THE CREDIT AGREEMENT NOT LESS THAN $84,000,000, PLUS 85% OF CONSOLIDATED NET INCOME (BUT EXCLUDING ANY NET LOSS) FROM JANUARY 1, 1998, PLUS 90% OF INCREASES IN THE STATED CAPITAL AND ADDITIONAL PAID IN CAPITAL ACCOUNTS OF THE COMPANY RESULTING FROM THE ISSUANCE OF EQUITY SECURITIES OR OTHER CAPITAL INVESTMENTS AFTER THE AMENDMENT EFFECTIVE DATE - -------------------------------------------------------------------------------------------------------------------- (1) $84,000,000 $84,000,000 (2) Consolidated Net Income (excluding any net loss) for $__________ all periods from and after January 1, 1998 (3) Multiply line (2) by .85 $__________ (4) Increases in the stated capital and additional paid in $__________ capital accounts of Borrower resulting from the issuance of equity securities or other capital investments after the Amendment Effective Date (5) Multiply line (4) by .9 $__________ (6) Required Minimum Net Worth: $__________ Add lines (1), (3) and (5) (7) Consolidated Net Worth at Measurement date: $__________
L-7 146
- -------------------------------------------------------------------------------------------------------------------- FIXED CHARGE COVERAGE RATIO (SECTION 6.13 OF THE CREDIT AGREEMENT): NOT LESS THAN OR EQUAL TO: 1.2 TO 1.0 - -------------------------------------------------------------------------------------------------------------------- (1) Annualized Consolidated EBITDAR (from calculation for $__________ Section 6.9) (2) Fixed Charges (a) Scheduled Principal Payments $__________ (b) The sum of the following for the two fiscal quarters then ending: Interest Expense (payable in cash) $__________ Facility Rent Expense $__________ Cash Taxes $__________ (c) Multiply line 2(b) by two $__________ (d) Actual Capital Expenditures for four fiscal $__________ quarters then ending(8) (e) Fixed Charges: Add lines (2)(a), (2)(c) and 2(d) $__________ (3) Ratio of Annualized Consolidated EBITDAR to Fixed Charges: __________ Divide line 1 by line 2(e)
- --------------- (8) Excluding, for measurement dates ending on or prior to September 30, 1998, aggregate acquisition expenditures and current building programs incurred on or prior to December 31, 1997 at Parkview Regional Hospital, Mexia, Texas and Colorado Plains Medical Center, Fort Morgan, Colorado, not to exceed $3,200,000). L-8 147
- -------------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES (SECTION 6.14 OF THE CREDIT AGREEMENT) NOT GREATER THAN 5% OF CONSOLIDATED NET REVENUES FOR THE FOUR FISCAL QUARTERS THEN ENDING (EXCLUDING THROUGH SEPTEMBER 30, 1998 ACQUISITION EXPENDITURES AND CURRENT BUILDING PROGRAMS AT PARKVIEW REGIONAL HOSPITAL, MEXIA, TEXAS AND COLORADO PLAINS MEDICAL CENTER, FORT MORGAN, COLORADO NOT TO EXCEED $3,200,000) - -------------------------------------------------------------------------------------------------------------------- (1) Capital Expenditures for four fiscal quarters then __________ ending(9) (2) Consolidated Net Revenues for such period $__________ (3) Maximum Permitted Capital Expenditures: Multiply line (2) by 0.05 __________ - --------------------------------------------------------------------------------------------------------------------
- ----------------- (9) Excluding, for measurement dates on or prior to September 30, 1998, aggregate acquisition expenditures and current building programs at Parkview Regional Hospital, Mexia, Texas and Colorado Plains Medical Center, Fort Morgan, Colorado not to exceed $3,200,000. L-9 148
- -------------------------------------------------------------------------------------------------------------------- ANNUALIZED NON-LANDLORD CONSENT EBITDAR (SECTION 6.15 OF THE CREDIT AGREEMENT): NOT GREATER THAN: TEN PERCENT (10%) OF ANNUALIZED CONSOLIDATED EBITDAR - -------------------------------------------------------------------------------------------------------------------- (1) Annualized Non-Landlord Consent EBITDAR for two immediately preceding fiscal quarters then ending (a) Consolidated Net Income, attributable to all $__________ Facility Leased Properties of the Company or any Subsidiary for which a Landlord Consent has not been delivered by the Agent, for two immediately preceding fiscal quarters then ending (b) The sum of the following, attributable to all Facility Leased Properties of the Borrower or any Subsidiary for which a Landlord Consent has not been delivered by the Agent, for such period Interest Expense $__________ Taxes $__________ Depreciation $__________ Amortization $__________ Facility Rent Expense $__________ Minority Interests(10) $__________ (c) Add lines (1)(a) and (1)(b) $__________ (d) Annualized Non-Landlord Consent EBITDAR: $__________ Multiply line (1)(c) by two(1)
(10) To extent issuer of minority interest is obligated to pay debt service on loans from Affiliates before making distributions. (11) Do not multiply losses of an extraordinary nature, included in Consolidated Net Income in line 1(a) above, by two. L-10 149
- -------------------------------------------------------------------------------------------------------------------- ANNUALIZED NON-LANDLORD CONSENT EBITDAR (SECTION 6.15 OF THE CREDIT AGREEMENT): NOT GREATER THAN: TEN PERCENT (10%) OF ANNUALIZED CONSOLIDATED EBITDAR - -------------------------------------------------------------------------------------------------------------------- (2) Annualized Consolidated EBITDAR (from calculations for $__________ Section 6.9) (3) Maximum Permitted Annualized Non-Landlord Consent $__________ EBITDAR: Multiply line (2) by .1
- -------------------------------------------------------------------------------------------------------------------- PARKVIEW REGIONAL HOSPITAL/EBITDAR TO FACILITY RENT EXPENSE (SECTION 6.16 OF THE CREDIT AGREEMENT): NOT LESS THAN 1.75 TO 1.0 AT ANY TIME - -------------------------------------------------------------------------------------------------------------------- (1) EBITDAR of Parkview Regional Hospital for the period $__________ of determination (2) Facility Rent Expense of Parkview Regional Hospital __________ for the period of determination (3) Ration of EBITDAR to Facility Rent Expense for __________ Parkview Regional Hospital: Divide line 1 by line 2
L-11 150 ATTACHMENT B Interest Rate Calculation Worksheet
- -------------------------------------------------------------------------------------------------------------------- RATIO OF CONSOLIDATED ADJUSTED DEBT TO ANNUALIZED CONSOLIDATED EBITDAR: - -------------------------------------------------------------------------------------------------------------------- (1) Consolidated Adjusted Debt (from calculation for $__________ Section 6.9) (2) Annualized Consolidated EBITDAR (From calculation for $__________ Section 6.9) (3) Ratio of Consolidated Adjusted Debt to Annualized $__________ Consolidated EBITDAR: Divide Line (1) by Line (2) (4) Applicable Margin: EURODOLLAR __________% ABR __________%
L-12 151 EXHIBIT M JOINDER AGREEMENT (Pursuant to Section 5.9 of the Participation Agreement) THIS JOINDER AGREEMENT dated as of _____________, ___________ (as amended, modified, supplemented, restated and/or replaced from time to time, the "Agreement"), is by and between ___________________, a ___________ (the "Company"), and FIRST UNION NATIONAL BANK, as the Agent for the Lenders and respecting the Security Documents, as the Agent for the Lenders and the Holders, to the extent of their interests (the "Agent"). Capitalized terms not otherwise defined herein shall have the meanings set forth therefor in the Participation Agreement dated as of March 30, 1998 (as amended, modified, supplemented, restated and/or replaced from time to time, the "Participation Agreement") among Province Healthcare Company, the various parties thereto from time to time, as the Guarantors, First Security Bank, National Association, as the Owner Trustee under the PHC Real Estate Trust 1998-1, the various banks and other lending institutions which are parties thereto from time to time, as the Lenders, the various banks and other lending institutions which are parties thereto from time to time, as the Holders, and the Agent. The Company is a Wholly-Owned Entity, and, consequently, the Credit Parties are required by Section 8.3(r) of the Participation Agreement to cause the Company to become a "Guarantor". Accordingly, the Company hereby agrees as follows with the Agent, for the benefit of the Financing Parties: 1. The Company hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Company will be deemed to be a party to the Participation Agreement and a "Guarantor" for all purposes of the Participation Agreement and all other Operative Agreements, and shall have all of the obligations of a Guarantor under the Operative Agreements as if the Company had executed the Participation Agreement. The Company hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions applicable to the Guarantors contained in the Operative Agreements. Without limiting the generality of the foregoing terms of this paragraph 1, the Company hereby (i) jointly and severally together with the other Guarantors, guarantees to each Financing Party, as provided in Sections 6B.1 through 6B.8 of the Participation Agreement, the prompt payment and performance of the Company Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof. 2. THE COMPANY HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES TO THE PROVISIONS OF SECTION 12.8 OF THE PARTICIPATION AGREEMENT, INCLUDING WITHOUT LIMITATION THOSE PROVISIONS REGARDING GOVERNING LAW, SUBMISSION TO JURISDICTION, WAIVER OF M-1 152 JURY TRIAL, VENUE AND ARBITRATION. THIS PROVISION HAS BEEN SPECIFICALLY REVIEWED BY THE COMPANY. 3. The chief executive office and principal place of business of the Company are located at the location(s) set forth on Schedule 1 attached hereto. 4. All notices and other communications to be delivered to the Company shall be directed to Province Healthcare Company at its address set forth in Section 12.3 of the Participation Agreement or such other address as may be specified, in accordance with the terms of the Participation Agreement, by Province Healthcare Company from time to time. 5. The Company hereby waives acceptance by the Financing Parties of the guaranty by the Company under Sections 6B.1 through 6B.8 of the Participation Agreement upon the execution of this Agreement by the Company. 6. This Agreement may be executed in multiple counterparts, each of which shall constitute an original but all of which when taken together shall constitute one contract. 7. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its authorized officers, and the Agent, for the benefit of the Financing Parties, has caused the same to be accepted by its authorized officer, as of the day and year first above written. [COMPANY] By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- Acknowledged and accepted: FIRST UNION NATIONAL BANK, as the Agent By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- M-2 153 EXHIBIT N
[States of Incorporation/Formation and Principal Place of Business of Each Guarantor] (Pursuant to Section 6.3(i) of the Participation Agreement) Guarantors State of Incorporation/ State of Principal Formation Place of Business BLYTHE-PROVINCE, INC. Tennessee Tennessee BRIM EQUIPMENT SERVICES, INC. Oregon Tennessee BRIM FIFTH AVENUE, INC. Oregon Tennessee BRIM HEALTHCARE, INC. Oregon Tennessee BRIM HOSPITALS, INC. Oregon Tennessee BRIM OUTPATIENT SERVICES, INC. Oregon Tennessee BRIM PAVILION, INC. Oregon Tennessee BRIM SERVICES GROUP, INC. Oregon Tennessee CARE HEALTH COMPANY, INC. Washington Tennessee MEXIA-PRINCIPAL, INC. Texas Tennessee PALESTINE-PRINCIPAL G.P., INC. Texas Tennessee PALESTINE-PRINCIPAL, INC. Tennessee Tennessee PHC-EUNICE, INC. Louisiana Tennessee PHC-LAKE HAVASU, INC. Arizona Tennessee PHC OF DELAWARE, INC. Delaware Tennessee PRINCIPAL HOSPITAL COMPANY OF NEVADA, INC. Nevada Tennessee PRINCIPAL KNOX COMPANY Delaware Tennessee PRINCIPAL-NEEDLES, INC. Tennessee Tennessee MEXIA PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP Texas Tennessee PALESTINE PRINCIPAL HEALTHCARE LIMITED PARTNERSHIP Texas Tennessee INTEGRATED HEALTH MANAGEMENT, LLC California Tennessee
N-1 154 Appendix A Rules of Usage and Definitions I. Rules of Usage The following rules of usage shall apply to this Appendix A and the Operative Agreements (and each appendix, schedule, exhibit and annex to the foregoing) unless otherwise required by the context or unless otherwise defined therein: (a) Except as otherwise expressly provided, any definitions set forth herein or in any other document shall be equally applicable to the singular and plural forms of the terms defined. (b) Except as otherwise expressly provided, references in any document to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits are references to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits in or to such document. (c) The headings, subheadings and table of contents used in any document are solely for convenience of reference and shall not constitute a part of any such document nor shall they affect the meaning, construction or effect of any provision thereof. (d) References to any Person shall include such Person, its successors, permitted assigns and permitted transferees. (e) Except as otherwise expressly provided, reference to any agreement means such agreement as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof. (f) Except as otherwise expressly provided, references to any law includes any amendment or modification to such law and any rules or regulations issued thereunder or any law enacted in substitution or replacement therefor. (g) When used in any document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (h) References to "including" means including without limiting the generality of any description preceding such term and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. Appendix A-1 155 (i) References herein to "attorney's fees", "legal fees", "costs of counsel" or other such references shall be deemed to exclude salary of the Agent's regularly employed personnel and overhead. (j) Each of the parties to the Operative Agreements and their counsel have reviewed and revised, or requested revisions to, the Operative Agreements, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Operative Agreements and any amendments or exhibits thereto. (k) Capitalized terms used in any Operative Agreements which are not defined in this Appendix A but are defined in another Operative Agreement shall have the meaning so ascribed to such term in the applicable Operative Agreement. II. Definitions "AAA" shall have the meaning given to such term in Section 12.8(d) of the Participation Agreement. "ABR" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Lending Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus one-half of one percent (0.5%). For purposes hereof: "Prime Lending Rate" shall mean the rate announced by the Agent from time to time as its prime lending rate as in effect from time to time. The Prime Lending Rate is a reference rate and is one of several interest rate bases used by the Agent and does not necessarily represent the lowest or most favorable rate offered by the Agent actually charged to any customer. Any Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. The Prime Lending Rate shall change automatically and without notice from time to time as and when the prime lending rate of the Agent changes. "Federal Funds Effective Rate" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members or the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Lending Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Lending Rate or the Federal Funds Effective Rate, respectively. "ABR Holder Advance" shall mean a Holder Advance bearing a Holder Yield based on the ABR. Appendix A-2 156 "ABR Loans" shall mean Loans the rate of interest applicable to which is based upon the ABR. "Acceleration" shall have the meaning given to such term in Section 6 of the Credit Agreement. "Accounts" shall have the meaning given to such term in Section 1 of the Security Agreement. "Acquisition Advance" shall have the meaning given to such term in Section 5.3 of the Participation Agreement. "Acquisition Loan" shall mean any Loan made in connection with an Acquisition Advance. "Additional Incorporated Terms" shall have the meaning given to such term in Section 28.1 of the Lease. "Advance" shall mean a Construction Advance or an Acquisition Advance. "Affiliate" shall mean, with respect to any Person, any Person or group acting in concert in respect of the Person in question that, directly or indirectly, controls or is controlled by or is under common control with such Person. "After Tax Basis" shall mean, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the amount of all taxes required to be paid by the recipient calculated at the then maximum marginal rates generally applicable to Persons of the same type as the recipients with respect to the receipt by the recipient of such amounts (less any tax savings realized as a result of the payment of the indemnified amount), such increased payment (as so reduced) is equal to the payment otherwise required to be made. "Agency Agreement" shall mean the Agency Agreement, dated on or about the Initial Closing Date between the Construction Agent and the Lessor. "Agency Agreement Event of Default" shall mean an "Event of Default" as defined in Section 5.1 of the Agency Agreement. "Agent" shall mean First Union National Bank, as agent for the Lenders pursuant to the Credit Agreement, or any successor agent appointed in accordance with the terms of the Credit Agreement and respecting the Security Documents, for the Lenders and the Holders, to the extent of their interests. "Annualized Consolidated EBITDAR" shall mean, as of the last day of any fiscal quarter, Consolidated EBITDAR for the two (2) consecutive fiscal quarters ending on such date, Appendix A-3 157 multiplied by two (2); provided, that for purposes of this calculation, losses of an extraordinary nature included in Consolidated Net Income shall not be multiplied by two. "Annualized Facility Rent Expense" shall mean, as of the last day of any fiscal quarter, Facility Rent Expense for the two (2) consecutive fiscal quarters ending on such date, multiplied by two (2). "Applicable Percentage" shall mean, at any time with respect to any Eurodollar Loan and the Lender Facility Fee, the applicable percentage points as determined under the following matrix with reference to the ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDAR, calculated as provided below:
Ratio of Consolidated Applicable Applicable Applicable Applicable Adjusted Debt to Percentage for Percentage Percentage Percentage Pricing Annualized Eurodollar for ABR for Lender for Holder Level Consolidated EBITDAR Loans Loans Facility Fee Facility Fee - ----- -------------------- ----- ----- ------------ ------------ Level I Less than 2.0 to 1.0 0.75% 0.00% 0.250% 0.250% Level II Less that 2.5 to 1.0 1.00% 0.00% 0.250% 0.250% but greater than or equal to 2.0 to 1.0 Level III Less than 3.0 to 1.0 1.25% 0.00% 0.3125% 0.3125% but greater than or equal to 2.5 to 1.0 Level IV Less than 3.5 to 1.0 1.50% 0.25% 0.3125% 0.3125% but greater than or equal to 3.0 to 1.0
Appendix A-4 158
Level V Less than 4.0 to 1.0 1.75% 0.50% 0.375% 0.375% but greater than or equal to 3.5 to 1.0 Level VI Equal to of greater 2.00% 0.75% 0.500% 0.500% than 4.0 to 1.0
From the Initial Closing Date until the fifth (5th) Business Day after receipt by the Agent of the financial statements of Borrower for the fiscal quarter ended March 31, 1998 (as delivered pursuant to Section 5.1(b) of the Lessee Credit Agreement), the Applicable Percentages shall be based on Pricing Level II. The Applicable Percentages shall be reset from time to time in accordance with the above matrix on the fifth (5th) Business Day after receipt by the Agent in accordance with Sections 5.1(a) or (b) of the Lessee Credit Agreement of financial statements, together with a Compliance Certificate attaching an Interest Rate Calculation worksheet (reflecting the computation of the ratio of Consolidated Adjusted Debt to Annualized Consolidated EBITDAR as of the last day of the preceding fiscal quarter or fiscal year, as appropriate) that provides for different Applicable Percentages than those then in effect. "Appraisal" shall mean, with respect to any Property, an appraisal to be delivered in connection with the Participation Agreement or in accordance with the terms of the Lease, in each case prepared by a reputable appraiser reasonably acceptable to the Agent, which in the judgment of counsel to the Agent, complies with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto, and all other applicable Legal Requirements. "Appraisal Procedure" shall have the meaning given such term in Section 22.4 of the Lease. "Approved State" shall mean any of the forty-eight states in the continental United States. "Appurtenant Rights" shall mean (a) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to the Land underlying the Improvements or the Improvements, including without limitation the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to the Land and (b) all permits, licenses and rights, appurtenant to such Land or the Improvements, in each case which is of record or is known to the Lessee. "Arbitration Rules" shall have the meaning given to such term in Section 12.8(d) of the Participation Agreement. "Assignment and Acceptance" shall mean the Assignment and Acceptance in the form attached to the Credit Agreement as EXHIBIT B. Appendix A-5 159 "Available Commitment" shall mean, as to any Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Lender's Commitment over (b) the aggregate principal amount of all Loans made by such Lender as of such date after giving effect to Section 5.2(d) of the Participation Agreement (but without giving effect to any other repayments or prepayments of any Loans hereunder). "Available Holder Commitments" shall mean an amount equal to the excess, if any, of (a) the aggregate amount of the Holder Commitments over (b) the aggregate amount of the Holder Advances made since the Initial Closing Date after giving effect to Section 5.2(d) of the Participation Agreement (but without giving effect to any other repayments or prepayments of any Holder Advances). "Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled "Bankruptcy," as now or hereafter in effect or any successor thereto. "Base Amount" shall have the meaning specified in Section 10.1(e) of the Lease. "Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b) the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is due. "Benefited Lender" shall have the meaning specified in Section 9.10(a) of the Credit Agreement. "Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and substance satisfactory to the Agent. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States (or any successor). "Borrower" shall mean the Owner Trustee, not in its individual capacity but as Borrower under the Credit Agreement. "Borrowing Date" shall mean any Business Day specified in a notice delivered pursuant to Section 2.3 of the Credit Agreement as a date on which the Lessor requests the Lenders to make Loans hereunder. "Budgeted Total Property Cost" shall mean, at any date of determination with respect to any Construction Period Property, an amount equal to the aggregate amount which the Construction Agent in good faith expects to be expended in order to achieve Completion with respect to such Property. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or any other states from which the Agent, any Lender or any Holder funds or engages in administrative activities with respect to the Appendix A-6 160 transactions under the Operative Agreements are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Asset" shall mean any asset that would, in accordance with GAAP, be required to be classified and accounted for as a capital asset. "Capital Lease" shall mean any lease of any property that would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of the lessee. "Capital Lease Obligation" shall mean, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder that would, in accordance with GAAP, appear on a balance sheet as a liability of such lessee in respect of such Capital Lease. "Capital Stock" shall mean any nonredeemable capital stock of any Credit Party or any of its Subsidiaries, whether common or preferred. "Casualty" shall mean any damage or destruction of all or any portion of the Property as a result of a fire or other casualty. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986. "Certificate" shall mean a Certificate in favor of each Holder regarding the Holder Commitment of such Holder issued pursuant to the terms and conditions of the Trust Agreement in favor of each Holder. "Change of Control" shall mean (i) any Person or "group" (within the meaning of Section 13(d)(3) under the Exchange Act), shall, directly or indirectly, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become, after the Initial Closing Date, the "beneficial owner" (within the meanings of Rules 13d-3 and 13d-5 under the Exchange Act) of securities of the Lessee representing 30% or more of the combined voting power of the then outstanding securities of the Lessee ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors, assuming the conversion, exchange or exercise into or for voting stock of all outstanding shares so convertible (other than GTCR Fund IV, Bruce V. Rauner or Joseph P. Nolan , which currently are the beneficial owners of 36.6% of the voting securities of the Lessee and may increase such holdings without causing a Change of Control), or (ii) the members of the Board of Directors of the Lessee shall cease to consist of a majority of the individuals (y) who constituted the Board of Directors as of the Initial Closing Date or (z) who shall have become members thereof subsequent to the Initial Closing Date after having been nominated, or otherwise approved in writing, by at least a majority of individuals who constituted the Board of Directors of the Lessee Appendix A-7 161 as of the Initial Closing Date. For purposes of this definition, "voting power" shall be determined with reference to the then outstanding securities of the Lessee ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors, assuming the conversion, exchange or exercise into or for voting stock of all outstanding securities of the Lessee other than voting stock. "Chattel Paper" shall have the meaning given to such term in Section 1 of the Security Agreement. "Claims" shall mean any and all obligations, liabilities, losses, actions, suits, penalties, claims, demands, costs and expenses (including without limitation reasonable attorney's fees and expenses) of any nature whatsoever. "Closing Date" shall mean the Initial Closing Date and each Property Closing Date. "Code" shall mean the Internal Revenue Code of 1986 together with rules and regulations promulgated thereunder, as amended from time to time, or any successor statute thereto. "Collateral" shall mean all assets of the Lessor, the Construction Agent and the Lessee, now owned or hereafter acquired, upon which a Lien is purported to be created by one or more of the Security Documents. "Commencement Date" shall have the meaning specified in Section 2.2 of the Lease. "Commitment" shall mean, as to any Lender, the obligation of such Lender to make the portion of the Loans to the Lessor in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1 of the Credit Agreement, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements. "Commitment Percentage" shall mean, as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of all of the Loans then outstanding), and such Commitment Percentage shall take into account both the Lender's Tranche A Commitment and the Lender's Tranche B Commitment. "Commitment Period" shall mean the period from and including the Initial Closing Date to and including the Construction Period Termination Date, or such earlier date as the Commitments shall terminate as provided in the Credit Agreement or the Holder Commitment shall terminate as provided in the Trust Agreement. "Company Obligations" shall mean the obligations of Province Healthcare Company, in any and all capacities under and with respect to the Operative Agreements and each Property. Appendix A-8 162 "Completion" shall mean, with respect to a Property, such time as the acquisition, installation, testing and final completion of the Improvements on such Property has been achieved in accordance with the Plans and Specifications, the Agency Agreement and/or the Lease, and in compliance with all Legal Requirements (except if non-compliance, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect) and Insurance Requirements and a certificate of occupancy has been issued with respect to such Property by the appropriate governmental entity. If the Lessor purchases a Property that includes existing Improvements that are to be immediately occupied by the Lessee, the date of Completion for such Property shall be the Property Closing Date. "Completion Date" shall mean, with respect to a Property, the earlier of (a) the date on which Completion for such Property has occurred or (b) the Construction Period Termination Date. "Compliance Certificate" shall mean a fully completed certificate in the form of EXHIBIT L. "Condemnation" shall mean any taking or sale of the use, access, occupancy, easement rights or title to any Property or any part thereof, wholly or partially (temporarily or permanently), by or on account of any actual or threatened eminent domain proceeding or other taking of action by any Person having the power of eminent domain, including without limitation