Exhibit 10.10


 


EXECUTION VERSION


 




 





SECOND LIEN CREDIT AND GUARANTY AGREEMENT


 


DATED AS OF OCTOBER 26, 2007


 


AMONG


 


CHEM RX CORPORATION,


 


CERTAIN SUBSIDIARIES OF CHEM RX CORPORATION,

AS GUARANTORS,


 


VARIOUS LENDERS,


 


CIBC WORLD
MARKETS CORP.,

AS SOLE LEAD ARRANGER AND SOLE BOOK RUNNER,


 


AND


 


CANADIAN
IMPERIAL BANK OF COMMERCE,

NEW YORK AGENCY

AS ADMINISTRATIVE AGENT AND COLLATERAL AGENT


 


 


$37,000,000 SECOND LIEN SENIOR SECURED CREDIT
FACILITIES




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE ONE DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Definitions

  	
  1

  
	
  Section 1.02

  	
  Accounting
  Terms

  	
  28

  
	
  Section 1.03

  	
  Interpretation,
  etc.

  	
  28

  
	
  Section 1.04

  	
  Construction

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWO LOANS

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Commitments

  	
  29

  
	
  Section 2.02

  	
  Borrowing
  Mechanics for Loans

  	
  29

  
	
  Section 2.03

  	
  [Reserved]

  	
  29

  
	
  Section 2.04

  	
  [Reserved]

  	
  30

  
	
  Section 2.05

  	
  [Reserved]

  	
  30

  
	
  Section 2.06

  	
  [Reserved]

  	
  30

  
	
  Section 2.07

  	
  [Reserved]

  	
  30

  
	
  Section 2.08

  	
  [Reserved]

  	
  30

  
	
  Section 2.09

  	
  [Reserved]

  	
  30

  
	
  Section 2.10

  	
  [Reserved]

  	
  30

  
	
  Section 2.11

  	
  [Reserved]

  	
  30

  
	
  Section 2.12

  	
  [Reserved]

  	
  30

  
	
  Section 2.13

  	
  [Reserved]

  	
  30

  
	
  Section 2.14

  	
  [Reserved]

  	
  30

  
	
  Section 2.15

  	
  [Reserved]

  	
  31

  
	
  Section 2.16

  	
  Use of
  Proceeds

  	
  31

  
	
  Section 2.17

  	
  Lenders’
  Evidence of Debt

  	
  31

  
	
  Section 2.18

  	
  Notes

  	
  31

  
	
  Section 2.19

  	
  Interest
  Rate on Loans

  	
  31

  
	
  Section 2.20

  	
  Interest
  Rate

  	
  32

  
	
  Section 2.21

  	
  Conversion/Continuation

  	
  33

  
	
  Section 2.22

  	
  Default
  Interest

  	
  33

  
	
  Section 2.23

  	
  Fees;
  Premium

  	
  33

  
	
  Section 2.24

  	
  Repayment

  	
  34

  
	
  Section 2.25

  	
  Voluntary
  Prepayments

  	
  34

  
	
  Section 2.26

  	
  [Reserved]

  	
  35

  
	
  Section 2.27

  	
  Mandatory
  Prepayments

  	
  35

  
	
  Section 2.28

  	
  [Reserved]

  	
  36

  
	
  Section 2.29

  	
  Prepayment
  Certificate

  	
  36

  
	
  Section 2.30

  	
  Application
  of Prepayments/Reductions

  	
  36

  
	
  Section 2.31

  	
  General
  Provisions Regarding Payments

  	
  37

  
	
  Section 2.32

  	
  Sharing of
  Payments by Lenders

  	
  38

  
	
  Section 2.33

  	
  Making or
  Maintaining Eurodollar Rate Loans

  	
  38

  
	
  Section 2.34

  	
  Compensation
  For Increased Costs

  	
  40

  
	
  Section 2.35

  	
  Capital
  Requirements; Certificates for Reimbursement; Delay in Requests

  	
  41

  
	
  Section 2.36

  	
  Taxes

  	
  41

  
	
  Section 2.37

  	
  Mitigation
  Obligations; Replacement of Lenders

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE THREE CONDITIONS PRECEDENT

  	
  44

  
					



 


i

















 


	
  Section 3.01

  	
  Closing Date

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE FOUR REPRESENTATIONS AND WARRANTIES

  	
  47

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Organization;
  Requisite Power and Authority; Qualification

  	
  47

  
	
  Section 4.02

  	
  Capital
  Stock and Ownership

  	
  48

  
	
  Section 4.03

  	
  Due
  Authorization

  	
  48

  
	
  Section 4.04

  	
  No Conflict

  	
  48

  
	
  Section 4.05

  	
  Governmental
  Consents

  	
  49

  
	
  Section 4.06

  	
  Binding
  Obligation

  	
  49

  
	
  Section 4.07

  	
  Historical
  Financial Statements

  	
  49

  
	
  Section 4.08

  	
  Projections

  	
  49

  
	
  Section 4.09

  	
  No Material
  Adverse Effect

  	
  50

  
	
  Section 4.10

  	
  Adverse
  Proceedings, etc.

  	
  50

  
	
  Section 4.11

  	
  Payment of
  Taxes

  	
  50

  
	
  Section 4.12

  	
  Properties

  	
  50

  
	
  Section 4.13

  	
  Environmental
  Matters

  	
  51

  
	
  Section 4.14

  	
  No Defaults

  	
  51

  
	
  Section 4.15

  	
  Material
  Contracts

  	
  52

  
	
  Section 4.16

  	
  Governmental
  Regulation

  	
  52

  
	
  Section 4.17

  	
  Margin Stock

  	
  52

  
	
  Section 4.18

  	
  Employee
  Matters

  	
  52

  
	
  Section 4.19

  	
  Employee
  Benefit Plans

  	
  53

  
	
  Section 4.20

  	
  Solvency

  	
  53

  
	
  Section 4.21

  	
  Compliance
  with Statutes, etc.

  	
  54

  
	
  Section 4.22

  	
  Disclosure

  	
  54

  
	
  Section 4.23

  	
  Health Care
  Matters

  	
  54

  
	
  Section 4.24

  	
  Intellectual
  Property

  	
  56

  
	
  Section 4.25

  	
  No Default

  	
  56

  
	
  Section 4.26

  	
  Investigations,
  Audits, Etc.

  	
  56

  
	
  Section 4.27

  	
  Patriot Act

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE FIVE AFFIRMATIVE COVENANTS

  	
  57

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Financial
  Statements and Other Reports

  	
  57

  
	
  Section 5.02

  	
  Existence

  	
  60

  
	
  Section 5.03

  	
  Payment of
  Taxes and Claims

  	
  61

  
	
  Section 5.04

  	
  Maintenance
  of Properties

  	
  61

  
	
  Section 5.05

  	
  Insurance

  	
  61

  
	
  Section 5.06

  	
  Inspections

  	
  62

  
	
  Section 5.07

  	
  Lenders’
  Meetings

  	
  62

  
	
  Section 5.08

  	
  Compliance
  with Laws

  	
  62

  
	
  Section 5.09

  	
  Environmental
  Disclosure

  	
  62

  
	
  Section 5.10

  	
  Hazardous
  Materials Activities, etc.

  	
  63

  
	
  Section 5.11

  	
  Subsidiaries

  	
  63

  
	
  Section 5.12

  	
  Additional
  Material Real Estate Assets

  	
  64

  
	
  Section 5.13

  	
  Interest
  Rate Protection

  	
  64

  
	
  Section 5.14

  	
  Further
  Assurances

  	
  64

  
	
  Section 5.15

  	
  Cash
  Management Systems

  	
  64

  
	
  Section 5.16

  	
  Books and
  Records

  	
  65

  
	
  Section 5.17

  	
  Performance
  of Leases, Related Documents and Other Material Agreements

  	
  65

  
	
  Section 5.18

  	
  Compliance
  Program

  	
  65

  
	
  Section 5.19

  	
  Condition of
  Participation in Third Party Payor Programs

  	
  65

  
					



 


ii

















 


	
  Section 5.20

  	
  Certain
  Post-Closing Obligations

  	
  65

  
	
   

  	
   

  	
  65

  
	
  Section 5.21

  	
  Maintenance
  of Ratings

  	
  66

  
	
   

  	
   

  	
   

  
	
  ARTICLE SIX NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Indebtedness

  	
  66

  
	
  Section 6.02

  	
  Liens

  	
  67

  
	
  Section 6.03

  	
  No Further
  Negative Pledges

  	
  69

  
	
  Section 6.04

  	
  Restricted
  Junior Payments

  	
  69

  
	
  Section 6.05

  	
  Restrictions
  on Subsidiary Distributions

  	
  71

  
	
  Section 6.06

  	
  Investments

  	
  71

  
	
  Section 6.07

  	
  Financial
  Covenants

  	
  72

  
	
  Section 6.08

  	
  Fundamental
  Changes; Disposition of Assets; Acquisitions

  	
  74

  
	
  Section 6.09

  	
  Disposal of
  Subsidiary Interests

  	
  75

  
	
  Section 6.10

  	
  Sales and
  Lease-Backs

  	
  75

  
	
  Section 6.11

  	
  Transactions
  with Shareholders and Affiliates

  	
  76

  
	
  Section 6.12

  	
  Conduct of
  Business

  	
  76

  
	
  Section 6.13

  	
  Amendments
  or Waivers of Certain Related Agreements

  	
  76

  
	
  Section 6.14

  	
  Amendments
  or Waivers of the First Lien Credit Agreement

  	
  76

  
	
  Section 6.15

  	
  Fiscal Year

  	
  77

  
	
  Section 6.16

  	
  No Foreign
  Subsidiaries

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE SEVEN GUARANTY

  	
  77

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Guaranty of
  the Obligations

  	
  77

  
	
  Section 7.02

  	
  Contribution
  by Guarantors

  	
  77

  
	
  Section 7.03

  	
  Payment by
  Guarantors

  	
  78

  
	
  Section 7.04

  	
  Liability of
  Guarantors Absolute

  	
  78

  
	
  Section 7.05

  	
  Waivers by
  Guarantors

  	
  80

  
	
  Section 7.06

  	
  Guarantors’
  Rights of Subrogation, Contribution, etc.

  	
  80

  
	
  Section 7.07

  	
  Subordination
  of Other Obligations

  	
  81

  
	
  Section 7.08

  	
  Continuing
  Guaranty

  	
  81

  
	
  Section 7.09

  	
  Authority of
  Guarantors or Borrower

  	
  81

  
	
  Section 7.10

  	
  Financial
  Condition of Borrower

  	
  81

  
	
  Section 7.11

  	
  Bankruptcy,
  etc.

  	
  82

  
	
  Section 7.12

  	
  Discharge of
  Guaranty upon Sale of Guarantor

  	
  82

  
	
   

  	
   

  	
   

  
	
  ARTICLE EIGHT EVENTS OF DEFAULT

  	
  82

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Events of
  Default

  	
  82

  
	
   

  	
   

  	
   

  
	
  ARTICLE NINE AGENTS

  	
  85

  
	
   

  	
   

  	
   

  
	
  Section 9.01

  	
  Appointment
  and Authority

  	
  85

  
	
  Section 9.02

  	
  Rights as a
  Lender

  	
  85

  
	
  Section 9.03

  	
  Exculpatory
  Provisions

  	
  86

  
	
  Section 9.04

  	
  Reliance by
  Administrative Agent and the Collateral Agent

  	
  87

  
	
  Section 9.05

  	
  Delegation
  of Duties

  	
  87

  
	
  Section 9.06

  	
  Resignation
  of Administrative Agent

  	
  87

  
	
  Section 9.07

  	
  Non-Reliance
  on Agents and Other Lenders

  	
  88

  
	
  Section 9.08

  	
  No Other
  Duties, etc.