an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, any Property or alter the pedestrian or vehicular traffic flow to any Property so as to result in a change in access to such Property, or by or on account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action. "Consolidated Adjusted Debt" shall mean the sum of (a) Consolidated Debt, and (b) the product of (i) Annualized Facility Rent Expense, multiplied by (ii) eight (8). "Consolidated Debt" shall mean, at any date, the aggregate (without duplication) of all Debt of the Lessee and its Subsidiaries as of such date, determined on a consolidated basis. "Consolidated EBITDAR" shall mean, with respect to the Lessee and its Subsidiaries on a consolidated basis as of the last day of any period, EBITDAR for the period ending on such date determined in accordance with GAAP. Consolidated EBITDAR shall be deemed to include without duplication, historical Consolidated EBITDAR, of any business acquired and operated by the Lessee or any Subsidiary after the commencement of the relevant measurement period, as if such business had been acquired by the Lessee or such Subsidiary as of the first day of such measurement period, subject to pro forma expense adjustments as set forth below; provided that such Consolidated EBITDAR is supported by financial statements, tax returns or other financial data acceptable to the Agent in its sole discretion. Calculations of Consolidated EBITDAR shall exclude the results of operations of any entity disposed of by the Lessee or any Subsidiary at any time after the first day of the relevant measurement period. Consolidated EBITDAR shall be adjusted for pro forma expense adjustments in connection with newly acquired entities, if and only to the extent approved in writing by the Majority Secured Parties. Appendix A-9 163 "Consolidated Net Income" shall mean, for any fiscal quarter, the net income (or loss) of the Lessee and its Subsidiaries, on a consolidated basis and excluding intercompany items, for such quarter, determined in accordance with GAAP, but excluding the effect of: (a) gains on the sale, conversion or other disposition of Capital Assets, (b) gains on the acquisition, retirement, sale or other disposition of stock of the Lessee or any of its Subsidiaries, (c) gains on the collection of life insurance proceeds, (d) any write-up of any asset, (e) any other gain or credit of an extraordinary nature, and (f) noncash losses approved in writing by the Agent. "Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary of such Person which under the rules of GAAP consistently applied should have its financial results consolidated with those of such Person for purposes of financial accounting statements. "Construction Advance" shall mean an advance of funds to pay Property Costs pursuant to Section 5.4 of the Participation Agreement. "Construction Agent" shall mean Province Healthcare Company, a Delaware corporation, as the construction agent under the Agency Agreement. "Construction Budget" shall mean the cost of acquisition, installation, testing, constructing and developing any Property as determined by the Construction Agent in its reasonable, good faith judgment. "Construction Commencement Date" shall mean, with respect to Improvements, the date on which construction of such Improvements commences pursuant to the Agency Agreement. "Construction Contract" shall mean any contract entered into between the Construction Agent or the Lessee with a Contractor for the construction of Improvements or any portion thereof on the Property. "Construction Loan" shall mean any Loan made in connection with a Construction Advance. "Construction Loan Property Cost" shall mean with respect to each Construction Period Property at the date of determination, an amount equal to (a) the aggregate principal amount of Construction Loans made on or prior to such date with respect to the Property minus (b) the aggregate principal amount of prepayments or repayments of the Loans allocated to reduce the Construction Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement. "Construction Period" shall mean, with respect to a Property, the period commencing on the Construction Commencement Date for such Property and ending on the Completion Date for such Property. Appendix A-10 164 "Construction Period Property" means, at any date of determination, any Property as to which the Rent Commencement Date has not occurred on or prior to such date. "Construction Period Termination Date" shall mean (a) the earlier of (i) the date that the Commitments have been terminated in their entirety in accordance with the terms of Section 2.5(a) of the Credit Agreement, or (ii) the second anniversary of the Initial Closing Date or (b) such later date as shall be agreed to by the Majority Secured Parties. "Contingent Obligation" shall mean, with respect to any Person, any direct or indirect liability of such Person with respect to any Debt, lease, dividend, guaranty, letter of credit (other than a standby letter of credit with no reasonable likelihood of draw, in the reasonable opinion of the Agent) or other obligation (the "primary obligation") of another Person (the "primary obligor"), whether or not contingent (a) to purchase, repurchase or otherwise acquire such primary obligations, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligations (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligator in respect thereof to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability of the primary obligor to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. "Contractor" shall mean each entity with whom the Construction Agent or the Lessee contracts to construct any Improvements or any portion thereof on the Property. "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Lessee, are treated as a single employer under Section 414 of the Code. "Co-Owner Trustee" shall have the meaning specified in Section 9.2 of the Trust Agreement. "Credit Agreement" shall mean the Credit Agreement, dated on or about the Initial Closing Date, among the Lessor, the Agent and the Lenders, as specified therein. "Credit Agreement Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Credit Agreement Event of Default. "Credit Agreement Event of Default" shall mean any event or condition defined as an "Event of Default" in Section 6 of the Credit Agreement. Appendix A-11 165 "Credit Documents" shall mean the Participation Agreement, the Credit Agreement, the Notes and the Security Documents. "Credit Parties" shall mean the Construction Agent, the Lessee and each Guarantor. "Debt" shall mean, with respect to any Person or group of Persons, without duplication, (i) all indebtedness of such Person for money borrowed, (ii) all reimbursement obligations of such Person with respect to surety bonds, letters of credit and bankers' acceptances (in each case, whether or not matured), (iii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (iv) all obligations of such Person to pay the deferred purchase price of property or services (including earnouts and other similar contingent obligations, calculated in accordance with GAAP), other than trade payables, (v) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (vi) all Capital Lease Obligations of such Person, (vii) all monetary obligations and amounts owing of such Person under the Operative Agreements or any other synthetic or end loaded lease facility of such Person, (viii) the net termination obligations of such Person under any Swap Agreement or other interest rate protection or hedging arrangement, calculated as of any date as if such agreement or arrangement were terminated as of such date, (ix) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock or other equity securities that, by their stated terms (or by the terms of any equity securities issuable upon conversion thereof or in exchange therefor), or upon the occurrence of any event, mature or are mandatorily redeemable, or are redeemable at the option of the holder thereof, in whole or in part, (x) all indebtedness referred to in clauses (i) through (ix) above secured by any lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person, and (xi) any Contingent Obligation of such Person to the extent that such Contingent Obligation in accordance with GAAP would be set forth in a specific Dollar amount on the liability side of a balance sheet, and excluding any guaranty of Debt related to an operating lease, provided that such guaranty will be included as a Contingent Obligation if the guaranty is called and there is not a corresponding forgiveness of lease payments in like amounts commencing in the order due, and provided, further, that Contingent Obligations of such Person under the Operative Agreements shall constitute "Debt" of such Person. "Deed" shall mean a warranty deed regarding the Land and/or Improvements in form and substance satisfactory to the Agent. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Holder" shall have the meaning given to such term in Section 12.5 of the Participation Agreement. Appendix A-12 166 "Defaulting Lender" shall have the meaning given to such term in Section 12.5 of the Participation Agreement. "Deficiency Balance" shall have the meaning given in Section 22.1(b) of the Lease Agreement. "Disputes" shall have the meaning given to such term in Section 12.8(d) of the Participation Agreement. "Documents" shall have the meaning given to such term in Section 1 of the Security Agreement. "Dollars" and "$" shall mean dollars in lawful currency of the United States of America. "Early Termination Conditions" shall mean (a) compliance with Section 8.3(j) of the Participation Agreement and (b) no Default or Event of Default shall have occurred and be continuing, either at the date any election of the Sale Option and/or the Purchase Option is elected in accordance with the applicable provisions of the Lease (other than any such Default or Event of Default that will be cured by the payment of Termination Value). "EBITDAR" shall mean, for any Person for any fiscal quarter, (i) Consolidated Net Income, plus (ii) the sum of Interest Expense, taxes, depreciation, amortization, and Facility Rent Expense. "Election Date" shall have the meaning given to such term in Section 20.1 of the Lease. "Election Notice" shall have the meaning given to such term in Section 20.1 of the Lease. "Eligible Assignee" shall mean (i) a commercial bank organized under the laws of the United States or any state thereof and having total assets in excess of $1,000,000,000, (ii) a commercial bank organized under the laws of any other country that is a member of the OECD or a political subdivision of any such country and having total assets in excess of $1,000,000,000, provided, that such bank is acting through a branch or agency located in the United States, in the country under the laws of which it is organized or in another country that is also a member of the OECD, (iii) the central bank of any country that is a member of the OECD, (iv) a finance company, mutual fund, insurance company or other financial institution that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $250,000,000, (v) any Affiliate of an existing Lender or (vi) any other Person (other than an Affiliate of any Credit Party) approved by the Agent and the Lessee, which approval shall not be unreasonably withheld. "Employee Benefit Plan" or "Plan" shall mean an employee benefit plan (within the meaning of Section 3(3) of ERISA, including without limitation any Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code and as interpreted by the Internal Revenue Appendix A-13 167 Service and the Department of Labor in rules, regulations, releases or bulletins in effect on any Closing Date. "Environmental Claims" shall mean any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or private in nature) arising (a) pursuant to, or in connection with, an actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Substance, (c) from any abatement, removal, remedial, corrective, or other response action in connection with a Hazardous Substance, Environmental Law, or other order of a Tribunal or (d) from any actual or alleged damage, injury, threat, or harm to health, safety, natural resources, or the environment. "Environmental Laws" shall mean any Law, permit, consent, approval, license, award, or other authorization or requirement of any Tribunal relating to emissions, discharges, releases, threatened releases of any Hazardous Substance into ambient air, surface water, ground water, publicly owned treatment works, septic system, or land, or otherwise relating to the handling, storage, treatment, generation, use, or disposal of Hazardous Substances, pollution or to the protection of health or the environment, including without limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., and state statutes analogous thereto. "Environmental Violation" shall mean any activity, occurrence or condition that violates or threatens (but only if the threat requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to violate or results in or threatens (but only if the threat requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to result in noncompliance with any Environmental Law. "Equipment" shall mean equipment, apparatus, furnishings, fittings and personal property of every kind and nature whatsoever purchased, leased or otherwise acquired using the proceeds of the Loans or the Holder Advances by the Construction Agent, the Lessee or the Lessor and all improvements and modifications thereto and replacements thereof, whether or not now owned or hereafter acquired or now or subsequently attached to, contained in or used or usable in any way in connection with any operation of any Improvements or other improvements to real property, including but without limiting the generality of the foregoing, all of the following to the extent acquired using the proceeds of the Loans or the Holder Advances and all improvements and modifications thereto and replacements thereof: all equipment described in the Appraisal including without limitation all heating, electrical, and mechanical equipment, lighting, switchboards, plumbing, ventilation, air conditioning and air-cooling apparatus, refrigerating, and incinerating equipment, escalators, elevators, loading and unloading equipment and systems, cleaning systems (including without limitation window cleaning apparatus), telephones, communication systems (including without limitation satellite dishes and antennae), televisions, computers, sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of every kind and description. Appendix A-14 168 "Equipment Schedule" shall mean (a) each Equipment Schedule attached to the applicable Requisition and (b) each Equipment Schedule attached to the applicable Lease Supplement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean each entity required to be aggregated with the Lessee pursuant to the requirements of Section 414(b) or (c) of the Code. "Eurocurrency Reserve Requirements" shall mean for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal) of reserve requirements in effect on such day (including without limitation basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed on eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D) maintained by a member bank of the Federal Reserve System. "Eurodollar Holder Advance" shall mean a Holder Advance bearing a Holder Yield based on the Eurodollar Rate. "Eurodollar Loans" shall mean Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), a per annum interest rate equal to the per annum rate determined by the Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), reported on Telerate page 3750 as of 11:00 a.m. (London time) two (2) Business Days before the first day of such Interest Period. In the event no such offered rates appear on Telerate page 3750, "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), a per annum interest rate equal to the per annum rate determined by the Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m. (London time) two (2) Business Days before the first day of such Interest Period (provided that if at least two (2) such offered rates appear on the Reuters Screen LIBO Page, the rate in respect of such Interest Period will be the arithmetic mean of such offered rates). As used herein, "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks) ("RMMRS"). In the event the RMMRS is not then quoting such offered rates, "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance Appendix A-15 169 comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), the average (rounded upward to the nearest one-sixteenth (1/16) of one percent (1%)) per annum rate of interest determined by the office of the Agent (each such determination to be conclusive and binding) as of two (2) Business Days prior to the first day of such Interest Period, as the effective rate at which deposits in immediately available funds in U.S. dollars are being, have been, or would be offered or quoted by the Agent to major banks in the applicable interbank market for Eurodollar deposits at any time during the Business Day which is the second Business Day immediately preceding the first day of such Interest Period, for a term comparable to such Interest Period and in the amount of the requested Eurodollar Loan and/or Eurodollar Holder Advance. If no such offers or quotes are generally available for such amount, then the Agent shall be entitled to determine the Eurodollar Rate from another recognized service or interbank quotation, or by estimating in its reasonable judgment the per annum rate (as described above) that would be applicable if such quote or offers were generally available. "Event of Default" shall mean a Lease Event of Default, an Agency Agreement Event of Default or a Credit Agreement Event of Default. "Excepted Payments" shall mean: (a) all indemnity payments (including without limitation indemnity payments made pursuant to Section 11 of the Participation Agreement), whether made by adjustment to Basic Rent or otherwise, to which the Owner Trustee, any Holder or any of their respective Affiliates, agents, officers, directors or employees is entitled; (b) any amounts (other than Basic Rent or Termination Value) payable under any Operative Agreement to reimburse the Owner Trustee, any Holder or any of their respective Affiliates (including without limitation the reasonable expenses of the Owner Trustee, the Trust Company and the Holders incurred in connection with any such payment) for performing or complying with any of the obligations of any Credit Party under and as permitted by any Operative Agreement; (c) any amount payable to a Holder by any transferee of such interest of a Holder as the purchase price of such Holder's interest in the Trust Estate (or a portion thereof); (d) any insurance proceeds (or payments with respect to risks self-insured or policy deductibles) under liability policies other than such proceeds or payments payable to the Agent or any Lender; (e) any insurance proceeds under policies maintained by the Owner Trustee or any Holder; (f) Transaction Expenses or other amounts, fees, disbursements or expenses paid or payable to or for the benefit of the Owner Trustee or any Holder; Appendix A-16 170 (g) all right, title and interest of any Holder or the Owner Trustee to any Property or any portion thereof or any other property to the extent any of the foregoing has been released from the Liens of the Security Documents and the Lease pursuant to the terms thereof; (h) upon termination of the Credit Agreement pursuant to the terms thereof, all remaining property covered by the Lease or Security Documents; (i) all payments in respect of the Holder Yield; (j) any payments in respect of interest to the extent attributable to payments referred to in clauses (a) through (i) above; and (k) any rights of either the Owner Trustee or the Trust Company to demand, collect, sue for or otherwise receive and enforce payment of any of the foregoing amounts, provided that such rights shall not include the right to terminate the Lease. "Excess Proceeds" shall mean the excess, if any, of the aggregate of all awards, compensation or insurance proceeds payable in connection with a Casualty or Condemnation over the Termination Value paid by the Lessee pursuant to the Lease with respect to such Casualty or Condemnation. "Exculpated Persons" shall mean the Borrower, the Holders, the Lessor, their officers, directors, shareholders and partners. "Expiration Date" shall have the meaning specified in Section 2.2 of the Lease. "Facility Fee" shall mean, collectively, the Holder Facility Fee and the Lender Facility Fee. "Facility Fee Payment Date" shall mean the last Business Day of each January, April, July and October and the last Business Day of the Commitment Period, or such earlier date as the Commitments shall terminate as provided in the Credit Agreement or the Holder Commitment shall terminate as provided in the Trust Agreement. "Facility Rent Expense" shall mean, for any fiscal quarter, all amounts paid, payable or accrued during such fiscal quarter by the Lessee and its Subsidiaries on a consolidated basis with respect to all operating leases of hospitals and the operating lease of any other facility with a Lease Expense in excess of $200,000 annually; provided that Facility Rent Expense shall exclude any amounts that constitute Debt pursuant to clause (vii) of the Debt definition. "Fair Market Sales Value" shall mean, with respect to any Property, the amount, which in any event, shall not be less than zero (0), that would be paid in cash in an arms-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, such Property. Fair Market Sales Value of any Property shall be determined based on the assumption that, except for purposes of Appendix A-17 171 Section 17 of the Lease, such Property is in the condition and state of repair required under Section 10.1 of the Lease and each Credit Party is in compliance with the other requirements of the Operative Agreements. "Federal Funds Effective Rate" shall have the meaning given to such term in the definition of ABR. "Financing Party" shall mean each of the Lessor, the Owner Trustee, in its trust capacity, the Agent, the Holders and/or the Lenders. "Fixtures" shall mean all fixtures relating to the Improvements, including without limitation all components thereof, located in or on the Improvements, together with all replacements, modifications, alterations and additions thereto. "Force Majeure Event" shall mean any event beyond the control of the Construction Agent, other than a Casualty or Condemnation, including without limitation strikes, lockouts, adverse soil conditions, acts of God, adverse weather conditions, inability to obtain labor or materials, governmental activities, civil commotion and enemy action; but excluding any event, cause or condition that results from the Construction Agent's financial condition. "Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America and such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates. "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of Treasury of the United States of America and such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates. "GAAP" shall mean generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants, consistently applied and maintained on a consistent basis for the Lessee and its Subsidiaries on a consolidated basis throughout the period indicated and consistent with the financial practice of the Lessee and its Subsidiaries after the date hereof. "Governmental Action" shall mean all permits, authorizations, registrations, consents, assignments, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Legal Requirement, and shall include, without limitation, all environmental and operating permits and licenses that are required for the full use, occupancy, zoning and operating of the Property. Appendix A-18 172 "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Ground Lease" shall mean a ground lease (in form and substance satisfactory to the Agent) respecting any Property owned by the Lessee (or a parent corporation or any Subsidiary of the Lessee) and leased to the Lessor where such lease (a) has at least a ninety-nine (99) year term and payments set at no more than $1.00 per year, or (b) is subject to such other terms and conditions as are satisfactory to the Agent. "GTCR Fund IV" shall mean Golder, Thoma, Cressy, Rauner Fund IV, L.P. "Guarantors" shall mean the various parties to the Participation Agreement from time to time, as guarantors of the Construction Agent and the Lessee with respect to the Operative Agreements and the Properties. "Hard Costs" shall mean all costs and expenses payable for supplies, materials, labor and profit with respect to the Improvements under any Construction Contract. "Hazardous Substance" shall mean any of the following: (a) any petroleum or petroleum product, explosives, radioactive materials, asbestos, formaldehyde, polychlorinated biphenyls, lead and radon gas; (b) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste, or pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous to the environment or human health or safety as determined in accordance with any Environmental Law; or (c) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste or pollutant that would support the assertion of any claim under any Environmental Law, whether or not defined as hazardous as such under any Environmental Law. "HCFA" shall mean the United States Health Care Financing Administration and any successor agency. "Holder Advance" shall mean any advance made by any Holder to the Owner Trustee pursuant to the terms of the Trust Agreement or the Participation Agreement. "Holder Amount" shall mean as of any date, the aggregate amount of Holder Advances made by each Holder to the Trust Estate pursuant to Section 2 of the Participation Agreement and Section 3.1 of the Trust Agreement less any payments of any Holder Advances received by the Holders pursuant to Section 3.4 of the Trust Agreement. "Holder Commitments" shall mean $1,050,000, as such amount may be increased or decreased from time to time in accordance with the provisions of the Operative Agreements; provided, if there shall be more than one (1) Holder, the Holder Commitment of each Holder Appendix A-19 173 shall be as set forth in Schedule I to the Trust Agreement as such Schedule I may be amended and replaced from time to time. "Holder Construction Property Cost" shall mean, with respect to each Construction Period Property, at any date of determination, an amount equal to the outstanding Holder Advances made with respect thereto under the Trust Agreement. "Holder Facility Fee" shall have the meaning given to such term in Section 7.4 of the Participation Agreement. "Holder Overdue Rate" shall mean the lesser of (a) the ABR plus two percent (2%) and (b) the highest rate permitted by applicable law. "Holder Property Cost" shall mean with respect to a Property an amount equal to the outstanding Holder Advances with respect thereto. "Holder Yield" shall mean with respect to Holder Advances from time to time either the Eurodollar Rate plus 2.00% or the ABR plus 0.75% as elected by the Owner Trustee from time to time with respect to such Holder Advances in accordance with the terms of the Trust Agreement; provided, however, (a) upon delivery of the notice described in Section 3.7(c) of the Trust Agreement, the outstanding Holder Advances of each Holder shall bear a yield at the ABR plus 0.75% applicable from time to time from and after the dates and during the periods specified in Section 3.7(c) of the Trust Agreement, and (b) upon the delivery by a Holder of the notice described in Section 11.3(f) of the Participation Agreement, the Holder Advances of such Holder shall bear a yield at the ABR plus 0.75% applicable from time to time after the dates and during the periods specified in Section 11.3(f) of the Participation Agreement. "Holders" shall mean First Union National Bank and each of the other banks and financial institutions which may be from time to time holders of Certificates in connection with the PHC Real Estate Trust 1998-1. "Impositions" shall mean, except to the extent described in the following sentence, any and all liabilities, losses, expenses, costs, charges and Liens of any kind whatsoever for fees, taxes, levies, imposts, duties, charges, assessments or withholdings ("Taxes") including but not limited to (i) real and personal property taxes, including without limitation personal property taxes on any property covered by the Lease that is classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including rent taxes and intangibles taxes); (iii) excise taxes; (iv) real estate transfer taxes, conveyance taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are or are in the nature of franchise, income, value added, privilege and doing business taxes, license and registration fees; (vi) assessments on any Property, including without limitation all assessments for public Improvements or benefits, whether or not such improvements are commenced or completed within the Term; and (vii) taxes, Liens, assessments or charges asserted, imposed or assessed by the PBGC or any governmental authority succeeding to or performing functions similar to, the PBGC; and in each case all Appendix A-20 174 interest, additions to tax and penalties thereon, which at any time prior to, during or with respect to the Term or in respect of any period for which the Lessee shall be obligated to pay Supplemental Rent, may be levied, assessed or imposed by any Governmental Authority upon or with respect to (a) any Property or any part thereof or interest therein; (b) the leasing, financing, refinancing, demolition, construction, substitution, subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, activity