  	
  88

  
	
  Section 9.09

  	
  Collateral
  Documents and Guaranty

  	
  89

  
	
  Section 9.10

  	
  Withholding
  Taxes

  	
  89

  



 


iii

















 


	
  ARTICLE TEN MISCELLANEOUS

  	
  89

  
	
   

  	
   

  	
   

  
	
  Section 10.01

  	
  Notices;
  Effectiveness; Electronic Communication

  	
  89

  
	
  Section 10.02

  	
  Expenses;
  Indemnity; Damage Waiver

  	
  91

  
	
  Section 10.03

  	
  Right of
  Set-Off

  	
  92

  
	
  Section 10.04

  	
  Amendments
  and Waivers

  	
  92

  
	
  Section 10.05

  	
  Execution of
  Amendments, etc.

  	
  93

  
	
  Section 10.06

  	
  Successors
  and Assigns; Participations

  	
  94

  
	
  Section 10.07

  	
  Independence
  of Covenants

  	
  96

  
	
  Section 10.08

  	
  Survival of
  Representations, Warranties and Agreements

  	
  96

  
	
  Section 10.09

  	
  No Waiver;
  Remedies Cumulative

  	
  96

  
	
  Section 10.10

  	
  Marshalling;
  Payments Set Aside

  	
  96

  
	
  Section 10.11

  	
  Severability

  	
  97

  
	
  Section 10.12

  	
  Obligations
  Several; Independent Nature of Lenders’ Rights

  	
  97

  
	
  Section 10.13

  	
  Headings

  	
  97

  
	
  Section 10.14

  	
  Governing
  Law; Jurisdiction; Etc.

  	
  97

  
	
  Section 10.15

  	
  WAIVER OF
  JURY TRIAL

  	
  98

  
	
  Section 10.16

  	
  Treatment of
  Certain Information; Confidentiality

  	
  98

  
	
  Section 10.17

  	
  Usury
  Savings Clause

  	
  99

  
	
  Section 10.18

  	
  Counterparts;
  Integration; Effectiveness

  	
  99

  
	
  Section 10.19

  	
  Entire
  Agreement

  	
  99

  
	
  Section 10.20

  	
  Electronic
  Execution of Assignments

  	
  99

  
	
  Section 10.21

  	
  Patriot Act
  Notification

  	
  100

  
	
  Section 10.22

  	
  Release on Payment in Full

  	
  100

  
	
  Section 10.23

  	
  Lender Addendum

  	
  100

  



 


iv

















 


	
  SCHEDULES:

  
	
  1.01:

  	
  Certain Adjustments to Financial Definitions

  
	
  4.01:

  	
  Jurisdictions of Organization and Qualification

  
	
  4.02:

  	
  Capital Stock and Ownership

  
	
  4.12:

  	
  Real Estate Assets

  
	
  4.15:

  	
  Material Contracts

  
	
  4.23:

  	
  Health Care Matters

  
	
  5.15:

  	
  Cash Management Systems

  
	
  6.01:

  	
  Certain Indebtedness

  
	
  6.02:

  	
  Certain Liens

  
	
  6.06:

  	
  Certain Investments

  
	
  6.11:

  	
  Certain Affiliate Transactions

  
	
   

  	
   

  
	
  EXHIBITS:

  
	
  A-1:

  	
  Funding Notice

  
	
  A-2:

  	
  Conversion/Continuation Notice

  
	
  B:

  	
  Note

  
	
  C:

  	
  Compliance Certificate

  
	
  D:

  	
  Assignment and Assumption Agreement

  
	
  E-1:

  	
  Closing Date Certificate

  
	
  E-2:

  	
  Solvency Certificate

  
	
  F:

  	
  Counterpart Agreement

  
	
  G:

  	
  Pledge and Security Agreement

  
	
  H:

  	
  Landlord Collateral Access Agreement

  
	
  I:

  	
  Intercreditor Agreement

  
	
  J:

  	
  Lender Addendum

  
	
  K:

  	
  Administrative Questionnaire

  
	
  L:

  	
  Prepayment Notice

  



 


v

















 


SECOND LIEN CREDIT AND GUARANTY AGREEMENT


 


This SECOND LIEN CREDIT AND GUARANTY AGREEMENT,
dated as of October 26, 2007, is entered into by and among CHEM RX CORPORATION
(formerly Paramount Acquisition Corp.), a Delaware corporation (“Borrower”),
CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the Lenders party hereto from
time to time, CIBC WORLD MARKETS CORP. (“CIBC WM”), as Sole Lead
Arranger and Sole Book Runner (in such respective capacities, “Lead Arranger”
and “Book Runner”), and CANADIAN IMPERIAL BANK OF COMMERCE, New York
Agency (“CIBC”), as Administrative Agent and Collateral Agent (in such
respective capacities, “Administrative Agent” and “Collateral Agent”).