conducted on, delivery, insuring, use, operation, improvement, sale, transfer of title, return or other disposition of such Property or any part thereof or interest therein; (c) the Notes, other indebtedness with respect to any Property, or the Certificates, or any part thereof or interest therein; (d) the rentals, receipts or earnings arising from any Property or any part thereof or interest therein; (e) the Operative Agreements, the performance thereof, or any payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to any Property or any part thereof or interest therein upon the sale or disposition thereof; (g) any contract (including the Agency Agreement) relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; (h) the issuance of the Notes or the Certificates; (i) the Owner Trustee, the Trust or the Trust Estate; or (j) otherwise in connection with the transactions contemplated by the Operative Agreements. "Improvements" shall mean, with respect to the construction, renovations and/or Modifications on any Land, all buildings, structures, Fixtures, and other improvements of every kind existing at any time and from time to time on or under the Land purchased, leased or otherwise acquired using the proceeds of the Loans or the Holder Advances or is otherwise leased pursuant to the Lease and in all cases, is encumbered by a first priority, perfected Mortgage Instrument, together with any and all appurtenances to such buildings, structures or improvements, including without limitation sidewalks, utility pipes, conduits and lines, parking areas and roadways, and including without limitation all Modifications and other additions to or changes in the Improvements at any time, including without limitation (a) any Improvements existing as of the Property Closing Date as such Improvements may be referenced on the applicable Requisition and (b) any Improvements made subsequent to such Property Closing Date. "Incorporated Covenants" shall have the meaning given to such term in Section 28.1 of the Lease. "Incorporated Representations and Warranties" shall have the meaning given to such term in Section 28.1 of the Lease. "Indebtedness" of a Person shall mean, without duplication, such Person's: (a) obligations for borrowed money; (b) obligations representing the deferred purchase price of Property (whether real, personal, tangible, intangible or mixed) or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade); Appendix A-21 175 (c) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person; (d) obligations which are evidenced by notes, acceptances or other instruments; (e) Capital Lease Obligations; (f) net liabilities under interest rate swap, exchange or cap agreements; and (g) contingent obligations. "Indemnified Person" shall mean the Lessor, the Owner Trustee, in its individual and its trust capacity, the Trust, the Trust Company, the Agent, the Holders, the Lenders and their respective successors, assigns, directors, shareholders, partners, officers, employees, agents and Affiliates. "Indemnity Provider" shall mean, respecting each Property, the Lessee. "Initial Closing Date" shall mean March 30, 1998. "Initial Construction Advance" shall mean any initial Advance to pay for: (a) Property Costs for construction of any Improvements; and (b) the Property Costs of restoring or repairing any Property which is required to be restored or repaired in accordance with Section 15.1(e) of the Lease. "Instruments" shall have the meaning given to such term in Section 1 of the Security Agreement. "Insurance Requirements" shall mean all terms and conditions of any insurance policy either required by the Lease to be maintained by the Lessee or required by the Agency Agreement to be maintained by the Construction Agent, and all requirements of the issuer of any such policy and, regarding self insurance, any other requirements of the Lessee. "Interest Expense" shall mean, for any fiscal quarter, total interest expense of the Lessee and its Subsidiaries on a consolidated basis for such fiscal quarter (including, without limitation, interest expense attributable to Capital Lease Obligations), determined in accordance with GAAP and all lease payments made by the Lessee and its Subsidiaries pursuant to the Operative Agreements. "Interest Period" shall mean (a) during the Commitment Period and thereafter as to any Eurodollar Loan or Eurodollar Holder Advance (i) with respect to the initial Interest Period, the period beginning on the date of the first Eurodollar Loan and Eurodollar Holder Advance and Appendix A-22 176 ending one (1) month, two (2) months or three (3) months thereafter, as selected by the Lessor (in the case of a Eurodollar Loan) or the Owner Trustee (in the case of a Eurodollar Holder Advance) in its applicable notice given with respect thereto and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance and ending one (1) month, two (2) months or three (3) months thereafter, as selected by the Lessor by irrevocable notice to the Agent (in the case of a Eurodollar Loan) or by the Owner Trustee (in the case of a Eurodollar Holder Advance) in each case not less than three (3) Business Days prior to the last day of the then current Interest Period with respect thereto; provided, however, that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Maturity Date or the Expiration Date, as the case may be, (C) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month, and (D) there shall not be more than four (4) Interest Periods outstanding at any one (1) time. "Interest Rate Calculation Worksheet" shall mean a fully completed worksheet in the form of Attachment B to Exhibit L. "Interests" shall mean all ownership or profit-sharing interests (howsoever designated) in any general or limited partnership, limited liability company or joint venture, and all agreements, instruments and documents convertible, in whole or in part, into any one or more or all of the foregoing. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, together with the rules and regulations promulgated thereunder. "Joinder Agreement" shall mean a joinder agreement, in the form of EXHIBIT M to the Participation Agreement, executed from time to time between a Wholly-Owned Entity and the Agent. "Land" shall mean a parcel of real property described on (a) the Requisition issued by the Construction Agent on the Property Closing Date relating to such parcel and (b) the schedules to each applicable Lease Supplement executed and delivered in accordance with the requirements of Section 2.4 of the Lease. "Law" shall mean any statute, law, ordinance, regulation, rule, directive, order, writ, injunction or decree of any Tribunal. "Lease" or "Lease Agreement" shall mean the Lease Agreement dated on or about the Initial Closing Date, between the Lessor and the Lessee, together with any Lease Supplements thereto. Appendix A-23 177 "Lease Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Lease Event of Default. "Lease Event of Default" shall have the meaning specified in Section 17.1 of the Lease. "Lease Expense" shall mean, for any fiscal quarter, all amounts paid, payable or accrued during such fiscal quarter by the Borrower and its Subsidiaries on a consolidated basis with respect to all leases and rental agreements, including, without limitation, all amounts paid as Facility Rent Expense, of the Lessee and its Subsidiaries, other than Capital Leases, determined in accordance with GAAP; provided that Lease Expense shall exclude any amounts that constitute Debt pursuant to clause (vii) of the Debt definition. "Lease Supplement" shall mean each Lease Supplement substantially in the form of EXHIBIT A to the Lease, together with all attachments and schedules thereto. "Legal Requirements" shall mean all foreign, federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting the Owner Trustee, any Holder, the Lessor, any Credit Party, the Agent, any Lender or any Property, Land, Improvement, Equipment or the taxation, demolition, construction, use or alteration of such Improvements, whether now or hereafter enacted and in force, including without limitation any that require repairs, modifications or alterations in or to any Property or in any way limit the use and enjoyment thereof (including without limitation all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. ss. 12101 et. seq., and any other similar federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including without limitation all Environmental Laws), and all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to any Credit Party affecting any Property or the Appurtenant Rights. "Lender Commitments" shall mean $33,950,000, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements; provided, if there shall be more than one (1) Lender, the Lender Commitment of each Lender shall be as set forth in Schedule 1.1 to the Credit Agreement as such Schedule 1.1 may be amended and replaced from time to time. "Lender Facility Fee" shall have the meaning given to such term in Section 7.4 of the Participation Agreement. "Lender Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and executed for filing in the applicable jurisdiction in order to procure a security interest in favor of the Agent in the Collateral subject to the Security Documents. Appendix A-24 178 "Lenders" shall mean First Union National Bank and each of the other banks and financial institutions which may be from time to time party to the Participation Agreement and the Credit Agreement. "Lessee" shall have the meaning set forth in the Lease. "Lessee Credit Agreement" shall mean that certain Amended and Restated Credit Agreement dated as of March 30, 1998 between the Lessee, First Union National Bank, as Agent and various financial institutions party thereto, as such may hereafter be amended, modified, supplemented, restated and/or replaced from time to time. "Lessee Credit Agreement Event of Default" shall mean an Event of Default as defined in Article VII of the Lessee Credit Agreement. "Lessee's Equipment" shall mean equipment which (a) is personal property or a fixture but otherwise shall not constitute real property, (b) is not financed with any Advance, (c) is not a replacement for any Equipment, (d) is not a Modification required by any Legal Requirement or any Insurance Requirement, (e) is not necessary or appropriate for the mechanical operation, utility service, structure or for any other such purpose relating to the physical plant of any Property and (f) may be removed from any Property without causing material damage to such Property. "Lessor" shall mean the Owner Trustee, not in its individual capacity, but as the Lessor under the Lease. "Lessor Basic Rent" shall mean the Holder Yield due on the Holder Advances on any Scheduled Interest Payment Date pursuant to the Trust Agreement (but not including interest on (a) any such scheduled Holder Yield due on the Holder Advances prior to the Rent Commencement Date with respect to the Property to which such Holder Advances relate or (b) overdue amounts under the Trust Agreement or otherwise). "Lessor Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and executed for filing in the applicable jurisdictions in order to protect the Lessor's interest under the Lease to the extent the Lease is a security agreement or a mortgage. "Lessor Lien" shall mean any Lien, true lease or sublease or disposition of title arising as a result of (a) any claim against the Lessor or the Trust Company, in its individual capacity, not resulting from the transactions contemplated by the Operative Agreements, (b) any act or omission of the Lessor or the Trust Company, in its individual capacity, which is not required by the Operative Agreements or is in violation of any of the terms of the Operative Agreements, (c) any claim against the Lessor or the Trust Company, in its individual capacity, with respect to Taxes or Transaction Expenses against which the Lessee is not required to indemnify the Lessor or the Trust Company, in its individual capacity, pursuant to Section 11 of the Participation Agreement or (d) any claim against the Lessor arising out of any transfer by the Lessor of all or Appendix A-25 179 any portion of the interest of the Lessor in the Properties, the Trust Estate or the Operative Agreements other than the transfer of title to or possession of any Properties by the Lessor pursuant to and in accordance with the Lease, the Credit Agreement, the Security Agreement or the Participation Agreement or pursuant to the exercise of the remedies set forth in Article XVII of the Lease. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien, option or charge of any kind. "Limited Recourse Amount" shall mean with respect to all the Properties on an aggregate basis, an amount equal to the sum of the Termination Values with respect to all the Properties on an aggregate basis on each Payment Date, less the Maximum Residual Guarantee Amount as of such date with respect to all the Properties on an aggregate basis. "Loan Basic Rent" shall mean the interest due on the Loans on any Scheduled Interest Payment Date pursuant to the Credit Agreement (but not including interest on (a) any such Loan due prior to the Rent Commencement Date with respect to the Property to which such Loan relates or (b) any overdue amounts under Section 2.8(c) of the Credit Agreement or otherwise). "Loan Property Cost" shall mean, with respect to each Property at any date of determination, an amount equal to (a) the aggregate principal amount all Loans (including without limitation all Acquisition Loans and Construction Loans) made on or prior to such date with respect to such Property minus (b) the aggregate amount of prepayments or repayments as the case may be of the Loans allocated to reduce the Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement. "Loans" shall mean the loans extended pursuant to the Credit Agreement and shall include both the Tranche A Loans and the Tranche B Loans. "Majority Holders" shall mean at any time, Holders whose Holder Advances outstanding represent at least fifty-one percent (51%) of (a) the aggregate Holder Advances outstanding or (b) to the extent there are no Holder Advances outstanding, the aggregate Holder Commitments. "Majority Lenders" shall mean at any time, Lenders whose Loans outstanding represent at least fifty-one percent (51%) of (a) the aggregate Loans outstanding or (b) to the extent there are no Loans outstanding, the aggregate Lender Commitments. "Majority Secured Parties" shall mean at any time, Lenders and Holders whose Loans and Holder Advances outstanding represent at least fifty-one percent (51%) of (a) the aggregate Advances outstanding or (b) to the extent there are no Advances outstanding, the sum of the aggregate Holder Commitments plus the aggregate Lender Commitments. "Marketing Period" shall mean, if the Lessee has given a Sale Notice in accordance with Section 20.1 of the Lease, the period commencing on the date such Sale Notice is given and ending on a particular Payment Date or the Expiration Date, as applicable. Appendix A-26 180 "Material Adverse Effect" shall, mean a material adverse effect on (a) the financial condition, operations, business, properties or prospects of the Lessee and its Subsidiaries, taken as a whole; (b) the ability of the Lessee or any of its Subsidiaries to perform its material obligations under any Material Operative Agreement; (c) the legality, validity or enforceability of any Material Operative Agreement; (d) the perfection or priority of the liens of the Agent granted under the Material Operative Agreements or the rights and remedies of the Agent or the other Financing Parties under the Material Operative Agreements, or (e) the value, utility or useful life of any Property or the use, or ability of the Lessee to use, any Property for the purpose for which it was intended (provided, respecting this subsection (e), no Material Adverse Effect shall result to the extent the applicable Property is purchased by the Lessee pursuant to the Purchase Option or is sold to another Person pursuant to the Sale Option, in each case (i) in accordance with Section 8(j) of the Participation Agreement and Articles XIX, XX and XXII of the Lease and (ii) within thirty (30) days of the Lessor having gained knowledge of such material adverse effect described in this subsection (e)). "Material Operative Agreements" shall mean the following: the Participation Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the Credit Agreement, the Notes, the Lease, the Lease Supplements (and memoranda of the Lease and each Lease Supplement in a form reasonably acceptable to the Agent), the Joinder Agreements, the Security Agreement, the Mortgage Instruments, the other Security Documents, the Ground Leases, the Deeds and the Bills of Sale. "Maturity Date" shall mean the Expiration Date. "Maximum Residual Guarantee Amount" shall mean an amount equal to the product of the aggregate Property Cost for all of Properties times eighty-five percent (85%). "Medicaid Regulations" shall mean, collectively, (i) all federal statutes (whether set forth in Title XIX of the Social Security Act, 42 USC ss.ss. 1396 et seq., or elsewhere) affecting the medical assistance program established by Title XIX of the Social Security Act, and any statutes succeeding thereto; (ii) all applicable provisions of all federal rules, regulations, manuals and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (i) above and all federal administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (i) above; (iii) all state statutes and plans for medical assistance enacted in connection with the statutes and provisions described in clauses (i) and (ii) above; and (iv) all applicable provisions of all rules, regulations, manuals and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (iii) above and all state administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (iii) above, in each case as may be amended, supplemented or otherwise modified from time to time. Appendix A-27 181 "MediCal Regulations" shall mean collectively, all California state statues (whether set forth in Cal. Welf. & Inst. Code ss.ss. 14000 et seq., or elsewhere) affecting the health insurance program for the aged and disabled established in connection with Title XIX of the Social Security Act, and any statutes succeeding thereto; together with all applicable provisions of all rules, regulations, manuals and orders and administrative, reimbursement and other guidelines having the force of law of all Governmental Authorities (including without limitation, the California Department of Health Services) promulgated pursuant to or in connection with any of the foregoing having the force of law, in each case as may be amended, supplemented or otherwise modified from to time. "Medicare Regulations" shall mean, collectively, all federal statutes (whether set forth in Title XVIII of the Social Security Act, 42 USC ss.ss. 1396, et seq., or elsewhere) affecting the health insurance program of the aged and disabled established by Title XVIII of the Social Security Act and any statutes succeeding thereto; together with all applicable provisions of all rules, regulations, manuals and orders and administrative, reimbursement and other guidelines having the force of law of all Governmental Authorities (including without limitation, Health and Human Services ("HHS"), HCFA, the Office of the Inspector General for HHS, or any Person succeeding to the functions of law, in each case as may be amended from time to time. "Modifications" shall have the meaning specified in Section 11.1(a) of the Lease. "Mortgage Instrument" shall mean any mortgage, deed of trust or any other instrument executed by the Owner Trustee and the Lessee (or regarding any property subject to a Ground Lease, the applicable Affiliate of the Lessee) in favor of the Agent (for the benefit of the Lenders and the Holders) and evidencing a Lien on the Property, in form and substance reasonably acceptable to the Agent. "Multiemployer Plan" shall mean any plan described in Section 4001(a)(3) of ERISA to which contributions are or have been made or required by any Credit Party or any of its Subsidiaries or ERISA Affiliates. "Multiple Employer Plan" shall mean a plan to which any Credit Party or any ERISA Affiliate and at least one (1) other employer other than an ERISA Affiliate is making or accruing an obligation to make, or has made or accrued an obligation to make, contributions. "New Facility" shall have the meaning given to such term in Section 28.1 of the Lease. "Non-Excluded Taxes" shall have the meaning given to such term in Section 11.5 of the Participation Agreement. "Notes" shall mean those notes issued to the Lenders pursuant to the Credit Agreement and shall include both the Tranche A Notes and the Tranche B Notes. "Obligations" shall have the meaning given to such term in Section 1 of the Security Agreement. Appendix A-28 182 "OECD" shall mean the Organization for Economic Cooperation and Development. "Officer's Certificate" with respect to any person shall mean a certificate executed on behalf of such person by a Responsible Officer who has made or caused to be made such examination or investigation as is necessary to enable such Responsible Officer to express an informed opinion with respect to the subject matter of such Officer's Certificate. "Operative Agreements" shall mean the following: the Participation Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the Credit Agreement, the Notes, the Lease, the Lease Supplements (and memoranda of the Lease and each Lease Supplement in a form reasonably acceptable to the Agent), the Joinder Agreements, the Security Agreement, the Mortgage Instruments, the other Security Documents, the Ground Leases, the Deeds, the Bills of Sale and any and all other agreements, documents and instruments executed from time to time in connection with any of the foregoing. "Original Executed Counterpart" shall have the meaning given to such term in Section 5 of EXHIBIT A to the Lease. "Overdue Interest" shall mean any interest payable pursuant to Section 2.8(c) of the Credit Agreement. "Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and any other amount owed under or with respect to the Credit Agreement or the Security Documents, the rate specified in Section 2.8(b) of the Credit Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any other amount owed under or with respect to the Trust Agreement, the Holder Overdue Rate, and (c) with respect to any other amount, the amount referred to in clause (y) of Section 2.8(b) of the Credit Agreement. "Owner Trustee," "Borrower" or "Lessor" shall mean First Security Bank, National Association, not individually, except as expressly stated in the various Operative Agreements, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1 and any successor or replacement and/or additional Owner Trustee expressly permitted under the Operative Agreements. "Participation Agreement" shall mean the Participation Agreement dated on or about the Initial Closing Date, among the Lessee, the Owner Trustee, not in its individual capacity except as expressly stated therein, the Holders, the Lenders and the Agent. "Payment Date" shall mean any Scheduled Interest Payment Date and any date on which interest or Holder Yield in connection with a prepayment of principal on the Loans or of the Holder Advances is due under the Credit Agreement or the Trust Agreement. Appendix A-29 183 "PBGC" shall mean the Pension Benefit Guaranty Corporation created by Section 4002(a) of ERISA or any successor thereto. "Pension Plan" shall mean a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA (other than a Multiemployer Plan), and to which any Credit Party or any ERISA Affiliate may have any liability, including without limitation any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five (5) years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "Permitted Facility" shall mean a medical office or acute care facility of the type and size customarily used and operated by the Lessee in its ordinary course of business as of the Initial Closing Date or an improvement to any of the foregoing. "Permitted Liens" shall mean: (a) the respective rights and interests of the parties to the Operative Agreements as provided in the Operative Agreements; (b) the rights of any sublessee or assignee under a sublease or an assignment expressly permitted by the terms of the Lease for no longer than the duration of the Lease; (c) Liens for Taxes that either are not yet delinquent or are being contested in accordance with the provisions of Section 13.1 of the Lease; (d) Liens arising by operation of law, materialmen's, mechanics', workmen's, repairmen's, employees', carriers', warehousemen's and other like Liens relating to the construction of the Improvements or in connection with any Modifications or arising in the ordinary course of business for amounts that either are not more than thirty (30) days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 13.1 of the Lease; (e) Liens of any of the types referred to in clause (d) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements satisfactory to the Lessor and the Agent have been made), which bonding (or arrangements) shall comply with applicable Legal Requirements, and shall have effectively stayed any execution or enforcement of such Liens; (f) Liens arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of which adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the Appendix A-30 184 execution of such judgments or awards and satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 13.1 of the Lease; (g) Liens in favor of municipalities to the extent agreed to by the Lessor; (h) Liens upon Lessee's Equipment leased under a Capital Lease (including sale/leaseback transactions permitted by Section 6.17 of the Lessee Credit Agreement) and placed upon such Lessee's Equipment at the time of, or within sixty (60) days after, the commencement of the lease thereof to secure the lease payments under such Capital Lease, provided that any such lien (i) shall not encumber any Property or any other property of the Lessee or any of its Subsidiaries and (ii) shall not exceed the total of such lease payments; and (i) Purchase money liens incurred or assumed in the purchase of Lessee's Equipment permitted under Section 6.14 of the Lessee Credit Agreement, provided that any such lien (i) attaches to such asset concurrently with or within ten (10) days after the acquisition thereof, (ii) shall not encumber any Property or any other property of the Lessee or any of its Subsidiaries and (iii) shall not exceed the purchase price of such asset. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, governmental authority or any other entity. "PHC" shall mean Province Healthcare Company, a Delaware corporation, and its successors and permitted assigns. "PHC Real Estate Trust 1998-1" shall mean the grantor trust created pursuant to the terms and conditions of the Trust Agreement. "Plans and Specifications" shall mean, with respect to Improvements, the plans and specifications for such Improvements to be constructed or already existing, as such Plans and Specifications may be amended, modified or supplemented from time to time in accordance with the terms of the Operative Agreements. "Prime Lending Rate" shall have the meaning given to such term in the definition of ABR. "Property" shall mean, with respect to each Permitted Facility that is (or is to be) acquired, constructed, renovated and/or modified pursuant to the terms of the Operative Agreements, the Land and each item of Equipment and the various Improvements, in each case located on such Land, including without limitation each Construction Period Property, each Property subject to a Ground Lease and each Property for which the Term has commenced. Appendix A-31 185 "Property Acquisition Cost" shall mean the cost to the Lessor to purchase a Property on a Property Closing Date. "Property Closing Date" shall mean the date on which the Lessor purchases a Property or, with respect to the first Advance, the date on which the Lessor seeks reimbursement for Property previously purchased by the Lessor. "Property Cost" shall mean with respect to a Property the aggregate amount (and/or the various items and occurrences giving rise to such amounts) of the Loan Property Cost plus the Holder Property Cost for such Property (as such amounts shall be increased equally among all Properties respecting the Holder Advances and the Loans extended from time to time to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in Sections 7.1(a) and 7.1(b) of the Participation Agreement). "Purchase Option" shall have the meaning given to such term in Section 20.1 of the Lease. "Register" shall have the meaning given to such term in Section 9.7(c) of the Credit Agreement. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. "Release" shall mean any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or emission of a Hazardous Substance. "Rent" shall mean, collectively, the Basic Rent and the Supplemental Rent, in each case payable under the Lease. "Rent Commencement Date" shall mean, regarding each Property, the Completion Date. "Replaced Financing Party" shall have the meaning specified in Section 11.6 of the Participation Agreement. "Replacement Effective Date" shall have the meaning specified in Section 11.6 of the Participation Agreement. "Replacement Financing Party" shall have the meaning specified in Section 11.6 of the Participation Agreement. "Reportable Event" shall have the meaning specified in ERISA. Appendix A-32 186 "Requested Funds" shall mean any funds requested by the Lessee or the Construction Agent, as applicable, in accordance with Section 5 of the Participation Agreement. "Requisition" shall have the meaning specified in Section 4.2 of the Participation Agreement. "Responsible Officer" shall mean the Chairman or Vice Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Senior Vice President or Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer, except that when used with respect to the Trust Company or the Owner Trustee, "Responsible Officer" shall also include the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, the Controller and any Assistant Controller or any other officer of the Trust Company or the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Sale Date" shall have the meaning given to such term in Section 20.3(a) of the Lease. "Sale Notice" shall mean a notice given to the Lessor in connection with the election by the Lessee of its Sale Option. "Sale Option" shall have the meaning given to such term in Section 20.1 of the Lease. "Sale Proceeds Shortfall" shall mean the amount by which the proceeds of a sale described in Section 22.1 of the Lease are less than the Limited Recourse Amount with respect to the Properties if it has been determined that the Fair Market Sales Value of the Properties at the expiration of the term of the Lease has been impaired by greater than expected wear and tear during the Term of the Lease. "Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar Loan or Eurodollar Holder Advance, the last day of the Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance, (b) as to any ABR Loan or any ABR Holder Advance, the fifteenth day of each month and (c) as to all Loans and Holder Advances, the date of any voluntary or involuntary payment, prepayment, return or redemption, and the Maturity Date or the Expiration Date, as the case may be. "Secured Parties" shall have the meaning given to such term in the Security Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. "Security Agreement" shall mean the Security Agreement dated on or about the Initial Closing Date between the Lessor and the Agent, for the benefit of the Secured Parties. Appendix A-33 187 "Security Documents" shall mean the collective reference to the Security Agreement, the Mortgage Instruments, (to the extent the Lease is construed as a security instrument) the Lease and all other security documents hereafter delivered to the Agent granting a lien on any asset or assets of any Person to secure the obligations and liabilities of the Lessor under the Credit Agreement and/or under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Soft Costs" shall mean all costs which are ordinarily and reasonably incurred in relation to the acquisition, development, installation, construction, improvement and testing of the Properties other than Hard Costs, including without limitation structuring fees, administrative fees, legal fees, upfront fees, fees and expenses related to appraisals, title examinations, title insurance, document recordation, surveys, environmental site assessments, geotechnical soil investigations and similar costs and professional fees customarily associated with a real estate closing, the Lender Facility Fee, the Holder Facility Fee, fees and expenses of the Owner Trustee payable or reimbursable under the Operative Agreements and costs and expenses incurred pursuant to Sections 7.3(a) and 7.3(b) of the Participation Agreement. "Stock" shall mean all shares, options, interests or other equivalents (howsoever designated) of or in a corporation, whether voting or nonvoting, including, without limitation, common stock, warrants, preferred stock, convertible debentures and all agreements, instruments and documents convertible, in whole or in part, into any one or more or all of the foregoing. "Subsidiary" shall mean any corporation of which more than fifty percent (50%) of the outstanding Stock having ordinary voting power to elect a majority of the board of directors, or other entity of which more than 50% of the Interests or voting power, is at the time, directly or indirectly, owned by any Person or one or more of its Subsidiaries (irrespective of whether, at the time, the ownership interests or Stock of any other class or classes of such entity or corporation shall have or might have voting power by reason of the happening of any contingency). When used without reference to a parent, the term "Subsidiary" shall be deemed to refer to a Subsidiary of the Lessee. "Supplemental Amounts" shall have the meaning given to such term in Section 9.18 of the Credit Agreement. "Supplemental Rent" shall mean all amounts, liabilities and obligations (other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor, the Trust Company, the Holders, the Agent, the Lenders or any other Person under the Lease or under any of the other Operative Agreements including without limitation payments of the Termination Value and the Maximum Residual Guarantee Amount and all indemnification amounts, liabilities and obligations. "Swap Agreement" shall mean any and all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance or other hedging arrangements and all other similar agreements or arrangements between the Lessee and any Lender designed to protect against fluctuations in interest rates. Appendix A-34 188 "Taxes" shall have the meaning specified in the definition of "Impositions". "Term" shall have the meaning specified in Section 2.2 of the Lease. "Termination Date" shall have the meaning specified in Section 16.2(a) of the Lease. "Termination Event" shall mean (a) with respect to any Pension Plan, the occurrence of a Reportable Event or an event described in Section 4062(e) of ERISA, (b) the withdrawal of any Credit Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate a Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (f) the complete or partial withdrawal of any Credit Party or any ERISA Affiliate from a Multiemployer Plan. "Termination Notice" shall have the meaning specified in Section 16.1 of the Lease. "Termination Value" shall mean the sum of (a) either (i) with respect to all Properties, an amount equal to the aggregate outstanding Property Cost for all the Properties, in each case as of the last occurring Payment Date, or (ii) with respect to a particular Property, an amount equal to the product of the Termination Value of all the Properties times a fraction, the numerator of which is the Property Cost allocable to the particular Property in question and the denominator of which is the aggregate Property Cost for all the Properties, in each case as of the last occurring Payment Date, plus (b) respecting the amounts described in each of the foregoing subclause (i) or (ii), as applicable, any and all accrued and unpaid interest on the Loans and any and all accrued and unpaid Holder Yield on the Holder Advances related to the applicable Property Cost, plus (c) to the extent the same is not duplicative of the amounts payable under clause (b) above, all other Rent and other amounts then due and payable or accrued under the Agency Agreement, Lease and/or under any other Operative Agreement (including without limitation amounts under Sections 11.1 and 11.2 of the Participation Agreement and all costs and expenses referred to in clause FIRST of Section 22.2 of the Lease). "Tranche A Commitments" shall mean the obligation of the Tranche A Lenders to make the Tranche A Loans to the Lessor in an aggregate principal amount at any one (1) time outstanding not to exceed the aggregate of the amounts set forth opposite each Tranche A Lender's name on Schedule 1.1 to the Credit Agreement, as such amount may be reduced from time to time in accordance with the provisions of the Operative Agreements; provided, no Tranche A Lender shall be obligated to make Tranche A Loans in excess of such Tranche A Lender's share of the Tranche A Commitments as set forth adjacent to such Tranche A Lender's name on Schedule 1.1 to Credit Agreement. Appendix A-35 189 "Tranche A Lenders" shall mean First Union National Bank and the several banks and other financial institutions from time to time party to the Credit Agreement that commit to make the Tranche A Loans. "Tranche A Loans" shall mean the Loans made pursuant to the Tranche A Commitment. "Tranche A Note" shall have the meaning given to it in Section 2.2 of the Credit Agreement. "Tranche B Commitments" shall mean the obligation of the Tranche B Lenders to make the Tranche B Loans to the Lessor in an aggregate principal amount at any one (1) time outstanding not to exceed the aggregate of the amounts set forth opposite each Tranche B Lender's name on Schedule 1.1 to the Credit Agreement, as such amount may be reduced from time to time in accordance with the provisions of the Operative Agreements; provided, no Tranche B Lender shall be obligated to make Tranche B Loans in excess of such Tranche B Lender's share of the Tranche B Commitments as set forth adjacent to such Tranche B Lender's name on Schedule 1.1 to Credit Agreement. "Tranche B Lenders" shall mean First Union National Bank and the several banks and other financial institutions from time to time party to the Credit Agreement that commit to make the Tranche B Loans. "Tranche B Loan" shall mean the Loans made pursuant to the Tranche B Commitment. "Tranche B Note" shall have the meaning given to it in Section 2.2 of the Credit Agreement. "Transaction Expenses" shall mean all Soft Costs and all other costs and expenses incurred in connection with the preparation, execution and delivery of the Operative Agreements and the transactions contemplated by the Operative Agreements including without limitation all costs and expenses described in Section 7.1 of the Participation Agreement and the following: (a) the reasonable fees, out-of-pocket expenses and disbursements of counsel in negotiating the terms of the Operative Agreements and the other transaction documents, preparing for the closings under, and rendering opinions in connection with, such transactions and in rendering other services customary for counsel representing parties to transactions of the types involved in the transactions contemplated by the Operative Agreements; (b) the reasonable fees, out-of-pocket expenses and disbursements of accountants for any Credit Party in connection with the transaction contemplated by the Operative Agreements; Appendix A-36 190 (c) any and all other reasonable fees, charges or other amounts payable to the Lenders, the Agent, the Holders, the Owner Trustee or any broker which arises under any of the Operative Agreements; (d) any other reasonable fee, out-of-pocket expenses, disbursement or cost of any party to the Operative Agreements or any of the other transaction documents; and (e) any and all Taxes and fees incurred in recording or filing any Operative Agreement or any other transaction document, any deed, declaration, mortgage, security agreement, notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Agreement. "Tribunal" shall mean any state, commonwealth, federal, foreign, territorial, or other court or government body, subdivision agency, department, commission, board, bureau or instrumentality of a governmental body. "Trust" shall mean the PHC Real Estate Trust 1998-1. "Trust Agreement" shall mean the Trust Agreement dated on or about the Initial Closing Date between the Holders and the Owner Trustee. "Trust Company" shall mean First Security Bank, National Association, in its individual capacity, and any successor owner trustee under the Trust Agreement in its individual capacity. "Trust Estate" shall have the meaning specified in Section 2.2 of the Trust Agreement. "Type" shall mean, as to any Loan, whether it is an ABR Loan or a Eurodollar Loan. "UCC Financing Statements" shall mean collectively the Lender Financing Statements and the Lessor Financing Statements. "Unanimous Vote Matters" shall have the meaning given it in Section 12.5 of the Participation Agreement. "Unfunded Amount" shall have the meaning specified in Section 3.2 of the Agency Agreement. "Unfunded Liability" shall mean, with respect to any Plan, at any time, the amount (if any) by which (a) the present value of all benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of the Company or any member of the Controlled Group to the PBGC or such Plan under Title IV of ERISA. Appendix A-37 191 "Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial Code as in effect in any applicable jurisdiction. "United States Bankruptcy Code" shall mean Title 11 of the United States Code. "Wholly-Owned Entity" shall mean a Person, with respect to which all of the shares of capital stock or other ownership interest are owned by Province Healthcare Company and/or one of its wholly-owned Subsidiaries or other wholly-owned entities; provided, such Person shall have assets with a gross value (determined in accordance with GAAP) in excess of $100,000. "Work" shall mean the furnishing of labor, materials, components, furniture, furnishings, fixtures, appliances, machinery, equipment, tools, power, water, fuel, lubricants, supplies, goods and/or services with respect to any Property. "Year 2000" shall mean the calendar year beginning January 1, 2000 and ending December 31, 2000. EX-10.1 4 LEASE AGREEMENT 1 EXHIBIT 10.1 LEASE AGREEMENT Dated as of March 30, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998, as Lessor and PROVINCE HEALTHCARE COMPANY, as Lessee - -------------------------------------------------------------------------------- This Lease Agreement is subject to a security interest in favor of First Union National Bank, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (the "Agent") under a Security Agreement dated as of March 30, 1998, between First Security Bank, National Association, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1 and the Agent, as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof. This Lease Agreement has been executed in several counterparts. To the extent, if any, that this Lease Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Lease Agreement may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by the Agent on the signature page hereof. 2 TABLE OF CONTENTS ARTICLE I........................................................................................................ 1 1.1 Definitions......................................................................................... 1 1.2 Interpretation...................................................................................... 2 ARTICLE II....................................................................................................... 2 2.1 Property............................................................................................ 2 2.2 Lease Term.......................................................................................... 2 2.3 Title............................................................................................... 2 2.4 Lease Supplements................................................................................... 2 ARTICLE III...................................................................................................... 3 3.1 Rent................................................................................................ 3 3.2 Payment of Basic Rent............................................................................... 3 3.3 Supplemental Rent................................................................................... 3 3.4 Performance on a Non-Business Day................................................................... 4 3.5 Rent Payment Provisions............................................................................. 4 ARTICLE IV....................................................................................................... 4 4.1 Taxes; Utility Charges.............................................................................. 4 ARTICLE V........................................................................................................ 5 5.1 Quiet Enjoyment..................................................................................... 5 ARTICLE VI....................................................................................................... 5 6.1 Net Lease........................................................................................... 5 6.2 No Termination or Abatement......................................................................... 6 ARTICLE VII...................................................................................................... 6 7.1 Ownership of the Properties......................................................................... 6 ARTICLE VIII..................................................................................................... 7 8.1 Condition of the Properties......................................................................... 7 8.2 Possession and Use of the Properties................................................................ 8 8.3 Integrated Properties............................................................................... 9 8.4 Lessee's Equipment..................................................................................10 ARTICLE IX.......................................................................................................10 9.1 Compliance With Legal Requirements, Insurance Requirements and Manufacturer's Specifications and Standards.......................................................10 ARTICLE X........................................................................................................10 10.1 Maintenance and Repair; Return.....................................................................10 10.2 Environmental Inspection...........................................................................12
i 3 ARTICLE XI.......................................................................................................12 11.1 Modifications......................................................................................12 ARTICLE XII......................................................................................................13 12.1 Warranty of Title..................................................................................13 ARTICLE XIII.....................................................................................................14 13.1 Permitted Contests Other Than in Respect of Indemnities............................................14 ARTICLE XIV......................................................................................................15 14.1 Public Liability and Workers' Compensation Insurance...............................................15 14.2 Permanent Hazard and Other Insurance...............................................................15 14.3 Coverage...........................................................................................16 ARTICLE XV.......................................................................................................17 15.1 Casualty and Condemnation..........................................................................17 15.2 Environmental Matters..............................................................................19 15.3 Notice of Environmental Matters....................................................................20 ARTICLE XVI......................................................................................................20 16.1 Termination Upon Certain Events....................................................................20 16.2 Procedures.........................................................................................20 ARTICLE XVII.....................................................................................................20 17.1 Lease Events of Default............................................................................20 17.2 Surrender of Possession............................................................................24 17.3 Reletting..........................................................................................24 17.4 Damages............................................................................................25 17.5 Power of Sale......................................................................................25 17.6 Final Liquidated Damages...........................................................................26 17.7 Environmental Costs................................................................................26 17.8 Waiver of Certain Rights...........................................................................26 17.9 Assignment of Rights Under Contracts...............................................................27 17.10 Remedies Cumulative...............................................................................27 ARTICLE XVIII....................................................................................................27 18.1 Lessor's Right to Cure Lessee's Lease Defaults.....................................................27 ARTICLE XIX......................................................................................................27 19.1 Provisions Relating to Lessee's Exercise of its Purchase Option....................................27 19.2 No Purchase or Termination With Respect to Less than All of a Property.............................28 ARTICLE XX.......................................................................................................28 20.1 Purchase Option or Sale Option-General Provisions..................................................28 20.2 Lessee Purchase Option.............................................................................29 20.3 Third Party Sale Option............................................................................30
ii 4 ARTICLE XXI......................................................................................................30 21.1 [Intentionally Omitted]............................................................................30 ARTICLE XXII.....................................................................................................30 22.1 Sale Procedure.....................................................................................30 22.2 Application of Proceeds of Sale....................................................................33 22.3 Indemnity for Excessive Wear.......................................................................33 22.4 Appraisal Procedure................................................................................34 22.5 Certain Obligations Continue.......................................................................34 ARTICLE XXIII....................................................................................................35 23.1 Holding Over.......................................................................................35 ARTICLE XXIV.....................................................................................................35 24.1 Risk of Loss.......................................................................................35 ARTICLE XXV......................................................................................................35 25.1 Assignment.........................................................................................35 25.2 Subleases..........................................................................................36 ARTICLE XXVI.....................................................................................................36 26.1 No Waiver..........................................................................................36 ARTICLE XXVII....................................................................................................37 27.1 Acceptance of Surrender............................................................................37 27.2 No Merger of Title.................................................................................37 ARTICLE XXVIII...................................................................................................37 28.1 Incorporation of Covenants.........................................................................37 ARTICLE XXIX.....................................................................................................38 29.1 Notices............................................................................................38 ARTICLE XXX......................................................................................................38 30.1 Miscellaneous......................................................................................38 30.2 Amendments and Modifications.......................................................................39 30.3 Successors and Assigns.............................................................................39 30.4 Headings and Table of Contents.....................................................................39 30.5 Counterparts.......................................................................................39 30.6 GOVERNING LAW......................................................................................39 30.7 Calculation of Rent................................................................................39 30.8 Memoranda of Lease and Lease Supplements...........................................................39 30.9 Allocations between the Lenders and the Holders....................................................40 30.10 Limitations on Recourse...........................................................................40 30.11 WAIVERS OF JURY TRIAL.............................................................................40 30.12 Exercise of Lessor Rights.........................................................................40
iii 5 30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION....................................................40 30.14 USURY SAVINGS PROVISION...........................................................................41 EXHIBITS EXHIBIT A - Lease Supplement No. ____ EXHIBIT B - Memorandum of Lease and Lease Supplement No. ____