 


RECITALS


 


WHEREAS, capitalized terms used in these Recitals
shall have the respective meanings set forth for such terms in Section 1.01
hereof;


 


WHEREAS, pursuant to the Stock Purchase Agreement,
the Merger Agreement and the Unit Redemption Agreement, Borrower has agreed to
acquire, directly or indirectly, all of the outstanding capital stock of
B.J.K., Inc., a  New York
corporation  doing business as Chem
Rx  (“Chem Rx”) and its
affiliates Chem Rx New Jersey, LLC, a New Jersey limited liability company (“Chem
Rx-NJ”), and Chem Rx/Salerno’s, LLC, a Pennsylvania limited liability
company (“Chem Rx-PA”);


 


WHEREAS, after the consummation of the Transactions,
Borrower will own all of the Capital Stock of Chem Rx;


 


WHEREAS, Lenders have agreed to extend a second lien
term loan facility to Borrower, in an aggregate amount not to exceed
$37,000,000;


 


WHEREAS, the proceeds of such credit facility will
be used, together with the First Lien Loans,
to (i) to finance, in part, the Acquisition, (ii) to pay fees and
expenses incurred in connection with the Transactions and (iii) to repay
the outstanding principal amount of Existing Indebtedness;


 


WHEREAS, Borrower has agreed to secure all of its
Obligations by granting to Collateral Agent, for the benefit of Secured
Parties, a Second Priority Lien on substantially all of its assets, including a
pledge of all of the Capital Stock of each of its Subsidiaries (including Chem
Rx); and


 


WHEREAS, Guarantors (including Chem Rx) have agreed
to guarantee the obligations of Borrower hereunder and to secure their
respective Obligations by granting to Collateral Agent, for the benefit of
Secured Parties, a Second Priority Lien on substantially all of their
respective assets, including a pledge of all of the Capital Stock of each of
their respective Subsidiaries.


 


NOW, THEREFORE, in consideration of the premises and
the agreements, provisions and covenants herein contained, the parties hereto
agree as follows:


 


ARTICLE ONE

DEFINITIONS


 


Section 1.01         Definitions.


 


The following terms used herein, including in the
preamble, recitals, exhibits and schedules hereto, shall have the following
meanings:


 

















 


“Act” as defined in Section 4.27.


 


“Acquisition” means (i) the purchase by
Borrower of all the Capital Stock of Chem Rx from Jerry Silva, Steven Silva,
The Jody R. Silva Trust and The Jerry Silva 2007 Annuity Trust (the “Sellers”)
pursuant to the Stock Purchase Agreement, (ii) the concurrent acquisition
of Chem Rx-NJ in connection with the merger of a Subsidiary of Borrower with
Chem Rx-NJ pursuant to the Merger Agreement and (iii) the concurrent
purchase of a minority interest in Chem Rx-PA from Benny Salerno (“Salerno”)
pursuant to the Unit Redemption Agreement.


 


“Adjusted Eurodollar Rate” means, for any
Interest Rate Determination Date with respect to an Interest Period for a
Eurodollar Rate Loan, the rate per annum obtained by dividing (i) the rate
per annum (a) as calculated by the British Bankers’ Association and
obtained by the Administrative Agent through a nationally recognized service
such as the Dow Jones Market Service (Telerate) or Reuters (the “Service”)
(or on any successor or substitute page of such Service, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of Service, as determined by the Administrative
Agent from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) for deposits (for
delivery on the first day of such period) with a term equivalent to such period
in Dollars, determined as of approximately 11:00 a.m. (London, England time) on
such Interest Rate Determination Date, or (b) in the event the rates
referenced in the preceding clause (a) is not available, the rate per annum
(rounded to the nearest 1/100 of 1%) equal to the offered quotation rate to
first class banks in the London interbank market) by CIBC for deposits (for
delivery on the first day of the relevant period) in Dollars of amounts in same
day funds comparable to the principal amount of the applicable Loan of
Administrative Agent, in its capacity as a Lender, for which the Adjusted
Eurodollar Rate is then being determined with maturities comparable to such period
as of approximately 11:00 a.m. (London, England time) on such Interest Rate
Determination Date, by (ii) an amount equal to (a) one minus
(b) the Applicable Reserve Requirement.


 


“Administrative Agent” as defined in the
preamble hereto.


 


“Administrative Questionnaire” means an
Administrative Questionnaire in substantially the form of Exhibit K.


 


“Adverse Proceeding” means any action, suit,
proceeding (whether administrative, judicial or otherwise), governmental
investigation, audit or arbitration (whether or not purportedly on behalf of
Borrower or any of its Subsidiaries) at law or in equity, or before or by any
Governmental Authority, domestic or foreign (including any Environmental
Claims), whether pending or, to the knowledge of Borrower or any of its Subsidiaries,
threatened against or affecting Borrower or any of its Subsidiaries or any
property of Borrower or any of its Subsidiaries.


 


“Affected Lender” as defined in Section
2.33(b).


 


“Affected Loans” as defined in Section
2.33(b).


 


“Affiliate” means, with respect to a
specified Person, another Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.


 


“Agent” means each of Syndication Agent,
Administrative Agent, Collateral Agent, Documentation Agent or any other agent
appointed by the Lead Arranger pursuant to Section 9.01 hereof.


 


“Aggregate Payments” as defined in Section
7.02.


 


2

















 


“Agreement” means this Second Lien Credit and
Guaranty Agreement, dated as of October 26, 2007, as it may be amended,
supplemented, restated or otherwise modified from time to time.


 


“Applicable Margin” means (i) with
respect to Eurodollar Rate Loans, 8.00% per annum and (ii) with respect to
Base Rate Loans, 7.00% per annum.


 


“Applicable Percentage” means with respect to
any Lender, the percentage of the total Commitments represented by such Lender’s
Commitment. If the Commitments have terminated or expired, the Applicable Percentages
shall be determined based upon the Commitments most recently in effect, giving
effect to any assignments.