iv 6 LEASE AGREEMENT THIS LEASE AGREEMENT dated as of March 30, 1998 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, this "Lease") is between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, having its principal office at 79 South Main Street, Salt Lake City, Utah 84111, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, as lessor (the "Lessor"), and PROVINCE HEALTHCARE COMPANY, a Delaware corporation, having its principal place of business at 105 Westwood Place, Suite 400, Brentwood, Tennessee 37027, as lessee (the "Lessee"). W I T N E S S E T H: A. WHEREAS, subject to the terms and conditions of the Participation Agreement and the Agency Agreement, Lessor will (i) purchase or ground lease various parcels of real property, some of which will (or may) have existing Improvements thereon, from one (1) or more third parties designated by Lessee and (ii) fund the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties by the Construction Agent; and B. WHEREAS, the Term shall commence with respect to each Property upon the Property Closing Date with respect thereto; provided, Basic Rent with respect thereto shall not be payable until the applicable Rent Commencement Date; and C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor, each Property; NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I 1.1 DEFINITIONS. For purposes of this Lease, capitalized terms used in this Lease and not otherwise defined herein shall have the meanings assigned to them in Appendix A to that certain Participation Agreement dated as of March 30, 1998 (as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof, the "Participation Agreement") among Lessee, Lessor, the various parties thereto from time to time, as the Guarantors, the various banks and other lending institutions which are parties thereto from time to time, as the Holders, the various banks and other lending institutions which are parties thereto from time to time, as the Lenders, and First Union National 7 Bank, as agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests. Unless otherwise indicated, references in this Lease to articles, sections, paragraphs, clauses, appendices, schedules and exhibits are to the same contained in this Lease. 1.2 INTERPRETATION. The rules of usage set forth in Appendix A to the Participation Agreement shall apply to this Lease. ARTICLE II 2.1 PROPERTY. Subject to the terms and conditions hereinafter set forth and contained in the respective Lease Supplement relating to each Property, Lessor hereby leases to Lessee and Lessee hereby leases from Lessor, each Property. 2.2 LEASE TERM. The term of this Lease with respect to each Property (the "Term") shall begin upon the Property Closing Date for such Property (in each case the "Commencement Date") and shall end on the fifth annual anniversary of the Initial Closing Date (the "Expiration Date"), unless the Term is earlier terminated. Notwithstanding the foregoing, Lessee shall not be obligated to pay Basic Rent until the Rent Commencement Date with respect to such Property. 2.3 TITLE. Each Property is leased to Lessee without any representation or warranty, express or implied, by Lessor other than those set forth in the Participation Agreement and subject to the rights of parties in possession (if any), the existing state of title (including without limitation the Permitted Liens) and all applicable Legal Requirements. Lessee shall in no event have any recourse against Lessor for any defect in Lessor's title to any Property or any interest of Lessee therein other than for Lessor Liens. 2.4 LEASE SUPPLEMENTS. On or prior to each Commencement Date, Lessee and Lessor shall each execute and deliver a Lease Supplement for the Property to be leased effective as of such Commencement Date in substantially the form of Exhibit A hereto. 2 8 ARTICLE III 3.1 RENT. (a) Lessee shall pay Basic Rent in arrears on each Payment Date, and on any date on which this Lease shall terminate with respect to any or all Properties during the Term; provided, however, with respect to each individual Property Lessee shall have no obligation to pay Basic Rent with respect to such Property until the Rent Commencement Date with respect to such Property (notwithstanding that Basic Rent for such Property shall accrue from and including the Scheduled Interest Payment Date immediately preceding such Rent Commencement Date). Basic Rent shall be adjusted with regard to amounts expended by Lessor for any Modification. (b) Basic Rent shall be due and payable in lawful money of the United States and shall be paid by wire transfer of immediately available funds on the due date therefor (or within the applicable grace period) to such account or accounts at such bank or banks as Lessor shall from time to time direct. (c) Lessee's inability or failure to take possession of all or any portion of any Property when delivered by Lessor, whether or not attributable to any act or omission of Lessor, the Construction Agent, Lessee or any other Person or for any other reason whatsoever, shall not delay or otherwise affect Lessee's obligation to pay Rent for such Property in accordance with the terms of this Lease. (d) Lessee shall make all payments of Rent prior to 12:00 noon, Charlotte, North Carolina time, on the applicable date for payment of such amount. 3.2 PAYMENT OF BASIC RENT. Basic Rent shall be paid absolutely net to Lessor or its designee, so that this Lease shall yield to Lessor the full amount thereof, without setoff, deduction or reduction. 3.3 SUPPLEMENTAL RENT. Lessee shall pay to the Person entitled thereto any and all Supplemental Rent when and as the same shall become due and payable, and if Lessee fails to pay any Supplemental Rent within three (3) days after the same is due, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent. All such payments of Supplemental Rent shall be in the full amount thereof, without setoff, deduction or reduction. Lessee shall pay to the appropriate Person, as Supplemental Rent due and owing to such Person, among other things, on demand, to the extent permitted by applicable Legal Requirements, (a) any and all payment obligations (except for amounts payable as Basic Rent) owing from time to time under the Operative Agreements by any Person to the Agent, any Lender, any Holder or any other Person and (b) interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due (subject to the applicable grace period) 3 9 for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due or demanded by the appropriate Person (subject to any applicable grace period) for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. It shall be an additional Supplemental Rent obligation of Lessee to pay to the appropriate Person all rent and other amounts when such become due and owing from time to time under each Ground Lease and without the necessity of any notice from Lessor with regard thereto. The expiration or other termination of Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the obligations of Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in this Lease, in the event of any failure on the part of Lessee to pay and discharge any Supplemental Rent as and when due, Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. 3.4 PERFORMANCE ON A NON-BUSINESS DAY. If any Basic Rent is required hereunder on a day that is not a Business Day, then such Basic Rent shall be due on the corresponding Scheduled Interest Payment Date. If any Supplemental Rent is required hereunder on a day that is not a Business Day, then such Supplemental Rent shall be due on the next succeeding Business Day. 3.5 RENT PAYMENT PROVISIONS. Lessee shall make payment of all Basic Rent and Supplemental Rent when due (subject to the applicable grace periods) regardless of whether any of the Operative Agreements pursuant to which same is calculated and is owing shall have been rejected, avoided or disavowed in any bankruptcy or insolvency proceeding involving any of the parties to any of the Operative Agreements. Such provisions of such Operative Agreements and their related definitions are incorporated herein by reference and shall survive any termination, amendment or rejection of any such Operative Agreements. ARTICLE IV 4.1 TAXES; UTILITY CHARGES. Lessee shall pay or cause to be paid all Impositions with respect to the Properties and/or the use, occupancy, operation, repair, access, maintenance or operation thereof and all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents, utilities and operating expenses of any kind or type used in or on any Property and related real property during the Term except those being contested by appropriate proceedings pursuant to Section 13.1. Upon Lessor's request, Lessee shall provide from time to time Lessor with evidence of all such payments referenced in the foregoing sentence. Lessee shall be entitled to receive any credit or refund with respect to any Imposition or utility charge paid by Lessee. Unless an Event of Default shall have occurred and be continuing, the amount of any credit or refund received by Lessor on account of any Imposition or utility charge paid by Lessee, net of 4 10 the costs and expenses incurred by Lessor in obtaining such credit or refund, shall be promptly paid over to Lessee. All charges for Impositions or utilities imposed with respect to any Property for a period during which this Lease expires or terminates shall be adjusted and prorated on a daily basis between Lessor and Lessee, and each party shall pay or reimburse the other for such party's pro rata share thereof. ARTICLE V 5.1 QUIET ENJOYMENT. Subject to the rights of Lessor contained in Sections 17.2, 17.3 and 20.3 and the other terms of this Lease and the other Operative Agreements and so long as no Event of Default shall have occurred and be continuing, Lessee shall peaceably and quietly have, hold and enjoy each Property for the applicable Term, free of any claim or other action by Lessor or anyone rightfully claiming by, through or under Lessor (other than Lessee) with respect to any matters arising from and after the applicable Commencement Date. ARTICLE VI 6.1 NET LEASE. This Lease shall constitute a net lease, and the obligations of Lessee hereunder are absolute and unconditional. Lessee shall pay all operating expenses arising out of the use, operation and/or occupancy of each Property. Any present or future law to the contrary notwithstanding, this Lease shall not terminate, nor shall Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall the obligations of Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) for any reason whatsoever, including without limitation by reason of: (a) any damage to or destruction of any Property or any part thereof; (b) any taking of any Property or any part thereof or interest therein by Condemnation or otherwise; (c) any prohibition, limitation, restriction or prevention of Lessee's use, occupancy or enjoyment of any Property or any part thereof, or any interference with such use, occupancy or enjoyment by any Person or for any other reason; (d) any title defect, Lien or any matter affecting title to any Property; (e) any eviction by paramount title or otherwise; (f) any default by Lessor hereunder; (g) any action for bankruptcy, insolvency, reorganization, liquidation, dissolution or other proceeding relating to or affecting the Agent, any Lender, Lessor, Lessee, any Holder or any Governmental Authority; (h) the impossibility or illegality of performance by Lessor, Lessee or both; (i) any action of any Governmental Authority or any other Person; (j) Lessee's acquisition of ownership of all or part of any Property; (k) breach of any warranty or representation with respect to any Property or any Operative Agreement; (l) any defect in the condition, quality or fitness for use of any Property or any part thereof; or (m) any other cause or circumstance whether similar or dissimilar to the foregoing and whether or not Lessee shall have notice or knowledge of any of the foregoing. The parties intend that the obligations of Lessee 5 11 hereunder shall be covenants, agreements and obligations that are separate and independent from any obligations of Lessor hereunder and shall continue unaffected unless such covenants, agreements and obligations shall have been modified or terminated in accordance with an express provision of this Lease. Lessor and Lessee acknowledge and agree that the provisions of this Section 6.1 have been specifically reviewed and subject to negotiation. 6.2 NO TERMINATION OR ABATEMENT. Lessee shall remain obligated under this Lease in accordance with its terms and shall not take any action to terminate, rescind or avoid this Lease, notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting any Person or any Governmental Authority, or any action with respect to this Lease or any Operative Agreement which may be taken by any trustee, receiver or liquidator of any Person or any Governmental Authority or by any court with respect to any Person, or any Governmental Authority. Lessee hereby waives all right (a) to terminate or surrender this Lease (except as permitted under the terms of the Operative Agreements) or (b) to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to any Rent. Lessee shall remain obligated under this Lease in accordance with its terms and Lessee hereby waives any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound by all of the terms and conditions contained in this Lease. ARTICLE VII 7.1 OWNERSHIP OF THE PROPERTIES. (a) Lessor and Lessee intend that (i) for financial accounting purposes with respect to Lessee (A) this Lease will be treated as an "operating lease" pursuant to Statement of Financial Accounting Standards No. 13, as amended, (B) Lessor will be treated as the owner and lessor of each Property and (C) Lessee will be treated as the lessee of each Property, but (ii) for federal and all state and local income tax purposes, bankruptcy purposes, regulatory purposes, commercial law and real estate purposes and all other purposes (A) this Lease will be treated as a financing arrangement and (B) Lessee will be treated as the owner of the Properties and will be entitled to all tax benefits ordinarily available to owners of property similar to the Properties for such tax purposes. Notwithstanding the foregoing, neither party hereto has made, or shall be deemed to have made, any representation or warranty as to the availability of any of the foregoing treatments under applicable accounting rules, tax, bankruptcy, regulatory, commercial or real estate law or under any other set of rules. Lessee shall claim the cost recovery deductions associated with each Property, and Lessor shall not, to the extent not prohibited by Law, take on its tax return a position inconsistent with Lessee's claim of such deductions. 6 12 (b) For all purposes other than as set forth in Section 7.1(a)(i), Lessor and Lessee intend this Lease to constitute a finance lease and not a true lease. In order to secure the obligations of Lessee now existing or hereafter arising under any and all Operative Agreements, Lessee hereby conveys, grants, assigns, transfers, hypothecates, mortgages and sets over to Lessor, for the benefit of all Financing Parties, a first priority security interest (but subject to the security interest in the assets granted by Lessee in favor of the Agent in accordance with the Security Agreement) in and lien on all right, title and interest of Lessee (now owned or hereafter acquired) in and to all Properties, to the extent such is personal property and irrevocably grants and conveys a lien, deed of trust and mortgage on all right, title and interest of Lessee (now owned or hereafter acquired) in and to all Properties to the extent such is real property, and to secure the obligations of each Credit Party now existing or hereafter arising under the Operative Agreements, (i) this Lease shall be a security agreement and financing statement within the meaning of Article 9 of the Uniform Commercial Code respecting each of the Properties and all proceeds (including without limitation insurance proceeds thereof) to the extent such is personal property and an irrevocable grant and conveyance of a lien, deed of trust and mortgage on each of the Properties and all proceeds (including without limitation insurance proceeds thereof) to the extent such is real property; (ii) the acquisition of title (or to the extent applicable, a leasehold interest pursuant to a Ground Lease) in each Property referenced in Article II constitutes a grant by Lessee to Lessor of a security interest, lien, deed of trust and mortgage in all of Lessee's right, title and interest in and to each Property and all proceeds (including without limitation insurance proceeds thereof) of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property, and an assignment of all rents, profits and income produced by each Property; and (iii) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of Lessee shall be deemed to have been given for the purpose of perfecting such lien, security interest, mortgage lien and deed of trust under applicable law. Lessor and Lessee shall promptly take such actions as may be necessary or advisable in either party's opinion (including without limitation the filing of Uniform Commercial Code Financing Statements, Uniform Commercial Code Fixture Filings and memoranda (or short forms) of this Lease and the various Lease Supplements) to ensure that the lien, security interest, lien, mortgage lien and deed of trust in each Property and the other items referenced above will be deemed to be a perfected lien, security interest, mortgage lien and deed of trust of first priority under applicable law and will be maintained as such throughout the Term. 7 13 ARTICLE VIII 8.1 CONDITION OF THE PROPERTIES. LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS-IS WHERE-IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY LESSOR (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR LIENS) AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS REGARDING ITS PHYSICAL CONDITION OR WHICH AN ACCURATE SURVEY MIGHT SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF AND/OR THE DATE OF THE APPLICABLE LEASE SUPPLEMENT. NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR LIENS) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. LESSEE HAS OR PRIOR TO THE COMMENCEMENT DATE WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS LESSOR, THE AGENT, EACH LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS BETWEEN LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS, ON THE ONE (1) HAND, AND LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE. 8.2 POSSESSION AND USE OF THE PROPERTIES. (a) At all times during the Term with respect to each Property, such Property shall be a Permitted Facility and shall be used by Lessee in the ordinary course of its business. Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of the Properties as contemplated by this Lease. Lessee shall not commit or permit any waste of the Properties or any part thereof, except as expressly permitted under the Operative Agreements. (b) The address stated in Section 29.1 of this Lease is the principal place of business and chief executive office of Lessee (as such terms are used in Section 9-103(3) of the Uniform Commercial Code of any applicable jurisdiction), and Lessee will provide Lessor with prior written notice of any change of location of its principal place of business or chief executive office. Regarding a particular Property, each Lease Supplement correctly identifies the initial location of the related Equipment (if any) and 8 14 Improvements (if any) and contains an accurate legal description for the related parcel of Land or a copy of the Ground Lease (if any). The Equipment (other than those items in transit for repair or under repair) and Improvements respecting each particular Property will be located only at the location identified in the applicable Lease Supplement. (c) Lessee will not attach or incorporate any item of Equipment to or in any other item of equipment or personal property or to or in any real property in a manner that could give rise to the assertion of any Lien on such item of Equipment by reason of such attachment or the assertion of a claim that such item of Equipment has become a fixture if in either case such Equipment thereby becomes subject to a Lien in favor of a third party that is prior to the Liens thereon created by the Operative Agreements. (d) On the Commencement Date for each Property, Lessor and Lessee shall execute a Lease Supplement in regard to such Property which shall contain an Equipment Schedule that generally describes the Equipment which is then or shall be a part of the Property, an Improvement Schedule that generally describes the Improvements which are then or shall be a part of the Property and a legal description of the Land which is then or shall be leased hereunder (or in the case of any Property subject to a Ground Lease to be subleased hereunder). Each Property subject to a Ground Lease shall be ground subleased from Lessor to Lessee as of the Commencement Date pursuant to a ground sublease (in form and substance satisfactory to Lessor and Lessee), and such ground sublease shall be in effect until this Lease is terminated or expires, in each case in accordance with the terms and provisions hereof. Lessee shall satisfy and perform all obligations imposed on Lessor under each Ground Lease. Simultaneously with the execution and delivery of each Lease Supplement, such Equipment, Improvements, Land, ground subleasehold interest, all additional Equipment and Improvements which are financed under the Operative Agreements after the Commencement Date and the remainder of such Property shall be deemed to have been accepted by Lessee for all purposes of this Lease and to be subject to this Lease. (e) At all times during the Term with respect to each Property, Lessee will comply with all obligations under and (to the extent no Event of Default exists and provided that such exercise will not materially impair the value, utility or remaining useful life of such Property) shall be permitted to exercise all rights and remedies under, all operation and easement agreements and related or similar agreements applicable to such Property. 8.3 INTEGRATED PROPERTIES. On the Rent Commencement Date for each Property, such Property and the applicable property subject to a Ground Lease shall constitute (and for the duration of the Term shall continue to constitute) all of the equipment, facilities, rights, other personal property and other real property necessary or appropriate to operate, utilize, maintain and control a Permitted Facility in a commercially reasonable manner. 9 15 8.4 LESSEE'S EQUIPMENT. At Lessee's sole cost and expense, Lessee shall be entitled to remove Lessee's Equipment from the applicable Property at any time during the Term. Lessee shall repair any and all damage (to the satisfaction of Lessor) caused to the applicable Property with respect to Lessee's removal of Lessee's Equipment. ARTICLE IX 9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND MANUFACTURER'S SPECIFICATIONS AND STANDARDS. Subject to the terms of Article XIII relating to permitted contests, Lessee, at its sole cost and expense, shall (a) comply with all applicable Legal Requirements (including without limitation all Environmental Laws), all Insurance Requirements relating to the Properties and all manufacturer's specifications and standards, including without limitation the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration thereof, whether or not compliance therewith shall require structural or extraordinary changes in any Property or interfere with the use and enjoyment of any Property, and (b) procure, maintain and comply with all licenses, permits, orders, approvals, consents and other authorizations required for the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties, unless the failure to procure, maintain and comply with such items identified in subparagraphs (a) and (b), individually or in the aggregate, shall not and could not reasonably be expected to have a Material Adverse Effect. Lessor agrees to take such actions as may be reasonably requested by Lessee in connection with the compliance by Lessee of its obligations under this Section 9.1. ARTICLE X 10.1 MAINTENANCE AND REPAIR; RETURN. (a) Lessee, at its sole cost and expense, shall maintain each Property in good condition, repair and working order (ordinary wear and tear excepted) and in the repair and condition as when originally delivered to Lessor and make all necessary repairs thereto and replacements thereof, of every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary, structural or nonstructural or foreseen or unforeseen, in each case as required by Section 9.1 and on a basis consistent with the operation and maintenance of properties or equipment comparable in type and function to the applicable Property, such that such Property is capable of being immediately utilized by a third party and in compliance with standard industry practice subject, however, to the provisions of Article XV with respect to Casualty and Condemnation. 10 16 (b) Lessee shall not use or locate any component of any Property outside of any Approved State. Lessee shall not move or relocate any component of any Property beyond the boundaries of the Land (comprising part of such Property) described in the applicable Lease Supplement, except for the temporary removal of Equipment and other personal property for repair or replacement. The foregoing provisions of this Section 10.1(b) shall not apply to Lessee's Equipment and title thereto shall vest in Lessee or Lessee's designee. (c) If any component of any Property becomes worn out, lost, destroyed, damaged beyond repair or otherwise permanently rendered unfit for use, Lessee, at its own expense, will within a reasonable time replace such component with a replacement component which is free and clear of all Liens (other than Permitted Liens and Lessor Liens) and has a value, utility and useful life at least equal to the component replaced (assuming the component replaced had been maintained and repaired in accordance with the requirements of this Lease). All components which are added to any Property shall immediately become the property of (and title thereto shall vest in) Lessor and shall be deemed incorporated in such Property and subject to the terms of this Lease as if originally leased hereunder. All components of any Property so replaced shall immediately become the property of (and title thereto shall vest in) Lessee. The foregoing provisions of this Section 10.1(c) shall not apply to Lessee's Equipment. (d) Upon reasonable advance notice but only in compliance with all applicable Law, Lessor and its agents shall have the right to inspect each Property and all maintenance records with respect thereto at any reasonable time during normal business hours but shall not, in the absence of an Event of Default, materially disrupt the business of Lessee. (e) If, at any time, the aggregate appraised value of Properties then subject to this Lease for which the Agent has received an Appraisal pursuant to the terms of Section 5.3 of the Participation Agreement is less than twenty percent (20%) of the aggregate Property Cost at such time (the "Base Amount"), then Lessee will cause an additional Appraisal or Appraisals to be immediately delivered to Lessor in an amount sufficient to cause such aggregate appraised value to equal or exceed the Base Amount. In addition, Lessee shall cause to be delivered to Lessor (at Lessee's sole expense) one (1) or more additional Appraisals (or reappraisals of Property) as Lessor may request if any one (1) of Lessor, the Agent, the Trust Company, any Lender or any Holder is required pursuant to any applicable Legal Requirement to obtain such Appraisals (or reappraisals) and upon the occurrence of any Event of Default. (f) Lessor shall under no circumstances be required to build any improvements or install any equipment on any Property, make any repairs, replacements, alterations or renewals of any nature or description to any Property, make any expenditure whatsoever in connection with this Lease or maintain any Property in any way. Lessor shall not be required to maintain, repair or rebuild all or any part of any Property, and Lessee waives the right to (i) require Lessor to maintain, repair, or rebuild 11 17 all or any part of any Property, or (ii) make repairs at the expense of Lessor pursuant to any Legal Requirement, Insurance Requirement, contract, agreement, covenant, condition or restriction at any time in effect. (g) Lessee shall, upon the expiration or earlier termination of this Lease with respect to a Property, if Lessee shall not have exercised its Purchase Option with respect to such Property and purchased such Property, surrender such Property (i) to Lessor pursuant to the exercise of the applicable remedies upon the occurrence of a Lease Event of Default or (ii) pursuant to the second paragraph of Section 22.1(a) hereof to Lessor, or the third party purchaser, as the case may be, subject to Lessee's obligations under this Lease (including without limitation the obligations of Lessee at the time of such surrender under Sections 9.1, 10.1(a) through (f), 10.2, 11.1, 12.1, 22.1 and 23.1). 10.2 ENVIRONMENTAL INSPECTION. If Lessee has not given notice of exercise of its Purchase Option on the Expiration Date pursuant to Section 20.1 or for whatever reason Lessee does not purchase a Property in accordance with the terms of this Lease, then not more than one hundred twenty (120) days nor less than sixty (60) days prior to the Expiration Date, Lessee at its expense shall cause to be delivered to Lessor a Phase I environmental site assessment recently prepared (no more than thirty (30) days prior to the date of delivery) by an independent recognized professional reasonably acceptable to the Agent, and in form, scope and content reasonably satisfactory to the Agent. ARTICLE XI 11.1 MODIFICATIONS. (a) Lessee at its sole cost and expense (subject to Section 11.1(c)), at any time and from time to time without the consent of Lessor may make modifications, alterations, renovations, improvements and additions to any Property or any part thereof and substitutions and replacements therefor (collectively, "Modifications"), and Lessee shall make any and all Modifications required to be made pursuant to all Legal Requirements, Insurance Requirements and manufacturer's specifications and standards; provided, that: (i) no Modification shall materially impair the value, utility or useful life of any Property from that which existed immediately prior to such Modification; (ii) each Modification shall be done expeditiously and in a good and workmanlike manner; (iii) no Modification shall adversely affect the structural integrity of any Property; (iv) to the extent required by Section 14.2(a), Lessee shall maintain builders' risk insurance at all times when a Modification is in progress; (v) subject to the terms of Article XIII relating to permitted contests, Lessee shall pay all costs and expenses and discharge any Liens (that are not Permitted Liens or Lessor Liens) arising with respect to any Modification; (vi) each Modification shall comply with the requirements of this Lease (including without limitation Sections 8.2 and 10.1); and (vii) no Improvement shall be demolished or 12 18 otherwise rendered unfit for use unless Lessee shall finance the proposed replacement Modification outside of this lease facility; provided, further, Lessee shall not make any Modification to the extent any such Modification, individually or in the aggregate, shall or could reasonably be expected to have a Material Adverse Effect. All Modifications shall immediately and without further action upon their incorporation into the applicable Property (1) become property of Lessor, (2) be subject to this Lease and (3) be titled in the name of Lessor. Lessee shall not remove or attempt to remove any Modification from any Property. Each Ground Lease for a Property shall expressly provide for the provisions of the foregoing sentence. Lessee, at its own cost and expense, will pay for the repairs of any damage to any Property caused by the removal or attempted removal of any Modification. (b) The construction process provided for in the Agency Agreement is acknowledged by Lessor and the Agent to be consistent with and in compliance with the terms and provisions of this Article XI. (c) Lessor shall fund each Advance for a Modification to the extent (i) the requirements in the Operative Agreements are satisfied for such Advance and (ii) such Modification complies with the requirements of this Lease. ARTICLE XII 12.1 WARRANTY OF TITLE. (a) Lessee hereby acknowledges and shall cause title in each Property (including without limitation all Equipment, all Improvements, all replacement components to each Property and all Modifications) immediately and without further action to vest in and become the property of Lessor and to be subject to the terms of this Lease (provided, respecting each Property subject to a Ground Lease, Lessor's interest therein is acknowledged to be a leasehold interest pursuant to such Ground Lease) from and after the date hereof or such date of incorporation into any Property. Lessee agrees that, subject to the terms of Article XIII relating to permitted contests, Lessee shall not directly or indirectly create or allow to remain, and shall promptly discharge at its sole cost and expense, any Lien, defect, attachment, levy, title retention agreement or claim upon any Property, any component thereof or any Modifications or any Lien, attachment, levy or claim with respect to the Rent or with respect to any amounts held by Lessor, the Agent or any Holder pursuant to any Operative Agreement, other than Permitted Liens and Lessor Liens. Lessee shall promptly notify Lessor in the event it receives actual knowledge that a Lien other than a Permitted Lien or Lessor Lien has occurred with respect to a Property, the Rent or any other such amounts, and Lessee represents and warrants to, and covenants with, Lessor that the Liens in favor of Lessor created by the Operative Agreements are (and until the financing parties under the Operative Agreements have been paid in full shall remain) first priority perfected Liens subject only to Permitted Liens and Lessor Liens. At all times subsequent to the Commencement Date 13 19 respecting a Property, Lessee shall (i) cause a valid, perfected, first priority Lien on each applicable Property to be in place in favor of the Agent (for the benefit of the Lenders and the Holders) and (ii) file all necessary documents under the applicable real property law and Article 9 of the Uniform Commercial Code to perfect such title and Liens. (b) Nothing contained in this Lease shall be construed as constituting the consent or request of Lessor, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO ANY PROPERTY. ARTICLE XIII 13.1 PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES. Except to the extent otherwise provided for in Section 11 of the Participation Agreement, Lessee, on its own or on Lessor's behalf but at Lessee's sole cost and expense, may contest, by appropriate administrative or judicial proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Legal Requirement, Imposition or utility charge payable pursuant to Section 4.1 or any Lien, attachment, levy, encumbrance or encroachment, and Lessor agrees not to pay, settle or otherwise compromise any such item, provided, that (a) the commencement and continuation of such proceedings shall suspend the collection of any such contested amount from, and suspend the enforcement thereof against, the applicable Properties, Lessor, each Holder, the Agent and each Lender; (b) there shall not be imposed a Lien (other than Permitted Liens and Lessor Liens) on any Property and no part of any Property nor any Rent would be in any danger of being sold, forfeited, lost or deferred; (c) at no time during the permitted contest shall there be a risk of the imposition of criminal liability or material civil liability on Lessor, any Holder, the Agent or any Lender for failure to comply therewith; and (d) in the event that, at any time, there shall be a material risk of extending the application of such item beyond the end of the Term, then Lessee shall deliver to Lessor an Officer's Certificate certifying as to the matters set forth in clauses (a), (b) and (c) of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute and deliver to Lessee such authorizations and other documents as may reasonably be required in connection with any such contest and, if reasonably requested by Lessee, shall join as a party therein at Lessee's sole cost and expense. 14 20 ARTICLE XIV 14.1 PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE. During the Term for each Property, Lessee shall procure and carry, at Lessee's sole cost and expense, commercial general liability and umbrella liability insurance for claims for injuries or death sustained by persons or damage to property while on such Property or respecting the Equipment and such other public liability coverages as are then customarily carried by similarly situated companies conducting business similar to that conducted by Lessee. Such insurance shall be on terms and in amounts that are no less favorable than insurance maintained by Lessee with respect to similar properties and equipment that it owns and are then carried by similarly situated companies conducting business similar to that conducted by Lessee, and in no event shall have a minimum combined single limit per occurrence coverage (i) for commercial general liability of less than $1,000,000 and (ii) for excess liability of less than $10,000,000. The policies shall name Lessee as the insured and shall be endorsed to name Lessor, the Holders, the Agent and the Lenders as additional insureds. The policies shall also specifically provide that such policies shall be considered primary insurance which shall apply to any loss or claim before any contribution by any insurance which Lessor, any Holder, the Agent or any Lender may have in force. In the operation of the Properties, Lessee shall comply with applicable workers' compensation laws and protect Lessor, each Holder, the Agent and each Lender against any liability under such laws. 14.2 PERMANENT HAZARD AND OTHER INSURANCE. (a) During the Term for each Property, Lessee shall keep such Property insured against all risk of physical loss or damage by fire and other risks and shall maintain builders' risk insurance during construction of any Improvements or Modifications in each case in amounts no less than the Termination Value from time to time and on terms that (i) are no less favorable than insurance covering other similar properties owned by Lessee and (ii) are then carried by similarly situated companies conducting business similar to that conducted by Lessee. The policies shall name Lessee as the insured and shall be endorsed to name Lessor, the Holders and the Agent (on behalf of the Lenders and the Holders) as a named additional insured and loss payee, to the extent of their respective interests; provided, so long as no Event of Default exists, any loss payable under the insurance policies required by this Section for losses up to $1,000,000 will be paid to Lessee. (b) If, during the Term with respect to a Property the area in which such Property is located is designated a "flood-prone" area pursuant to the Flood Disaster Protection Act of 1973, or any amendments or supplements thereto or is in a zone designated A or V, then Lessee shall comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973. In addition, Lessee will fully comply with the requirements of the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as each may be amended from time to time, and with any other Legal Requirement, concerning flood insurance to the extent that it applies to any 15 21 such Property. During the Term, Lessee shall, in the operation and use of each Property, maintain workers' compensation insurance consistent with that carried by similarly situated companies conducting business similar to that conducted by Lessee and containing minimum liability limits of no less than $100,000. In the operation of each Property, Lessee shall comply with workers' compensation laws applicable to Lessee, and protect Lessor, each Holder, the Agent and each Lender against any liability under such laws. 14.3 COVERAGE. (a) As of the date of this Lease and annually thereafter during the Term, Lessee shall furnish the Agent (on behalf of Lessor and the other beneficiaries of such insurance coverage) with certificates prepared by the insurers or insurance broker of Lessee showing the insurance required under Sections 14.1 and 14.2 to be in effect, naming (to the extent of their respective interests) Lessor, the Holders, the Agent and the Lenders as additional insureds and loss payees and evidencing the other requirements of this Article XIV. All such insurance shall be at the cost and expense of Lessee and provided by nationally recognized, financially sound insurance companies having an A+ or better rating by A.M. Best's Key Rating Guide. Lessee shall cause such certificates to include a provision for thirty (30) days' advance written notice by the insurer to the Agent (on behalf of Lessor and the other beneficiaries of such insurance coverage) in the event of cancellation or material alteration of such insurance. If an Event of Default has occurred and is continuing and Lessor so requests, Lessee shall deliver to the Agent (on behalf of Lessor and the other beneficiaries of such insurance coverage) copies of all insurance policies required by Sections 14.1 and 14.2. (b) Lessee agrees that the insurance policy or policies required by Sections 14.1, 14.2(a) and 14.2(b) shall include an appropriate clause pursuant to which any such policy shall provide that it will not be invalidated should Lessee or any Contractor, as the case may be, waive, at any time, any or all rights of recovery against any party for losses covered by such policy or due to any breach of warranty, fraud, action, inaction or misrepresentation by Lessee or any Person acting on behalf of Lessee. Lessee hereby waives any and all such rights against Lessor, the Holders, the Agent and the Lenders to the extent of payments made to any such Person under any such policy. (c) Neither Lessor nor Lessee shall carry separate insurance concurrent in kind or form or contributing in the event of loss with any insurance required under this Article XIV, except that Lessor may carry separate liability insurance at Lessor's sole cost so long as (i) Lessee's insurance is designated as primary and in no event excess or contributory to any insurance Lessor may have in force which would apply to a loss covered under Lessee's policy and (ii) each such insurance policy will not cause Lessee's insurance required under this Article XIV to be subject to a coinsurance exception of any kind. 16 22 (d) Lessee shall pay as they become due all premiums for the insurance required by Section 14.1 and Section 14.2, shall renew or replace each policy prior to the expiration date thereof or otherwise maintain the coverage required by such Sections without any lapse in coverage. ARTICLE XV 15.1 CASUALTY AND CONDEMNATION. (a) Subject to the provisions of the Agency Agreement and this Article XV and Article XVI (in the event Lessee delivers, or is obligated to deliver or is deemed to have delivered, a Termination Notice), and prior to the occurrence and continuation of a Default or an Event of Default, Lessee shall be entitled to receive (and Lessor hereby irrevocably assigns to Lessee all of Lessor's right, title and interest in) any condemnation proceeds, award, compensation or insurance proceeds under Sections 14.2(a) or 14.2(b) hereof to which Lessee or Lessor may become entitled by reason of their respective interests in a Property (i) if all or a portion of such Property is damaged or destroyed in whole or in part by a Casualty or (ii) if the use, access, occupancy, easement rights or title to such Property or any part thereof is the subject of a Condemnation; provided, however, if a Default or an Event of Default shall have occurred and be continuing or if such award, compensation or insurance proceeds shall exceed $1,000,000, then such award, compensation or insurance proceeds shall be paid directly to Lessor or, if received by Lessee, shall be held in trust for Lessor, and shall be paid over by Lessee to Lessor and held in accordance with the terms of this paragraph (a). All amounts held by Lessor hereunder on account of any award, compensation or insurance proceeds either paid directly to Lessor or turned over to Lessor shall be applied to reduce Lessee's obligations hereunder and under the other Operative Agreements. (b) Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At Lessee's reasonable request, and at Lessee's sole cost and expense, Lessor and the Agent shall participate in any such proceeding, action, negotiation, prosecution or adjustment. Lessor and Lessee agree that this Lease shall control the rights of Lessor and Lessee in and to any such award, compensation or insurance payment. (c) If Lessee shall receive notice of a Casualty or a Condemnation of a Property or any interest therein where damage to the affected Property is estimated to equal or exceed twenty-five percent (25%) of the Property Cost of such Property, Lessee shall give notice thereof to Lessor and to the Agent promptly after Lessee's receipt of such notice. In the event such a Casualty or Condemnation occurs (regardless of whether Lessee gives notice thereof), then Lessee shall be deemed to have delivered a Termination Notice to Lessor and the Agent and the provisions of Sections 16.1 and 16.2 shall apply. 17 23 (d) In the event of a Casualty or a Condemnation (regardless of whether notice thereof must be given pursuant to paragraph (c)), this Lease shall terminate with respect to the applicable Property in accordance with Section 16.1 if Lessee, within thirty (30) days after such occurrence, delivers to Lessor and the Agent a notice to such effect. (e) If pursuant to this Section 15.1 this Lease shall continue in full force and effect following a Casualty or Condemnation with respect to the affected Property, Lessee shall, at its sole cost and expense and using, if available, the proceeds of any award, compensation or insurance with respect to such Casualty or Condemnation (including without limitation any such award, compensation or insurance which has been received by Lessor or the Agent which shall be turned over to Lessee (subject to 15.1(a)) pursuant to the terms of the Operative Agreements, and if not available or sufficient, using its own funds), promptly and diligently repair any damage to the applicable Property caused by such Casualty or Condemnation in conformity with the requirements of Sections 10.1 and 11.1, using the as-built Plans and Specifications or manufacturer's specifications for the applicable Improvements, Equipment or other components of the applicable Property (as modified to give effect to any subsequent Modifications, any Condemnation affecting the applicable Property and all applicable Legal Requirements), so as to restore the applicable Property to the same or a greater remaining economic value, useful life, utility, condition, operation and function as existed immediately prior to such Casualty or Condemnation (assuming all maintenance and repair standards have been satisfied). In such event, title to the applicable Property shall remain with Lessor. (f) In no event shall a Casualty or Condemnation affect Lessee's obligations to pay Rent pursuant to Article III. (g) Notwithstanding anything to the contrary set forth in Section 15.1(a) or Section 15.1(e), if during the Term with respect to a Property a Casualty occurs with respect to such Property or Lessee receives notice of a Condemnation with respect to such Property, and following such Casualty or Condemnation, the applicable Property cannot reasonably be restored, repaired or replaced on or before the day one hundred eighty (180) days prior to the Expiration Date or the date nine (9) months after the occurrence of such Casualty or Condemnation (if such Casualty or Condemnation occurs during the Term) to the same or a greater remaining economic value, useful life, utility, condition, operation and function as existed immediately prior to such Casualty or Condemnation (assuming all maintenance and repair standards have been satisfied) or on or before such day such Property is not in fact so restored, repaired or replaced, then Lessee shall be required to exercise its Purchase Option for such Property on the next Payment Date (notwithstanding the limits on such exercise contained in Section 20.2) and pay Lessor the Termination Value for such Property; provided, if any Default or Event of Default has occurred and is continuing, Lessee shall also promptly (and in any event within three (3) Business Days) pay Lessor any award, compensation or insurance proceeds received on account of any Casualty or Condemnation with respect to any Property; provided, further, that if no Default or Event of Default has occurred and is continuing, any Excess 18 24 Proceeds shall be paid to Lessee. If a Default or an Event of Default has occurred and is continuing and any Loans, Holder Advances or other amounts are owing with respect thereto, then any Excess Proceeds (to the extent of any such Loans, Holder Advances or other amounts owing with respect thereto) shall be paid to Lessor, held as security for the performance of Lessee's obligations hereunder and under the other Operative Agreements and applied to such obligations upon the exercise of remedies in connection with the occurrence of an Event of Default, with the remainder of such Excess Proceeds in excess of such Loans, Holder Advances and other amounts owing with respect thereto being distributed to the Lessee. 15.2 ENVIRONMENTAL MATTERS. Promptly upon Lessee's actual knowledge of the presence of Hazardous Substances in any portion of any Property or Properties in concentrations and conditions that constitute an Environmental Violation and which, in the reasonable opinion of Lessee, the cost to undertake any legally required response, clean up, remedial or other action will or might result in a cost to Lessee of more than $50,000, Lessee shall notify Lessor in writing of such condition. In the event of any Environmental Violation (regardless of whether notice thereof must be given), Lessee shall, not later than thirty (30) days after Lessee has actual knowledge of such Environmental Violation, either deliver to Lessor a Termination Notice with respect to the applicable Property or Properties pursuant to Section 16.1, if applicable, or, at Lessee's sole cost and expense, promptly and diligently undertake and diligently complete any response, clean up, remedial or other action (including without limitation the pursuit by Lessee of appropriate action against any off-site or third party source for contamination) necessary to remove, cleanup or remediate the Environmental Violation in accordance with all Environmental Laws. Any such undertaking shall be timely completed in accordance with prudent industry standards. If Lessee does not deliver a Termination Notice with respect to such Property pursuant to Section 16.1, Lessee shall, upon completion of remedial action by Lessee (to the extent such remedial action costs in excess of $50,000), cause to be prepared by a reputable environmental consultant acceptable to Lessor a report describing the applicable Environmental Violation and the actions taken by Lessee (or its agents) in response to such Environmental Violation, and a statement by the consultant that the Environmental Violation has been remedied in full compliance with applicable Environmental Law. Not less than sixty (60) days prior to any time that Lessee elects to cease operations with respect to any Property or to remarket any Property pursuant to Section 20.1 hereof or any other provision of any Operative Agreement, Lessee at its expense shall cause to be delivered to Lessor a Phase I environmental site assessment respecting such Property recently prepared (no more than thirty (30) days prior to the date of delivery) by an independent recognized professional selected by Lessee and acceptable to the Agent in its reasonable discretion and in form, scope and content satisfactory to the Agent in its reasonable discretion. Notwithstanding any other provision of any Operative Agreement, if Lessee fails to comply with the foregoing obligation regarding the Phase I environmental site assessment, Lessee shall be obligated to purchase such Property for its Termination Value and shall not be permitted to exercise (and Lessor shall have no obligation to honor any such exercise) any rights under any Operative Agreement regarding a sale of such Property to a Person other than Lessee or any Affiliate of Lessee. 19 25 15.3 NOTICE OF ENVIRONMENTAL MATTERS. Promptly, but in any event within five (5) Business Days from the date Lessee has actual knowledge thereof, Lessee shall provide to Lessor written notice of any pending or threatened claim, action or proceeding involving any Environmental Law or any Release on or in connection with any Property or Properties. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and Lessee's proposed response thereto. In addition, Lessee shall provide to Lessor, within five (5) Business Days of receipt, copies of all material written communications with any Governmental Authority relating to any Environmental Law in connection with any Property. Lessee shall also promptly provide such detailed reports of any such material Environmental Claims as may reasonably be requested by Lessor. ARTICLE XVI 16.1 TERMINATION UPON CERTAIN EVENTS. If Lessee has delivered, or is deemed to have delivered, written notice of a termination of this Lease with respect to the applicable Property to Lessor and the Agent in the form described in Section 16.2(a) (a "Termination Notice") pursuant to the provisions of this Lease, then following the applicable Casualty, Condemnation or Environmental Violation, this Lease shall terminate with respect to the affected Property on the applicable Termination Date. 16.2 PROCEDURES. (a) A Termination Notice shall contain: (i) notice of termination of this Lease with respect to the affected Property on a Payment Date not more than sixty (60) days after Lessor's receipt of such Termination Notice (the "Termination Date"); and (ii) a binding and irrevocable agreement of Lessee to pay the Termination Value for the applicable Property and purchase such Property on such Termination Date. (b) On each Termination Date, Lessee shall pay to Lessor the Termination Value for the applicable Property, and Lessor shall convey such Property or the remaining portion thereof, if any, to Lessee (or Lessee's designee), all in accordance with Section 20.2. 20 26 ARTICLE XVII 17.1 LEASE EVENTS OF DEFAULT. If any one (1) or more of the following events (each a "Lease Event of Default") shall occur: (a) Lessee shall fail to make payment of (i) any Basic Rent (except as set forth in clause (ii)) within three (3) days after the same has become due and payable or (ii) any Termination Value, on the date any such payment is due and payable, or any payment of Basic Rent or Supplemental Rent due on the due date of any such payment of Termination Value, or any amount due on the Expiration Date; (b) Lessee shall fail to make payment of any Supplemental Rent (other than Supplemental Rent referred to in Section 17.1(a)(ii)) or any other Credit Party shall fail to make any payment of any amount under any Operative Agreement which has become due and payable within three (3) days after receipt of notice that such payment is due; (c) Lessee shall fail (i) to maintain insurance as required by Article XIV of this Lease or (ii) to deliver any requisite annual certificate with respect thereto within ten (10) days after the date such certificate is due under the terms hereof, but only after notice of such delinquent certificate has been provided by Lessor or the Agent to Lessee; (d) (i) Lessee shall fail to observe or perform any term, covenant, obligation or condition of Lessee under this Lease (including without limitation the Incorporated Covenants) or any other Material Operative Agreement to which Lessee is a party other than those set forth in Sections 17.1(a), (b) or (c) hereof, or any other Credit Party shall fail to observe or perform any term, covenant, obligation or condition of such Credit Party under any Material Operative Agreement other than those set forth in Section 17.1(b) hereof and such failure shall continue for fifteen (15) days (or with respect to the Incorporated Covenants, the grace period, if any, applicable thereto under the Lessee Credit Agreement) after notice thereof to the Lessee or such Credit Party, or (ii) any representation or warranty made by Lessee or any other Credit Party set forth in this Lease (including without limitation the Incorporated Representation and Warranties) or in any other Operative Agreement or in any document entered into in connection herewith or therewith or in any document, certificate or financial or other statement delivered in connection herewith or therewith shall be false or inaccurate in any material way when made; (e) An Agency Agreement Event of Default shall have occurred and be continuing; (f) Any Credit Party or any Subsidiary of any Credit Party shall default (beyond applicable periods of grace and/or notice and cure) in the payment when due of any principal of or interest on any Indebtedness having an outstanding principal amount of at least $5,000,000; or any event or condition shall occur which results in the acceleration of the maturity of any such Indebtedness or enables the holder of any such Indebtedness or any Person acting on such holder's behalf to accelerate the maturity thereof; 21 27 (g) The liquidation or dissolution of any Credit Party, or the suspension of the business of any Credit Party, or the filing by any Credit Party of a voluntary petition or an answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under the United States Bankruptcy Code, as amended, or under any other insolvency act or law, state or federal, now or hereafter existing, or any other action of any Credit Party indicating its consent to, approval of or acquiescence in, any such petition or proceeding; the application by any Credit Party for, or the appointment by consent or acquiescence of any Credit Party of a receiver, a trustee or a custodian of any Credit Party for all or a substantial part of its property; the making by any Credit Party of any assignment for the benefit of creditors; any Credit Party is generally not paying its debts and other financial obligations as they become due and payable; or any Credit Party taking any corporate action to authorize any of the foregoing; (h) The filing of an involuntary petition against any Credit Party in bankruptcy or seeking reorganization, arrangement, readjustment of its debts or for any other relief under the United States Bankruptcy Code, as amended, or under any other insolvency act or law, state or federal, now or hereafter existing; or the involuntary appointment of a receiver, a trustee or a custodian of any Credit Party for all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of any Credit Party, and the continuance of any of such events for ninety (90) days undismissed or undischarged; (i) The adjudication of any Credit Party as bankrupt or insolvent; (j) The entering of any order in any proceedings against any Credit Party or any Subsidiary of any Credit Party decreeing the dissolution, divestiture or split-up of any Credit Party or any Subsidiary of any Credit Party, and such order remains in effect for more than sixty (60) days; (k) Any report, certificate, financial statement or other instrument delivered to Lessor by or on behalf of any Credit Party pursuant to the terms of this Lease or any other Operative Agreement is false or misleading in any material respect when made or delivered; (l) Any Lessee Credit Agreement Event of Default shall have occurred and be continuing and shall not have been waived; (m) A final judgment or judgments for the payment of money shall be rendered by a court or courts against any Credit Party or any Subsidiary of any Credit Party or any of their assets in excess of $500,000 in the aggregate, and (i) the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof, or (ii) any Credit Party or such Subsidiary shall not, within said period of thirty (30) days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal, 22 28 or (iii) such judgment or judgments shall not be discharged (or provisions shall not be made for such discharge) within thirty (30) days after a decision has been reached with respect to such appeal and the related stay has been lifted; (n) A notice of lien, levy or assessment is filed of record against any portion of the assets of Lessee or any of its Subsidiaries by the United States, or any department, agency or instrumentality thereof, or by any other Governmental Authority or any other Person, including without limitation the PBGC, or if any taxes or debts owing at any time or times hereafter to any one of them becomes a Lien (other than a Permitted Lien) upon the Collateral or any other asset of Lessee or any of its Subsidiaries, and the same is not dismissed, released, bonded or discharged within five (5) days after the same becomes a Lien or, in the case of ad valorem taxes, prior to the last day when payment may be made without penalty and, if bonded, such bond (or a replacement bond) shall not continue in effect at all times until such judgment is dismissed or discharged, and any such event shall or could reasonably be expected to have a Material Adverse Effect; (o) The occurrence of a Change of Control; (p) Martin S. Rash or Richard D. Gore shall cease to be the Chief Executive Officer and Chief Financial Officer, respectively, of the Lessee or cease to be involved in the day-to-day operations of the Lessee and its Subsidiaries, and within 120 days following the cessation of their respective involvement, the relevant executive is not succeeded by a chief executive officer or chief financial officer, as applicable, reasonably acceptable to the Majority Secured Parties; (q) The Lessee or any Subsidiary, to the extent, if any, presently participating or required by law to participate, in Medicaid, Medicare or MediCal programs shall fail to be eligible for any reason to participate in Medicaid, Medicare or MediCal programs or to accept assignments or rights to reimbursement under Medicaid Regulations, Medicare Regulations or MediCal Regulations, such failure could reasonably be expected to have a Material Adverse Effect, and such failure shall also continue beyond the completion of any appeal process diligently pursued by the Lessee or such Subsidiary in good faith; (r) Any Operative Agreement shall cease to be in full force and effect; or (s) The occurrence of any of the following events: (i) the happening of a Reportable Event that could give rise to liability (that is not waived by the PBGC or by the Majority Secured Parties, or if such liability can be avoided by any corrective action of Lessee, such corrective action is not completed within ninety (90) days after the occurrence of such Reportable Event) with respect to any Pension Plan; (ii) the termination of any Pension Plan in a "distress termination" under the provisions of Section 4041 of ERISA; (iii) the appointment of a trustee by an appropriate United States District Court to administer any Pension Plan; (iv) the institution of any proceedings by the PBGC to terminate any Pension Plan or to appoint a trustee to administer any such plan; and (v) the failure of Lessee to notify the Lenders and the Holders promptly upon 23 29 receipt by Lessee of the institution of any proceeding or any other actions that may result in the termination of any such plan; then, in any such event, Lessor may, in addition to the other rights and remedies provided for in this Article XVII and in Section 18.1, terminate this Lease by giving Lessee five (5) days notice of such termination provided, notwithstanding the foregoing, this Lease shall be deemed to be automatically terminated without the giving of notice upon the occurrence of a Lease Event of Default under Sections 17.1(g), (h) or (i), and this Lease shall terminate, and all rights of Lessee under this Lease shall cease. Lessee shall, to the fullest extent permitted by law, pay as Supplemental Rent all costs and expenses incurred by or on behalf of Lessor or any other Financing Party, including without limitation reasonable fees and expenses of counsel, as a result of any Lease Event of Default hereunder. A POWER OF SALE HAS BEEN GRANTED IN THIS LEASE. A POWER OF SALE MAY ALLOW LESSOR TO TAKE THE PROPERTIES AND SELL THE PROPERTIES WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF A LEASE EVENT OF DEFAULT. 