 


“Applicable Reserve Requirement” means, at
any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a
decimal, at which reserves (including any basic marginal, special,
supplemental, emergency or other reserves) are required to be maintained with
respect thereto against “Eurocurrency liabilities” (as such term is defined in
Regulation D) under regulations issued from time to time by the Board of
Governors of the Federal Reserve System or other applicable banking regulator. Without
limiting the effect of the foregoing, the Applicable Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by
reference to which the applicable Adjusted Eurodollar Rate or any other
interest rate of a Loan is to be determined, or (ii) any category of
extensions of credit or other assets which include Eurodollar Rate Loans. A
Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and
as such shall be deemed subject to reserve requirements without benefits of
credit for proration, exceptions or offsets that may be available from time to
time to the applicable Lender. The rate of interest on Eurodollar Rate Loans
shall be adjusted automatically on and as of the effective date of any change
in the Applicable Reserve Requirement.


 


“Appointing Sub-Agent” as defined in Section
9.05.


 


“Approved Fund” means any Fund that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender
or (c) an entity or an Affiliate of an entity that administers or manages
a Lender.


 


“Assessments” as defined in Section 4.23(g).


 


“Asset Sale” means a sale, lease or sub-lease
(as lessor or sublessor), sale and leaseback, assignment, conveyance, exclusive
license (as licensor or sublicensor), transfer or other disposition to, or any
exchange of property with, any Person (other than Borrower or any Guarantor),
in one transaction or a series of transactions, of all or any part of Borrower’s
or any of its Subsidiaries’ businesses, assets or properties of any kind,
whether real, personal, or mixed and whether tangible or intangible, whether
now owned or hereafter acquired, leased or licensed, including the Capital
Stock of any of Borrower’s Subsidiaries, other than (i) inventory sold or
leased in the ordinary course of business, (ii) sales of Cash or Cash
Equivalents for fair market value; and (iii) sales, leases or licenses out
of other assets for aggregate consideration of less than $300,000 with respect
to any transaction or series of related transactions and less than $1,200,000
in the aggregate during any Fiscal Year.


 


“Assignment and Assumption Agreement” means
an Assignment and Assumption Agreement entered into by a Lender and an Eligible
Assignee (with the consent of any party whose consent is required by Section
10.06), and accepted by Administrative Agent, in substantially the form of
Exhibit D or any other form approved by Administrative Agent.


 


3

















 


“Authorized Officer” means, as applied to any
Person, any individual holding the position of chairman of the board (if an
officer), chief executive officer, chief operating officer or president, and
such Person’s chief financial officer or treasurer.


 


“Available Equity Credit” means, as at any
date of determination, the aggregate amount equal to (i) the fair market
value of the common Capital Stock of the Borrower used by the Borrower as
consideration to consummate a Permitted Acquisition or other permitted
Investment plus (ii) the net cash proceeds received by Borrower
from an offering of common Capital Stock of Borrower to the extent not required
to prepay the Loans pursuant to Section 2.27(c) of the First Lien Credit
Agreement and Section 2.27(c) of this Agreement for such Fiscal Year minus
(iii) the aggregate amount of the Available Equity Credit applied to make
Permitted Acquisitions, Investments permitted pursuant to Section 6.06, Initial
Earnout Payments and Milestone Payments pursuant to Section 6.04(d) and
excluded from Consolidated Capital Expenditures, in each case using such credit
from the Closing Date and on or prior to such date of determination.


 


“Available Warrant Credit” means, with
respect to the amount of Permitted Acquisitions, as at any date of
determination, (a) the aggregate amount of net cash proceeds received by
Borrower from the exercise of the Warrants during the period from the Closing
Date to and including such date of determination minus (b) the sum
of (i) the aggregate amount of the Available Warrant Credit applied to
make Permitted Acquisitions from the Closing Date and on or prior to such date
of determination plus (ii) the aggregate amount of the prepayments
required pursuant to Section 2.27(f) of the First Lien Credit Agreement and
Section 2.27(f) of this Agreement to be made prior to or concurrently with the
making of Permitted Acquisitions utilizing the Available Warrant Credit from
the Closing Date and on or prior to such date of determination.


 


“Bankruptcy Code” means Title 11 of the
United States Code entitled “Bankruptcy,” as now and hereafter in effect, or
any successor statute.


 


“Base Rate” means, for any day, a rate per
annum equal to the greater of (i) the Prime Rate in effect on such day and
(ii) the Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1%. Any
change in the Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective day of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.


 


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


 


“Beneficiary” means each Agent, Lender and
Lender Counterparty.


 


“Board of Directors” means (i) in the
case of a Person that is a limited partnership, the general partner or any
committee authorized to act therefor, (ii) in the case of a Person that is
a corporation, the board of directors of such Person or any committee
authorized to act therefor, (iii) in the case of a Person that is a
limited liability company, the board of managers or members of such Person or
such Person’s manager or any committee authorized to act therefor and
(iv) in the case of any other Person, the board of directors, management
committee or similar governing body or any authorized committee thereof
responsible for the management of the business and affairs of such Person.


 


“Book Runner” as defined in the preamble hereto.


 


“Borrower” as defined in the preamble hereto.


 


4

















 


“Business Day” means (i) any day
excluding Saturday, Sunday and any day which is a legal holiday under the laws
of the State of New York or is a day on which banking institutions located in
such state are authorized or required by law or other governmental action to
close and (ii) with respect to all notices, determinations, fundings and
payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate
Loans, the term “Business Day” shall mean any day which is a Business Day
described in clause (i) and which is also a day for trading by and between
banks in Dollar deposits in the London interbank market.


 


“Capital Lease” means, as applied to any
Person, any lease of any property (whether real, personal or mixed) by that
Person as lessee that, in conformity with GAAP, is or should be accounted for
as a capital lease on the balance sheet of that Person.


 


“Capital Stock” means any and all shares,
interests, participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in a Person
(other than a corporation), including partnership interests and membership
interests, and any and all warrants, rights or options to purchase or other
arrangements or rights to acquire any of the foregoing.


 


“Cash” means money, currency or a credit
balance in any demand or Deposit Account.


 


“Cash Equivalents” means, as at any date of
determination, (i) marketable securities (a) issued or directly and
unconditionally guaranteed as to interest and principal by the United States
Government or (b) issued by any agency of the United States the
obligations of which are backed by the full faith and credit of the United
States, in each case maturing within one year after such date;
(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, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, a rating of at least A-1
from S&P or at least P-1 from Moody’s; (iii) commercial paper maturing
no more than one year from the date of creation thereof and having, at the time
of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1
from Moody’s; (iv) certificates of deposit or bankers’ acceptances
maturing within one year after such date and issued or accepted by any Lender
or by any commercial bank organized under the laws of the United States of
America or any state thereof or the District of Columbia that (a) is at
least “adequately capitalized” (as defined in the regulations of its primary
Federal banking regulator) and (b) has Tier 1 capital (as defined in such
regulations) of not less than $100,000,000; and (v) shares of any money
market mutual fund that (a) has substantially all of its assets invested
continuously in the types of investments referred to in clauses (i) and (ii)
above, (b) has net assets of not less than $500,000,000, and (c) has
the highest rating obtainable from either S&P or Moody’s.


 


“Change in Law” means the occurrence, after
the date of this Agreement, of any of the following:  (a) the adoption or taking effect of any
law, rule, regulation or treaty, (b) any change in any law, rule,
regulation or treaty or in the administration, interpretation or application
thereof by any Governmental Authority or (c) the making or issuance of any
request, guideline or directive (whether or not having the force of law) by any
Governmental Authority.


 


“Change of Control” means, at any time,
(i) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5
under the Exchange Act) other than Management Investors (a) shall have acquired
beneficial ownership of 35% or more on a fully diluted basis of the voting
and/or economic interest in the Capital Stock of Borrower or (b) shall
have obtained the power (whether or not exercised) to elect a majority of the
members of the Board of Directors of Borrower; (ii) the majority of the
seats (other than vacant seats) on the Board of Directors of Borrower cease to
be occupied by Persons who either (a) were members of the Board of
Directors of Borrower on the Closing Date or (b) were nominated for
election by the Board of Directors of Borrower, a majority of whom were
directors on the


 


5

















 


Closing Date or whose
election or nomination for election was previously approved by a majority of
such directors; or (iii) Borrower shall cease to beneficially own and
control 100% on a fully diluted basis of the economic and voting interest in
the Capital Stock of Chem Rx.


 


“Chem Rx” as defined in the recitals hereto.


 


“Chem Rx-NJ” as defined in the recitals hereto.


 


“Chem Rx-PA” as defined in the recitals
hereto.


 


“CIBC” as defined in the preamble hereto.


 


“CIBC WM” as defined in the preamble hereto.


 


“Closing Date” means the date on which the
Loans are made.


 


“Closing Date Certificate” means a Closing
Date Certificate substantially in the form of Exhibit E-1.


 


“Collateral” means, collectively, all of the
real, personal and mixed property (including Capital Stock) in which Liens are
purported to be granted pursuant to the Collateral Documents as security for
the Obligations.


 


“Collateral Agent” as defined in the preamble
hereto.


 


“Collateral Documents” means the
Intercreditor Agreement, the Lien Subordination Agreement, the Pledge and
Security Agreement, the Mortgages, the Landlord Collateral Access Agreements,
Control Agreements, IP Security Agreements, if any, and all other instruments,
documents and agreements delivered by any Loan Party pursuant to this Agreement
or any of the other Loan Documents in order to grant to Collateral Agent, for
the benefit of Lenders, a Lien on any real, personal or mixed property of that
Loan Party as security for the Obligations.


 


“Collateral Questionnaire” means a
certificate in form reasonably satisfactory to the Collateral Agent that
provides information with respect to the personal or mixed property of each
Loan Party.


 


“Commitment” means the commitment of a Lender
to make or otherwise fund a Loan and “Commitments” means such commitments of
all Lenders in the aggregate. The amount of each Lender’s Commitment, if any,
is set forth on the Lender Addendum or in the applicable Assignment and
Assumption Agreement, subject to any adjustment or reduction pursuant to the
terms and conditions hereof. The aggregate amount of the Commitments as of the
Closing Date is $37,000,000.


 


“Compliance Certificate” means a Compliance
Certificate substantially in the form of Exhibit C.


 


“Consent Subsidiary” means any Subsidiary
formed or acquired after the date hereof, in respect of which (a) the
consent of any Person other than Borrower or any Wholly Owned Subsidiary is
required by applicable law or the terms of any organizational document of such
Subsidiary or other agreement of such Subsidiary or any Affiliate of such
Subsidiary in order for such Subsidiary to become a Guarantor or in order for
Capital Stock of such Subsidiary to be pledged under the Collateral Documents,


 


6

















 


as the case may be, and
(b) Borrower endeavored in good faith to obtain such consents and such
consents shall not have been obtained.


 


“Consolidated Adjusted EBITDA” means, for any
period, an amount determined for Borrower and its Subsidiaries on a
consolidated basis equal to (i) the sum, without duplication, of the
amounts for such period of (a) Consolidated Net Income, (b) Consolidated
Interest Expense, (c) provisions for Taxes based on income, (d) total
depreciation expense, (e) total amortization expense, (f) Transaction
Costs incurred and paid in the period (to the extent expensed), including,
without limitation, bonus payments paid to employees in connection with the
Acquisition in an amount not to exceed $5,350,000, and (g) other non-cash
items reducing Consolidated Net Income (excluding any such non-cash item to the
extent that it represents an accrual or reserve for potential cash items in any
future period or amortization of a prepaid cash item that was paid in a prior
period) minus (ii) other non-cash items increasing Consolidated Net
Income for such period (excluding (A) any such non-cash item to the extent
it represents the reversal of an accrual or reserve for potential cash items in
any prior period and (B) any such non-cash item to the extent it will
result in the receipt of cash payments in any future period or in respect of
which cash was received in a prior period); provided  that with
respect to any calculation period ending prior to the first anniversary of the
Closing Date the foregoing shall be subject to adjustment as set forth in
Schedule 1.01.