17.2 SURRENDER OF POSSESSION. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall, upon thirty (30) days written notice, surrender to Lessor possession of the Properties. Lessor may enter upon and repossess the Properties by such means as are available at law or in equity, and may remove Lessee and all other Persons and any and all personal property and Lessee's equipment and personalty and severable Modifications from the Properties. Lessor shall have no liability by reason of any such entry, repossession or removal performed in accordance with applicable law. Upon the written demand of Lessor, Lessee shall return the Properties promptly to Lessor, in the manner and condition required by, and otherwise in accordance with the provisions of, Section 22.1(c) hereof. 17.3 RELETTING. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessor may, but shall be under no obligation to, relet any or all of the Properties, for the account of Lessee or otherwise, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term) and on such conditions (which may include concessions or free rent) and for such purposes as Lessor may determine, and Lessor may collect, receive and retain the rents resulting from such reletting. Lessor shall not be liable to Lessee for any failure to relet any Property or for any failure to collect any rent due upon such reletting. 24 30 17.4 DAMAGES. Neither (a) the termination of this Lease as to all or any of the Properties pursuant to Section 17.1; (b) the repossession of all or any of the Properties; nor (c) the failure of Lessor to relet all or any of the Properties, the reletting of all or any portion thereof, nor the failure of Lessor to collect or receive any rentals due upon any such reletting, shall relieve Lessee of its liabilities and obligations hereunder, all of which shall survive any such termination, repossession or reletting. If any Lease Event of Default shall have occurred and be continuing and notwithstanding any termination of this Lease pursuant to Section 17.1, Lessee shall forthwith pay to Lessor all Rent and other sums due and payable hereunder to and including without limitation the date of such termination. Thereafter, on the days on which the Basic Rent or Supplemental Rent, as applicable, are payable under this Lease or would have been payable under this Lease if the same had not been terminated pursuant to Section 17.1 and until the end of the Term hereof or what would have been the Term in the absence of such termination, Lessee shall pay Lessor, as current liquidated damages (it being agreed that it would be impossible accurately to determine actual damages) an amount equal to the Basic Rent and Supplemental Rent that are payable under this Lease or would have been payable by Lessee hereunder if this Lease had not been terminated pursuant to Section 17.1, less the net proceeds, if any, which are actually received by Lessor with respect to the period in question of any reletting of any Property or any portion thereof; provided, that Lessee's obligation to make payments of Basic Rent and Supplemental Rent under this Section 17.4 shall continue only so long as Lessor shall not have received the amounts specified in Section 17.6. In calculating the amount of such net proceeds from reletting, there shall be deducted all of Lessor's, any Holder's, the Agent's and any Lender's reasonable expenses in connection therewith, including without limitation repossession costs, brokerage or sales commissions, fees and expenses for counsel and any necessary repair or alteration costs and expenses incurred in preparation for such reletting. To the extent Lessor receives any damages pursuant to this Section 17.4, such amounts shall be regarded as amounts paid on account of Rent. Lessee specifically acknowledges and agrees that its obligations under this Section 17.4 shall be absolute and unconditional under any and all circumstances and shall be paid and/or performed, as the case may be, without notice or demand and without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever. 17.5 POWER OF SALE. Without limiting any other remedies set forth in this Lease, in the event that a court of competent jurisdiction rules that this Lease constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties, then Lessor and Lessee agree that Lessee has granted, pursuant to Section 7.1(b) hereof and each Lease Supplement, a Lien against the Properties WITH POWER OF SALE, and that, upon the occurrence and during the continuance of any Lease Event of Default, Lessor shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Properties. 25 31 17.6 FINAL LIQUIDATED DAMAGES. If a Lease Event of Default shall have occurred and be continuing, whether or not this Lease shall have been terminated pursuant to Section 17.1 and whether or not Lessor shall have collected any current liquidated damages pursuant to Section 17.4, Lessor shall have the right to recover, by demand to Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for final liquidated damages, but exclusive of the indemnities payable under Section 11 of the Participation Agreement (which, if requested, shall be paid concurrently), and in lieu of all current liquidated damages beyond the date of such demand (it being agreed that it would be impossible accurately to determine actual damages) the Termination Value. Upon payment of the amount specified pursuant to the first sentence of this Section 17.6, Lessee shall be entitled to receive from Lessor, either at Lessee's request or upon Lessor's election, in either case at Lessee's cost, an assignment of Lessor's entire right, title and interest in and to the Properties, Improvements, Fixtures, Modifications, Equipment and all components thereof, in each case in recordable form and otherwise in conformity with local custom and free and clear of the Lien of this Lease (including without limitation the release of any memoranda of Lease and/or the Lease Supplement recorded in connection therewith) and any Lessor Liens. The Properties shall be conveyed to Lessee "AS-IS, WHERE-IS" and in their then present physical condition. If any statute or rule of law shall limit the amount of such final liquidated damages to less than the amount agreed upon, Lessor shall be entitled to the maximum amount allowable under such statute or rule of law; provided, however, Lessee shall not be entitled to receive an assignment of Lessor's interest in the Properties, the Improvements, Fixtures, Modifications, Equipment or the components thereof unless Lessee shall have paid in full the Termination Value. Lessee specifically acknowledges and agrees that its obligations under this Section 17.6 shall be absolute and unconditional under any and all circumstances and shall be paid and/or performed, as the case may be, without notice or demand and without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever. 17.7 ENVIRONMENTAL COSTS. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall pay directly to any third party (or at Lessor's election, reimburse Lessor) for the cost of any environmental testing and/or remediation work undertaken respecting any Property, as such testing or work is deemed appropriate in the reasonable judgment of Lessor. Lessee shall pay all amounts referenced in the immediately preceding sentence within ten (10) days of any request by Lessor for such payment. The provisions of this Section 17.7 shall not limit the obligations of Lessee under any Operative Agreement regarding indemnification obligations, environmental testing, remediation and/or work. 17.8 WAIVER OF CERTAIN RIGHTS. If this Lease shall be terminated pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by Law, (a) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (b) any right of redemption, re-entry or possession; (c) the 26 32 benefit of any laws now or hereafter in force exempting property from liability for rent or for debt; and (d) any other rights which might otherwise limit or modify any of Lessor's rights or remedies under this Article XVII. 17.9 ASSIGNMENT OF RIGHTS UNDER CONTRACTS. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall upon Lessor's demand immediately assign, transfer and set over to Lessor all of Lessee's right, title and interest in and to each agreement executed by Lessee in connection with the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties (including without limitation all right, title and interest of Lessee with respect to all warranty, performance, service and indemnity provisions), as and to the extent that the same relate to the acquisition, installation, testing, use, development, construction, operation, maintenance, repair, refurbishment and restoration of the Properties or any of them. 17.10 REMEDIES CUMULATIVE. The remedies herein provided shall be cumulative and in addition to (and not in limitation of) any other remedies available at law, equity or otherwise, including without limitation any mortgage foreclosure remedies. ARTICLE XVIII 18.1 LESSOR'S RIGHT TO CURE LESSEE'S LEASE DEFAULTS. Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to) remedy any Lease Event of Default for the account and at the sole cost and expense of Lessee, including without limitation the failure by Lessee to maintain the insurance required by Article XIV, and, may to the fullest extent permitted by law and notwithstanding any right of quiet enjoyment in favor of Lessee, (a) enter upon any Property and (b) take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of any lessee. All out-of-pocket costs and expenses so incurred (including without limitation fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by Lessor, shall be paid by Lessee to Lessor on demand. ARTICLE XIX 19.1 PROVISIONS RELATING TO LESSEE'S EXERCISE OF ITS PURCHASE OPTION. Subject to Section 19.2, in connection with any termination of this Lease with respect to any Property pursuant to the terms of Section 16.2, or in connection with Lessee's 27 33 exercise of its Purchase Option, upon the date on which this Lease is to terminate with respect to any Property, and upon tender by Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as applicable, Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's cost and expense an assignment (by deed or other appropriate instrument) of Lessor's entire interest in such Property, in each case in recordable form and otherwise in conformity with local custom and free and clear of any Lessor Liens attributable to Lessor but without any other warranties (of title or otherwise) from Lessor. Such Property shall be conveyed to Lessee "AS-IS, "WHERE-IS" and in then present physical condition. 19.2 NO PURCHASE OR TERMINATION WITH RESPECT TO LESS THAN ALL OF A PROPERTY. Lessee shall not be entitled to exercise its Purchase Option or the Sale Option separately with respect to a portion of any Property consisting of Land, Equipment, Improvements and/or any interest pursuant to a Ground Lease but shall be required to exercise its Purchase Option or the Sale Option with respect to an entire Property. ARTICLE XX 20.1 PURCHASE OPTION OR SALE OPTION-GENERAL PROVISIONS. Not less than one hundred twenty (120) days and no more than one hundred eighty (180) days prior to any Payment Date or the Expiration Date (such Payment Date or Expiration Date being hereinafter referred to as the "Election Date"), Lessee may give Lessor irrevocable written notice (the "Election Notice") that Lessee is electing to exercise either (a) (i) in the case of any Payment Date prior to the Expiration Date, the option to purchase one or more Properties (subject to the Early Termination Conditions) and (ii) in the case of the Expiration Date, the option to purchase all, but not less than all, the Properties (each such option may be referred to as the "Purchase Option") or (b) (i) in the case of any Payment Date prior to the Expiration Date, the option to sell to a Person other than Lessee or any Affiliate of the Lessee one or more Properties (subject to the Early Termination Conditions) and (ii) in the case of the Expiration Date, the option to sell to a Person other than Lessee or any Affiliate of Lessee all, but not less than all, the Properties (each such option may be referred to as that "Sale Option"). Purchases pursuant to the Purchase Option and sales pursuant to the Sale Option shall be accomplished in a manner consistent with the provisions of the Operative Agreement including without limitation Articles XIX, XX and XXII of this Lease. Prior to the Expiration Date, there may be multiple purchases pursuant to the Purchase Option and sales pursuant to the Sale Option and all shall be subject to the Early Termination Conditions. If Lessee does not give an Election Notice indicating the Purchase Option or the Sale Option at least one hundred twenty (120) days and not more than one hundred eighty (180) days prior to the Expiration Date, then Lessee shall be deemed to have elected for the Purchase Option to apply on the Expiration Date. With respect to the Expiration Date, if Lessee shall either (i) elect (or be deemed to have elected) to exercise the Purchase Option or (ii) elect the Sale Option and fail to cause all, but not less than all, the Properties to be sold in accordance with the terms of Section 22.1 on the applicable Election Date, then in either case Lessee shall pay to Lessor on the date on which such purchase or sale is 28 34 scheduled to occur an amount equal to the Termination Value for all, but not less than all, the Properties (which the parties do not intend to be a "bargain" purchase) and, upon receipt of such amounts and satisfaction of such obligations, Lessor shall transfer to Lessee all of Lessor's right, title and interest in and to all, but not less than all, the Properties in accordance with Section 20.2. 20.2 LESSEE PURCHASE OPTION. Provided, no Default or Event of Default shall have occurred and be continuing (other than those that will be cured by the payment of the Termination Value for all the Properties) and provided, that the Election Notice has been appropriately given specifying the Purchase Option, Lessee shall purchase (in the case of any Payment Date prior to the Expiration Date) one or more Properties or (in the case of the Expiration Date) all, but not less than all, the Properties. All such purchases shall be made on the applicable Election Date at a price equal to the Termination Value for all such Properties (which the parties do not intend to be a "bargain" purchase price). Subject to Section 19.2, in connection with any termination of this Lease with respect to any Property pursuant to the terms of Section 16.2, or in connection with Lessee's exercise of its Purchase Option, upon the date on which this Lease is to terminate with respect to a Property or all of the Properties, and upon tender by Lessee of the amounts set forth in Section 16.2(b) or this Section 20.2, as applicable, Lessor shall execute, acknowledge (where required) and deliver to Lessee, at Lessee's cost and expense, each of the following: (a) a termination or assignment (as requested by the Lessee) of each applicable Ground Lease and special or limited warranty Deeds conveying each Property (to the extent it is real property not subject to a Ground Lease) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (b) a Bill of Sale conveying each Property (to the extent it is personal property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax affidavit or other document required by law to be executed and filed in order to record the applicable Deed and/or the applicable Ground Lease termination; and (d) FIRPTA affidavits. All of the foregoing documentation must be in form and substance reasonably satisfactory to Lessor. The applicable Property shall be conveyed to Lessee "AS-IS, WHERE-IS" and in then present physical condition. If any Property is the subject of remediation efforts respecting Hazardous Substances at the applicable Election Date which could materially and adversely impact the Fair Market Sales Value of such Property (with materiality determined in Lessor's discretion), then Lessee shall be obligated to repurchase each such Property pursuant to Section 20.2. On the applicable Election Date on which Lessee has elected to exercise its Purchase Option, Lessee shall pay (or cause to be paid) to Lessor, the Agent and all other parties, as appropriate, the sum of all costs and expenses incurred by any such party in connection with the election by Lessee to exercise its Purchase Option and all Rent and all other amounts then due and payable or accrued under this Lease and/or any other Operative Agreement. 29 35 20.3 THIRD PARTY SALE OPTION. (a) Provided, that (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Election Notice has been appropriately given specifying the Sale Option, Lessee shall undertake to cause a sale (in the case of any Payment Date prior to the Expiration Date) of one or more Properties and (in the case of the Expiration Date) of all, but not less than all, of the Properties on the applicable Election Date (all as specified in the Election Notice), in accordance with the provisions of Section 22.1 hereof. Such Election Date on which a sale is required may be hereafter referred to as the "Sale Date". (b) In the event Lessee exercises the Sale Option then, as soon as practicable and in all events not less than sixty (60) days prior to the Sale Date, Lessee at its expense shall cause to be delivered to Lessor a Phase I environmental site assessment for each of the Properties then subject to sale recently prepared (no more than thirty (30) days old prior to the Sale Date) by an independent recognized professional reasonably acceptable to the Agent and in form, scope and content reasonably satisfactory to the Agent. In the event that the Agent shall not have received such environmental site assessment by the date sixty (60) days prior to the Sale Date or in the event that such environmental assessment shall reveal the existence of any material violation of Environmental Laws, other material Environmental Violation or potential material Environmental Violation (with materiality determined in each case by the Agent in its reasonable discretion), then Lessee on the Sale Date shall pay to Lessor an amount equal to the Termination Value for all such Properties then subject to sale and any and all other amounts due and owing hereunder. Upon receipt of such payment and all other amounts due under the Operative Agreements, Lessor shall transfer to Lessee all of Lessor's right, title and interest in and to all such Properties then subject to sale in accordance with Section 19.1. ARTICLE XXI 21.1 [INTENTIONALLY OMITTED]. ARTICLE XXII 22.1 SALE PROCEDURE. (a) During the Marketing Period, Lessee, on behalf of Lessor, shall obtain bids for the cash purchase of (in the case of a sale scheduled for a Payment Date prior to the Expiration Date) one or more Properties subject to sale and (in the case of the Expiration Date) all, but not less than all, the Properties in connection with a sale to one or more third party purchasers to be consummated on the applicable Sale Date for the highest price available, shall notify Lessor promptly of the name and address of each prospective purchaser and the cash price which each prospective purchaser shall have 30 36 offered to pay for each such Property and shall provide Lessor with such additional information about the bids and the bid solicitation procedure as Lessor may reasonably request from time to time. All such prospective purchasers must be Persons other than Lessee or any Affiliate of Lessee. On the applicable Sale Date, Lessee shall pay (or cause to be paid) to Lessor and all other parties, as appropriate, the sum of all costs and expenses incurred by Lessor and/or the Agent (as the case may be) in connection with such sale of one or more Properties, all Rent and all other amounts then due and payable or accrued under this Lease and/or any other Operative Agreement. Lessor may reject any and all bids and may solicit and obtain bids by giving Lessee written notice to that effect; provided, however, that notwithstanding the foregoing, Lessor may not reject the bids submitted by Lessee if such bids, in the aggregate, are (but only regarding a sale on or with respect to the Expiration Date) greater than or equal to the sum of the Limited Recourse Amount for all the Properties then subject to sale in accordance with the terms of this Lease, and represent bona fide offers from one or more third party purchasers. If the highest price which a prospective purchaser or the prospective purchasers shall have offered to pay for all such Properties on the Sale Date (but only regarding a sale on or with respect to the Expiration Date) is less than the sum of the Limited Recourse Amount for all the Properties or if such bids do not represent bona fide offers from one or more third parties or if there are no bids, Lessor may elect to retain one or more of the Properties by giving Lessee prior written notice of Lessor's election to retain the same, and promptly upon receipt of such notice, Lessee shall surrender, or cause to be surrendered, each of the Properties specified in such notice in accordance with the terms and conditions of Section 10.1. Upon acceptance of any bid, Lessor agrees, at Lessee's request and expense, to execute a contract of sale with respect to such sale, so long as the same is consistent with the terms of this Article 22 and provides by its terms that it is nonrecourse to Lessor. Unless Lessor shall have elected to retain one or more of the Properties then subject to sale in accordance with the terms of this Lease and pursuant to the provisions of the preceding paragraph, Lessee shall arrange for Lessor to sell all such Properties free and clear of the Lien of this Lease and any Lessor Liens attributable to Lessor, without recourse or warranty (of title or otherwise), for cash on the applicable Sale Date to the purchaser or purchasers offering the highest cash sales price, as identified by Lessee or Lessor, as the case may be; provided, however, solely as to Lessor or the Trust Company, in its individual capacity, any Lessor Lien shall not constitute a Lessor Lien so long as Lessor or the Trust Company, in its individual capacity, is diligently and in good faith contesting, at the cost and expense of Lessor or the Trust Company, in its individual capacity, such Lessor Lien by appropriate proceedings in which event the applicable Sale Date, all without penalty or cost to Lessee, shall be delayed for the period of such contest. To effect such transfer and assignment, Lessor shall execute, acknowledge (where required) and deliver to the appropriate purchaser each of the following: (a) special or limited warranty Deeds conveying each such Property (to the extent it is real property titled to Lessor) and an assignment of the Ground Lease conveying the leasehold interest of Lessor in each such Property (to the extent it is real property and subject to a Ground 31 37 Lease) to the appropriate purchaser free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (b) a Bill of Sale conveying each such Property (to the extent it is personal property) titled to Lessor to the appropriate purchaser free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax affidavit or other document required by law to be executed and filed in order to record each Deed and/or each Ground Lease assignment; and (d) FIRPTA affidavits, as appropriate. All of the foregoing documentation must be in form and substance reasonably satisfactory to Lessor. Lessee shall surrender the Properties so sold or subject to such documents to each purchaser in the condition specified in Section 10.1, or in such other condition as may be agreed between Lessee and such purchaser. Lessee shall not take or fail to take any action which would have the effect of unreasonably discouraging bona fide third party bids for any Property. If each of the Properties (then subject to sale in accordance with the terms of this Lease) is not either (i) sold on the applicable Sale Date in accordance with the terms of this Section 22.1, or (ii) retained by Lessor pursuant to an affirmative election made by Lessor pursuant to the second sentence of the second paragraph of this Section 22.1(a), then (x) Lessee shall be obligated to pay Lessor on the applicable Sale Date an amount equal to the aggregate Termination Value for all such Properties less any sales proceeds received, and (y) Lessor shall transfer each applicable Property to Lessee in accordance with Section 20.2. (b) If the Properties (then subject to sale in accordance with the terms of this Lease) are sold on a Sale Date to one or more third party purchasers in accordance with the terms of Section 22.1(a) and the aggregate purchase price paid for all the Properties is less than the sum of the aggregate Property Cost for all such Properties (hereinafter such difference shall be referred to as the "Deficiency Balance"), then Lessee hereby unconditionally promises to pay to Lessor on the applicable Sale Date (to the extent such Sale Date is not the Expiration Date) the Deficiency Balance and (to the extent such Sale Date is the Expiration Date) the lesser of (i) the Deficiency Balance or (ii) the Maximum Residual Guarantee Amount for all the Properties. On a Sale Date if (x) Lessor receives the aggregate Termination Value for all the Properties (then subject to sale in accordance with the terms of this Lease) from one (1) or more third party purchasers, (y) Lessor and such other parties receive all other amounts specified in the last sentence of the first paragraph of Section 22.1(a) and (z) the aggregate purchase price paid for all such Properties on such date exceeds the sum of the aggregate Property Cost for all such Properties, then Lessee may retain such excess. If one or more of such Properties is retained by Lessor pursuant to an affirmative election made by Lessor pursuant to the provisions of Section 22.1(a), then Lessee hereby unconditionally promises to pay to Lessor on the Sale Date (but only regarding a sale on or with respect to the Expiration Date) an amount equal to the Maximum Residual Guarantee Amount for the Properties so retained. Any payment of the foregoing amounts described in this Section 22.1(b) shall be made together with a payment of all other amounts referenced in the last sentence of the first paragraph of Section 22.1(a). 32 38 (c) In the event that all the Properties (then subject to sale in accordance with the terms of this Lease) are either sold to one (1) or more third party purchasers on the Sale Date or retained by Lessor in connection with an affirmative election made by Lessor pursuant to the provisions of Section 22.1(a), then in either case on the applicable Sale Date Lessee shall provide Lessor or such third party purchaser (unless otherwise agreed by such third party purchaser) with (i) all permits, certificates of occupancy, governmental licenses and authorizations necessary to use, operate, repair, access and maintain each such Property for the purpose it is being used by Lessee, and (ii) such manuals, permits, easements, licenses, intellectual property, know-how, rights-of-way and other rights and privileges in the nature of an easement as are reasonably necessary or desirable in connection with the use, operation, repair, access to or maintenance of each such Property for its intended purpose or otherwise as Lessor or such third party purchaser(s) shall reasonably request (and a royalty-free license or similar agreement to effectuate the foregoing on terms reasonably agreeable to Lessor or such third party purchaser(s), as applicable). All assignments, licenses, easements, agreements and other deliveries required by clauses (i) and (ii) of this paragraph (c) shall be in form reasonably satisfactory to the Agent or such third party purchaser(s), as applicable, and shall be fully assignable (including without limitation both primary assignments and assignments given in the nature of security) without payment of any fee, cost or other charge. Lessee shall also execute any documentation requested by Lessor or such third party purchaser(s), as applicable, evidencing the continuation or assignment of each Ground Lease. 