 


“Consolidated Capital Expenditures” means,
for any period, the aggregate of all expenditures of Borrower and its
Subsidiaries during such period determined on a consolidated basis that, in
accordance with GAAP, are or should be included in “purchase of property and
equipment” or similar items reflected in the consolidated statement of cash
flows of Borrower and its Subsidiaries. For purposes of Section 6.07, the
following shall be excluded from Consolidated Capital Expenditures:
(i) the principal amount of Indebtedness incurred to finance such
expenditures, but including principal payments or prepayments of any such
Indebtedness incurred during such period or any prior period,
(ii) expenditures made using the proceeds of the issuance of Capital
Stock, to the extent such proceeds are not required to prepay the Loans pursuant
to Section 2.27(c) of the First Lien Credit Agreement or, if the First Lien
Credit Agreement is no longer in effect, pursuant to Section 2.27(c) of this
Agreement and (iii) expenditures made using the proceeds of asset sales,
insurance settlements, condemnation awards and other settlements in respect of
lost, destroyed, damaged or condemned assets, equipment or other property to
the extent such expenditures are reinvested or committed to be reinvested
pursuant to Section 2.27(a) or (b).


 


“Consolidated Cash Interest Expense” means,
for any period, Consolidated Interest Expense for such period, excluding any
amount not payable in cash for such period and excluding any Earnout Interest; provided
that, with respect to any calculation period ending prior to the first
anniversary of the Closing Date the foregoing shall be subject to adjustment as
set forth in Schedule 1.01.


 


“Consolidated Current Assets” means, as at
any date of determination, the total assets of Borrower and its Subsidiaries on
a consolidated basis that may properly be classified as current assets in
conformity with GAAP, excluding Cash and Cash Equivalents; provided,
that Consolidated Current Assets shall include all trade receivables, whether
or not classified as a current asset.


 


“Consolidated Current Liabilities” means, as
at any date of determination, the total liabilities of Borrower and its
Subsidiaries on a consolidated basis that may properly be classified as current
liabilities in conformity with GAAP, excluding the current portion of long term
debt.


 


“Consolidated Excess Cash Flow” means, for
any period, an amount (if positive) equal to: 
(i) the sum, without duplication, of the amounts for such period of
(a) Consolidated Adjusted EBITDA, plus (b) the Consolidated Working
Capital Adjustment, minus (ii) the sum, without duplication,


 


7

















 


of the amounts for such
period of (a) voluntary and scheduled repayments of Consolidated Total
Debt (excluding repayments of Revolving Loans or Swing Line Loans (each, as
defined in the First Lien Credit Agreement) except to the extent the Revolving
Commitments (as defined in the First Lien Credit Agreement) are permanently
reduced in connection with such repayments), (b) Consolidated Capital
Expenditures, (c) Consolidated Cash Interest Expense, and
(d) provisions for current taxes based on income of Borrower and its
Subsidiaries and payable in cash with respect to such period.


 


“Consolidated Interest Expense” means, for
any period, total interest expense (including that portion attributable to
Capital Leases in accordance with GAAP and capitalized interest and after
giving effect to any net payments made or received with respect to Interest
Rate Agreements) of Borrower and its Subsidiaries on a consolidated basis with
respect to all outstanding Indebtedness of Borrower and its Subsidiaries,
including all commissions, discounts and other fees and charges owed with
respect to letters of credit and net termination costs under Interest Rate
Agreements, but excluding, however, any amounts referred to in Section 2.23(a)
or Section 2.23(f) of First Lien Credit Agreement payable on or before the
Closing Date; provided  that, with respect to any calculation
period ending prior to the first anniversary of the Closing Date, the foregoing
shall be subject to adjustment as set forth in Schedule 1.01.


 


“Consolidated Net Income” means, for any
period, (i) the net income (or loss) of Borrower and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP, minus (ii) (a) the income
(or loss) of any Person (other than a Loan Party) in which any other Person
(other than a Loan Party) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to a Loan Party by
such Person during such period, (b) the income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of Borrower or is merged into
or consolidated with Borrower or any of its Subsidiaries or that Person’s
assets are acquired by Borrower or any of its Subsidiaries, (c) the income
of any Subsidiary of Borrower to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (d) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any Pension Plan, and
(e) (to the extent not included in clauses (a) through (d) above) any net
extraordinary gains or net extraordinary losses.


 


“Consolidated Total Debt” means, as at any
date of determination, the aggregate stated balance sheet amount of all
Indebtedness of Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP (without giving effect to original issue
discount).


 


“Consolidated Working Capital” means, as at
any date of determination, the excess of Consolidated Current Assets over
Consolidated Current Liabilities.


 


“Consolidated Working Capital Adjustment”
means, for any period on a consolidated basis, the amount (which may be a
negative number) by which Consolidated Working Capital as of the beginning of
such period exceeds (or is less than) Consolidated Working Capital as of the
end of such period.


 


“Contractual Obligation” means, as applied to
any Person, any provision of any Security issued by that Person or of any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.


 


“Contributing Guarantors” as defined in
Section 7.02.


 


8
















 


“Control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ability to exercise voting power, by
contract or otherwise. “Controlling” and “Controlled” have meanings correlative
thereto.