22.2 APPLICATION OF PROCEEDS OF SALE. Lessor shall apply the proceeds of sale of any Property in the following order of priority: (a) FIRST, to pay or to reimburse Lessor (and/or the Agent, as the case may be) for the payment of all reasonable costs and expenses incurred by Lessor (and/or the Agent, as the case may be) in connection with the sale (to the extent Lessee has not satisfied its obligation to pay such costs and expenses); (b) SECOND, so long as the Credit Agreement is in effect and any Loans or Holder Advances or any amount is owing to the Financing Parties under any Operative Agreement, to the Agent to be applied pursuant to intercreditor provisions among Lessor, the Lenders and the Holders contained in the Operative Agreements; and (c) THIRD, to Lessee. 22.3 INDEMNITY FOR EXCESSIVE WEAR. If the proceeds of the sale described in Section 22.1 with respect to the Properties on the Expiration Date shall be less than the Limited Recourse Amount with respect to the Properties, and at the time of such sale it shall have been reasonably determined (pursuant to the Appraisal Procedure) that the Fair Market Sales Value of the Properties shall have been impaired 33 39 by greater than expected wear and tear during the term of the Lease, Lessee shall pay to Lessor within ten (10) days after receipt of Lessor's written statement (i) the amount of such excess wear and tear determined by the Appraisal Procedure or (ii) the amount of the Sale Proceeds Shortfall, whichever amount is less. 22.4 APPRAISAL PROCEDURE. For determining the Fair Market Sales Value of the Properties or any other amount which may, pursuant to any provision of any Operative Agreement, be determined by an appraisal procedure, Lessor and Lessee shall use the following procedure (the "Appraisal Procedure"). Lessor and Lessee shall endeavor to reach a mutual agreement as to such amount for a period of ten (10) days from commencement of the Appraisal Procedure under the applicable section of the Lease, and if they cannot agree within ten (10) days, then two (2) qualified appraisers, one (1) chosen by Lessee and one (1) chosen by Lessor, shall mutually agree thereupon, but if either party shall fail to choose an appraiser within twenty (20) days after notice from the other party of the selection of its appraiser, then the appraisal by such appointed appraiser shall be binding on Lessee and Lessor. If the two (2) appraisers cannot agree within twenty (20) days after both shall have been appointed, then a third appraiser shall be selected by the two (2) appraisers or, failing agreement as to such third appraiser within thirty (30) days after both shall have been appointed, by the American Arbitration Association. The decisions of the three (3) appraisers shall be given within twenty (20) days of the appointment of the third appraiser and the decision of the appraiser most different from the average of the other two (2) shall be discarded and such average shall be binding on Lessor and Lessee; provided, that if the highest appraisal and the lowest appraisal are equidistant from the third appraisal, the third appraisal shall be binding on Lessor and Lessee. The fees and expenses of the appraiser appointed by Lessee shall be paid by Lessee; the fees and expenses of the appraiser appointed by Lessor shall be paid by Lessor (such fees and expenses not being indemnified pursuant to Section 13 of the Participation Agreement); and the fees and expenses of the third appraiser shall be divided equally between Lessee and Lessor. 22.5 CERTAIN OBLIGATIONS CONTINUE. During the Marketing Period, the obligation of Lessee to pay Rent with respect to the Properties (including without limitation the installment of Basic Rent due on the Sale Date) shall continue undiminished until payment in full to Lessor of the sale proceeds, if any, the Maximum Residual Guarantee Amount, the amount due under Section 22.3, if any, and all other amounts due to Lessor or any other Person with respect to all Properties or any Operative Agreement. Lessor shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take action in connection with any such sale, other than as expressly provided in this Article XXII. 34 40 ARTICLE XXIII 23.1 HOLDING OVER. If Lessee shall for any reason remain in possession of a Property after the expiration or earlier termination of this Lease as to such Property (unless such Property is conveyed to Lessee), such possession shall be as a tenancy at sufferance during which time Lessee shall continue to pay Supplemental Rent that would be payable by Lessee hereunder were the Lease then in full force and effect with respect to such Property and Lessee shall continue to pay Basic Rent at the Lesser of the highest lawful rate and at one hundred ten percent (110%) of the last payment of Basic Rent due with respect to such Property prior to such expiration or earlier termination of this Lease. Such Basic Rent shall be payable from time to time upon demand by Lessor and such additional amount of Basic Rent shall be applied by Lessor ratably to the Lenders and the Holders based on their relative amounts of the then outstanding aggregate Property Cost for all Properties. During any period of tenancy at sufferance, Lessee shall, subject to the second preceding sentence, be obligated to perform and observe all of the terms, covenants and conditions of this Lease, but shall have no rights hereunder other than the right, to the extent given by law to tenants at sufferance, to continue their occupancy and use of such Property. Nothing contained in this Article XXIII shall constitute the consent, express or implied, of Lessor to the holding over of Lessee after the expiration or earlier termination of this Lease as to any Property (unless such Property is conveyed to Lessee) and nothing contained herein shall be read or construed as preventing Lessor from maintaining a suit for possession of such Property or exercising any other remedy available to Lessor at law or in equity. ARTICLE XXIV 24.1 RISK OF LOSS. During the Term, unless Lessee shall not be in actual possession of any Property in question solely by reason of Lessor's exercise of its remedies of dispossession under Article XVII, the risk of loss or decrease in the enjoyment and beneficial use of such Property as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by Lessee, and Lessor shall in no event be answerable or accountable therefor. ARTICLE XXV 25.1 ASSIGNMENT. (a) Lessee may not assign this Lease or any of its rights or obligations hereunder or with respect to any Property in whole or in part to any Person without the prior written consent of the Agent, the Lenders, the Holders and Lessor (except as provided in Section 25.2(b)). 35 41 (b) No assignment by Lessee (referenced in this Section 25.1 or otherwise) or other relinquishment of possession to any Property shall in any way discharge or diminish any of the obligations of Lessee to Lessor hereunder and Lessee shall remain directly and primarily liable under the Operative Agreements as to any rights or obligations assigned by Lessee or regarding any Property in which rights or obligations have been assigned or otherwise transferred. 25.2 SUBLEASES. (a) Promptly, but in any event within five (5) Business Days, following the execution and delivery of any sublease permitted by this Article XXV, Lessee shall notify Lessor and the Agent of the execution of such sublease. As of the date of each Lease Supplement, Lessee shall lease the respective Properties described in such Lease Supplement from Lessor, and any existing tenant respecting such Property shall automatically be deemed to be a subtenant of Lessee and not a tenant of Lessor (except as provided in Section 25.2(b)). (b) Without the prior written consent of the Agent, any Lender, any Holder or Lessor and subject to the other provisions of this Section 25.2, Lessee may sublet any Property or portion thereof to any wholly-owned Subsidiary of Lessee or to any physician or ancillary service provider (and any such wholly-owned Subsidiary of Lessee may enter into a second tier sublease with any physician or ancillary service provider, in accordance with this Section 25.2); provided, however, that (1) concurrent with the execution of such sublease, Lessee shall certify in writing to the Agent that any such sublease of all or any portion of a Property has been entered into in accordance with market terms and for market rental amounts, as both relate to such Property, and in no way diminishes the fair market value, utility or useful life of such Property and (2) no such sublease shall be for a term extending more than seven (7) years beyond the Expiration Date. Except as referenced in the immediately preceding sentence, no other subleases shall be permitted unless consented to in writing by Lessor and the Agent. (c) No sublease (referenced in this Section 25.2 or otherwise) or other relinquishment of possession to any Property shall in any way discharge or diminish any of Lessee's obligations to Lessor hereunder and Lessee shall remain directly and primarily liable under this Lease as to such Property, or portion thereof, so sublet. ARTICLE XXVI 26.1 NO WAIVER. No failure by Lessor or Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a 36 42 waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Lease, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent default. ARTICLE XXVII 27.1 ACCEPTANCE OF SURRENDER. No surrender to Lessor of this Lease or of all or any portion of any Property or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by Lessor and the Agent and no act by Lessor or the Agent or any representative or agent of Lessor or the Agent, other than a written acceptance, shall constitute an acceptance of any such surrender. 27.2 NO MERGER OF TITLE. There shall be no merger of this Lease or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, (b) any right, title or interest in any Property, (c) any Notes, or (d) a beneficial interest in Lessor. ARTICLE XXVIII 28.1 INCORPORATION OF COVENANTS. Reference is made to the Lessee Credit Agreement and the representations and warranties of Lessee contained in Article IV of the Lessee Credit Agreement (hereinafter referred to as the "Incorporated Representations and Warranties") and the covenants contained in Article V and Article VI of the Lessee Credit Agreement (hereinafter referred to as the "Incorporated Covenants"). Lessee agrees with Lessor that the Incorporated Representations and Warranties and the Incorporated Covenants (and all other relevant provisions of the Lessee Credit Agreement related thereto, including without limitation the defined terms contained in Article I thereof which are used in the Incorporated Representations and Warranties and the Incorporated Covenants, hereinafter referred to as the "Additional Incorporated Terms") are hereby incorporated by reference into this Lease and shall inure to the benefit of Lessor to the same extent and with the same effect as if set forth fully herein. In the event a waiver is granted under the Lessee Credit Agreement or an amendment or modification is executed with respect to the Lessee Credit Agreement, and such waiver, amendment and/or modification affects the Incorporated Representations and Warranties, the Incorporated Covenants or the Additional Incorporated Terms, then such waiver, amendment or modification shall be effective with respect to the Incorporated Representations and Warranties, the Incorporated Covenants and the Additional Incorporated Terms as incorporated by reference into this Lease upon the date and for 37 43 the duration of effectiveness thereof under the Lessee Credit Agreement (a) automatically, if the financing parties in the Lessee Credit Agreement hold a pro rata interest in both the Lessee Credit Agreement and the Commitments and (b) if the foregoing subsection (a) is not satisfied, only if consented to in writing by the Agent (acting upon the direction of the Majority Secured Parties). If such consent referenced in subsection (b) of the previous sentence is required but is not granted, then the Incorporated Representations and Warranties, Incorporated Covenants and Additional Incorporated Terms (together with any modification or amendments approved prior to such time in accordance with this paragraph) shall continue to be effective hereunder. In the event of any replacement of the Lessee Credit Agreement with a similar credit facility (the "New Facility"), the representations and warranties, covenants and additional terms contained in the New Facility which correspond to the Incorporated Representations and Warranties, Incorporated Covenants and Additional Incorporated Terms shall become the Incorporated Representations and Warranties, the Incorporated Covenants and the Additional Incorporated Terms hereunder (x) automatically, if the financing parties in the New Facility hold a pro rata interest in both the New Facility and the Commitments and (y) if the foregoing subsection (x) is not satisfied, only if consented to in writing by the Agent (acting upon the direction of the Majority Secured Parties). If such consent referenced in subsection (y) of the previous sentence is required but is not granted or if the Lessee Credit Agreement is terminated and not replaced, then the Incorporated Representations and Warranties, Incorporated Covenants and Additional Incorporated Terms (together with any modifications or amendments approved prior to such time in accordance with this paragraph) shall continue to be effective hereunder. ARTICLE XXIX 29.1 NOTICES. All notices required or permitted to be given under this Lease shall be in writing and delivered as provided in the Participation Agreement. ARTICLE XXX 30.1 MISCELLANEOUS. Anything contained in this Lease to the contrary notwithstanding, all claims against and liabilities of Lessee or Lessor arising from events commencing prior to the expiration or earlier termination of this Lease shall survive such expiration or earlier termination. If any provision of this Lease shall be held to be unenforceable in any jurisdiction, such unenforceability shall not affect the enforceability of any other provision of this Lease and such jurisdiction or of such provision or of any other provision hereof in any other jurisdiction. 38 44 30.2 AMENDMENTS AND MODIFICATIONS. Neither this Lease nor any Lease Supplement may be amended, waived, discharged or terminated except in accordance with the provisions of Section 12.5 of the Participation Agreement. 30.3 SUCCESSORS AND ASSIGNS. All the terms and provisions of this Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 30.4 HEADINGS AND TABLE OF CONTENTS. The headings and table of contents in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 30.5 COUNTERPARTS. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one (1) and the same instrument. 30.6 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA, EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE A PARTICULAR PROPERTY IS LOCATED ARE REQUIRED TO APPLY. 30.7 CALCULATION OF RENT. All calculation of Rent payable hereunder shall be computed based on the actual number of days elapsed over a year of three hundred sixty (360) days or, to the extent such Rent is based on the Prime Lending Rate, three hundred sixty-five (365) (or three hundred sixty-six (366), as applicable) days. 30.8 MEMORANDA OF LEASE AND LEASE SUPPLEMENTS. This Lease shall not be recorded; provided, Lessor and Lessee shall promptly record (a) a memorandum of this Lease and the applicable Lease Supplement (in substantially the form of Exhibit B attached hereto) or a short form lease (in form and substance reasonably satisfactory to the Agent) regarding each Property promptly after the acquisition thereof in the local filing office with respect thereto, in all cases at Lessee's cost and expense, and as required under applicable law to sufficiently evidence this Lease and any such Lease Supplement in the applicable real estate filing records. 39 45 30.9 ALLOCATIONS BETWEEN THE LENDERS AND THE HOLDERS. Notwithstanding any other term or provision of this Lease to the contrary, the allocations of the proceeds of the Properties and any and all other Rent and other amounts received hereunder shall be subject to the inter-creditor provisions between the Lenders and the Holders contained in the Operative Agreements (or as otherwise agreed among the Lenders and the Holders from time to time). 30.10 LIMITATIONS ON RECOURSE. Notwithstanding anything contained in this Lease to the contrary, Lessee agrees to look solely to Lessor's estate and interest in the Properties (and in no circumstance to the Agent, the Lenders, the Holders or otherwise to Lessor) for the collection of any judgment requiring the payment of money by Lessor in the event of liability by Lessor, and no other property or assets of Lessor or any shareholder, owner or partner (direct or indirect) in or of Lessor, or any director, officer, employee, beneficiary, Affiliate of any of the foregoing shall be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Lessee under or with respect to this Lease, the relationship of Lessor and Lessee hereunder or Lessee's use of the Properties or any other liability of Lessor to Lessee. Nothing in this Section shall be interpreted so as to limit the terms of Sections 6.1 or 6.2 or the provisions of Section 12.10 of the Participation Agreement. 30.11 WAIVERS OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE AND FOR ANY COUNTERCLAIM THEREIN. 30.12 EXERCISE OF LESSOR RIGHTS. Lessee hereby acknowledges and agrees that the rights and powers of Lessor under this Lease have been assigned to the Agent pursuant to the terms of the Security Agreement and the other Operative Agreements. Lessor and Lessee hereby acknowledge and agree that (a) the Agent shall, in its discretion, direct and/or act on behalf of Lessor pursuant to Sections 8.2(h) and 8.6 of the Participation Agreement, (b) all notices to be given to Lessor shall be given to the Agent and (c) all notices to be given by Lessor may be given by the Agent, at its election. 30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION. THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS. 40 46 30.14 USURY SAVINGS PROVISION. IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE EXTENT ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS SECTION 30.14 SHALL APPLY. ANY SUCH RENT OR PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS LEASE OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT INTEND TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO LESSOR SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR 41 47 EXTENSION) OF THIS LEASE SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW. [Signature page follows] 42 48 IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed and delivered as of the date first above written. PROVINCE HEALTHCARE COMPANY By: /s/ CHRISTOPHER T. HANNON --------------------------------------- Name: Christopher T. Hannon ------------------------------------- Title: Vice President - Finance ------------------------------------ FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, as Lessor By: /s/ C. SCOTT NIELSON --------------------------------------- Name: C. Scott Nielson ------------------------------------- Title: Vice President ------------------------------------ Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as the date hereof FIRST UNION NATIONAL BANK, as the Agent By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 49 EXHIBIT A TO THE LEASE LEASE SUPPLEMENT NO. ___ THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of [________________] between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, as lessor (the "Lessor"), and PROVINCE HEALTHCARE COMPANY, as lessee (the "Lessee"). WHEREAS, Lessor is the owner or will be the owner of the Property described on Schedule 1 hereto (the "Leased Property") and wishes to lease the same to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement, dated as of March 30, 1998, among Lessee, Lessor, not individually, except as expressly stated therein, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, the various banks and other lending institutions which are parties thereto from time to time, as the Holders, the various banks and other lending institutions which are parties thereto from time to time, as the Lenders, and First Union National Bank, as the Agent for the Lenders and respecting the Security Documents, as the Agent for the Lenders and Holders, to the extent of their interests, as such may be amended, modified, extended, supplemented, restated and/or replaced from time to time. SECTION 2. THE PROPERTIES. Attached hereto as Schedule 1 is the description of the Leased Property, with an Equipment Schedule attached hereto as Schedule 1-A, an Improvement Schedule attached hereto as Schedule 1-B and [A LEGAL DESCRIPTION OF THE LAND / A COPY OF THE GROUND LEASE] attached hereto as Schedule 1-C. Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, the Leased Property shall be subject to the terms and provisions of the Lease. Without further action, any and all additional Equipment funded under the Operative Agreements and any and all additional Improvements made to the Land shall be deemed to be titled to the Lessor and subject to the terms and conditions of the Lease and this Lease Supplement. SECTION 3. USE OF PROPERTY. At all times during the Term with respect to each Property, Lessee will comply with all obligations under and (to the extent no Event of Default exists and provided, that such exercise will not impair the value of such Property) shall be permitted to exercise all rights and remedies under, all operation and easement agreements and related or similar agreements applicable to such Property. A-1 50 SECTION 4. RATIFICATION; INCORPORATION BY REFERENCE. Except as specifically modified hereby, the terms and provisions of the Lease and the Operative Agreements are hereby ratified and confirmed and remain in full force and effect. The Lease is hereby incorporated herein by reference as though restated herein in its entirety. SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF NORTH CAROLINA, EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE A PARTICULAR PROPERTY IS LOCATED ARE REQUIRED TO APPLY. SECTION 7. MORTGAGE; POWER OF SALE. Without limiting any other remedies set forth in the Lease, in the event that a court of competent jurisdiction rules that the Lease constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties, then Lessor and Lessee agree that Lessee hereby grants a Lien against the Leased Property WITH POWER OF SALE, and that, upon the occurrence of any Lease Event of Default, Lessor shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Leased Property. SECTION 8. COUNTERPART EXECUTION. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one (1) and the same instrument. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] A-2 51 IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, as Lessor By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ PROVINCE HEALTHCARE COMPANY, as Lessee By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as the date hereof. FIRST UNION NATIONAL BANK, as the Agent By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ A-3 52 [CONFORM TO STATE LAW REQUIREMENTS] STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, on behalf of the Owner Trustee. [Notarial Seal] ----------------------------------- Notary Public My commission expires:____________ STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of _______________, a ________________ corporation, on behalf of the corporation. [Notarial Seal] ----------------------------------- Notary Public My commission expires:____________ STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ________________ this ____ day of ___________, by _____________, as __________________ of FIRST UNION NATIONAL BANK, a national banking association, as the Agent. [Notarial Seal] ----------------------------------- Notary Public My commission expires:____________ A-4 53 SCHEDULE 1 TO LEASE SUPPLEMENT NO. ____ (Description of the Leased Property) A-5 54 SCHEDULE 1-A TO LEASE SUPPLEMENT NO. ____ (Equipment) A-6 55 SCHEDULE 1-B TO LEASE SUPPLEMENT NO. ____ (Improvements) A-7 56 SCHEDULE 1-C TO LEASE SUPPLEMENT NO. ____ [(LAND)/ (GROUND LEASE)] A-8 57 EXHIBIT B TO THE LEASE [MODIFY OR SUBSTITUTE SHORT FORM LEASE AS NECESSARY FOR LOCAL LAW REQUIREMENTS] Recordation requested by: Moore & Van Allen, PLLC After recordation return to: Moore & Van Allen, PLLC (WMA) 100 North Tryon Street, Floor 47 Charlotte, NC 28202-4003 Space above this line for Recorder's use - -------------------------------------------------------------------------------- MEMORANDUM OF LEASE AGREEMENT AND LEASE SUPPLEMENT NO. _____________ THIS MEMORANDUM OF LEASE AGREEMENT AND LEASE SUPPLEMENT NO. ____________ ("Memorandum"), dated as of _____________, 1998, is by and between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, with an office at 79 South Main Street, Salt Lake City, Utah 84111 (hereinafter referred to as "Lessor") and PROVINCE HEALTHCARE COMPANY, a Delaware corporation, with an office at ___________________ (hereinafter referred to as "Lessee"). WITNESSETH: That for value received, Lessor and Lessee do hereby covenant, promise and agree as follows: 1. DEMISED PREMISES AND DATE OF LEASE. Lessor has leased to Lessee, and Lessee has leased from Lessor, for the Term (as hereinafter defined), certain real property and other property located in ________________, which is described in the attached Schedule 1 (the "Property"), pursuant to the terms of a Lease Agreement between Lessor and Lessee dated as of March 30, 1998 (as such may be amended, modified, extended, supplemented, restated and/or B-1 58 replaced from time to time, "Lease") and a Lease Supplement No. _____ between Lessor and Lessee dated as of ______________ (the "Lease Supplement"). 2. TERM, RENEWAL, EXTENSION AND PURCHASE OPTION. The term of the Lease for the Property ("Term") commenced as of __________, 19__ and shall end as of _________, 19__, unless the Term is extended or earlier terminated in accordance with the provisions of the Lease. The Lease contains provisions for renewal and extension. The tenant has a purchase option under the Lease. 3. TAX PAYER NUMBERS. Lessor's tax payer number: __________________. Lessee's tax payer number: ____________________. 4. MORTGAGE; POWER OF SALE. Without limiting any other remedies set forth in the Lease, in the event that a court of competent jurisdiction rules that the Lease constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties, then Lessor and Lessee agree that Lessee has granted, pursuant to the terms of the Lease and the Lease Supplement, a Lien against the Property WITH POWER OF SALE, and that, upon the occurrence and during the continuance of any Lease Event of Default, Lessor shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Property. 5. EFFECT OF MEMORANDUM. The purpose of this instrument is to give notice of the Lease and the Lease Supplement and their respective terms, covenants and conditions to the same extent as if the Lease and the Lease Supplement were fully set forth herein. This Memorandum shall not modify in any manner the terms, conditions or intent of the Lease or the Lease Supplement and the parties agree that this Memorandum is not intended nor shall it be used to interpret the Lease or the Lease Supplement or determine the intent of the parties under the Lease or the Lease Supplement. [The remainder of this page has been intentionally left blank.] B-2 59 IN WITNESS WHEREOF, the parties hereto have duly executed this instrument as of the day and year first written. LESSOR: FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1 By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ LESSEE: PROVINCE HEALTHCARE COMPANY By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ B-3 60 SCHEDULE 1 (Description of Property) B-4 61 [CONFORM TO STATE LAW REQUIREMENTS] STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Memorandum of Lease Agreement and Lease Supplement No. _____ was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually, but solely as the Owner Trustee under the PHC Real Estate Trust 1998-1, on behalf of the Owner Trustee. [Notarial Seal] ----------------------------------- Notary Public My commission expires:____________ STATE OF _______________ ) ) ss: COUNTY OF ______________ ) The foregoing Memorandum of Lease Agreement and Lease Supplement No. _____ was acknowledged before me, the undersigned Notary Public, in the County of _________________ this _____ day of ______________, by ________________, as __________________ of PROVINCE HEALTHCARE COMPANY, a Delaware corporation, on behalf of the corporation. [Notarial Seal] ----------------------------------- Notary Public My commission expires:____________ B-5 EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 6,775 0 41,267 5,562 3,848 52,251 74,345 7,540 181,222 16,563 52,106 0 0 130 95,714 181,222 47,242 47,851 0 38,867 0 3,082 1,855 4,047 1,772 2,275 0 0 0 2,275 0.17 0.16
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