 


“Control Agreements” means each control
agreement executed and delivered to the Collateral Agent for the benefit of the
Secured Parties, a securities intermediary or depositary bank and by the
applicable Loan Party on or after the Closing Date and each control agreement
to be executed and delivered by the Collateral Agent, a securities intermediary
or depository bank and the applicable Loan Party pursuant to the terms of the
Pledge and Security Agreement with such modifications as the Collateral Agent
may reasonably request or approve, in each case, to the extent permitted by and
in accordance with applicable law.


 


“Conversion/Continuation Date” means the
effective date of a continuation or conversion, as the case may be, as set
forth in the applicable Conversion/Continuation Notice.


 


“Conversion/Continuation Notice” means a
Conversion/Continuation Notice substantially in the form of Exhibit A-2.


 


“Counterpart Agreement” means a Counterpart
Agreement substantially in the form of Exhibit F delivered by a Loan Party
pursuant to Section 5.11.


 


“Credit Extension” means the making of a
Loan.


 


“Default” means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default.


 


“Deposit Account” means a demand, time,
savings, passbook or like account with a bank, savings and loan association,
credit union or like organization, other than an account evidenced by a
negotiable certificate of deposit.


 


“Documentation Agent” shall mean a
documentation agent appointed by the Lead Arranger pursuant to Section 9.01.


 


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


 


“Domestic Subsidiary” means any Subsidiary
organized under the laws of the United States of America, any State thereof or
the District of Columbia.


 


“Earnout Interest” means the interest payable
pursuant to Section 1.8(c) of the Stock Purchase Agreement.


 


“Earnout Seller Notes” means any Indebtedness
of Borrower in favor of the Sellers (or their family members or to a trust,
partnership or other entity formed for the benefit of the Sellers or such
family members primarily for estate or family planning purposes) incurred to
enable Borrower to make the Initial Earnout Payments and Milestone Payments; provided
that (i) such Indebtedness is unsecured and not guaranteed by any of
Borrower’s Subsidiaries, (ii) such Indebtedness does not bear interest
(other than payment-in-kind interest) and is not subject to commissions,
charges, expenses, fees, attorneys’ fees or disbursements, indemnities or other
amounts (other than any amounts that may not be paid until the Termination Date
has occurred), (iii) such Indebtedness shall be subordinated to the
Obligations in a manner reasonably acceptable to the Administrative Agent and
(iv) the maturity date of such Indebtedness shall be no earlier than six
months following the Maturity Date and such Indebtedness shall not be subject


 


9

















 


to amortization or
prepayment prior to such date; provided further that such Indebtedness
may be required to be prepaid on or after the Termination Date if on or prior
to such date, Borrower shall have received at least $30,000,000 of net cash
proceeds from the exercise of the Warrants or any equity offering.


 


“Eligible Assignee” means (a) a Lender,
(b) an Affiliate of a Lender, (c) an Approved Fund, or (d) any
other Person (other than a natural person) approved by (i) Administrative
Agent and (ii) unless an Event of Default has occurred and is continuing
or the primary syndication period is continuing (which will end not later than
six months after the Closing Date), Borrower (each such approval not to be
unreasonably withheld or delayed); provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include Borrower’s Affiliates or
Subsidiaries or any natural person; provided  further that
promptly following the termination of the primary syndication period, the
Administrative Agent shall provide written notice thereof to the Borrower.


 


“Employee Benefit Plan” means any material “employee
benefit plan” as defined in Section 3(3) of ERISA which is or was
sponsored, maintained or contributed to by, or required to be contributed by,
Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates.


 


“Environmental Claim” means any
investigation, notice, notice of violation, claim, action, suit, proceeding,
demand, abatement order or other order or directive (conditional or otherwise),
by any Governmental Authority or any other Person, arising (i) pursuant to
or in connection with any actual or alleged violation of any Environmental Law;
(ii) in connection with any Release of, or exposure to, Hazardous Material
or any actual or alleged Hazardous Materials Activity; or (iii) in
connection with any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.


 


“Environmental Laws” means any and all
foreign or domestic, federal or state (or any subdivision of either of them),
statutes, ordinances, orders, rules, regulations, judgments, Governmental
Authorizations, or any other requirements of Governmental Authorities relating
to (i) environmental matters, including those relating to any Hazardous
Materials Activity; (ii) the generation, use, storage, transportation or
disposal of Hazardous Materials; or (iii) occupational safety and health,
industrial hygiene or the protection of human, plant or animal health or
welfare, in any manner applicable to Borrower or any of its Subsidiaries or any
Facility.


 


“Equity Contribution” means the release of at
least $42,300,000 in proceeds from the Borrower’s initial public offering being
held in trust to the Borrower and a rollover of equity by the Sellers and by
Michael Segal in an amount not less than 17.0% of the pro forma capitalization
of the Borrower after consummation of the Acquisition.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor thereto.


 


“ERISA Affiliate” means, as applied to any
Person, (i) any corporation which is a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue
Code of which that Person is a member; (ii) any trade or business (whether
or not incorporated) which is a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Internal Revenue
Code of which that Person is a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Internal Revenue Code of which that Person, any corporation described in clause
(i) above or any trade or business described in clause (ii) above is a member. Any
former ERISA Affiliate of Borrower or any of its Subsidiaries shall continue to
be considered an ERISA Affiliate of Borrower or any such Subsidiary within the
meaning of this definition with respect to the period such entity was an ERISA
Affiliate of Borrower or such


 


10

















 


Subsidiary and with respect
to liabilities arising after such period for which Borrower or such Subsidiary
could be liable under the Internal Revenue Code or ERISA.


 


“ERISA Event” means (i) a “reportable
event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder
with respect to any Pension Plan (excluding those for which the provision for
30-day notice to the PBGC has been waived by regulation); (ii) the failure
to meet the minimum funding standard of Section 412 of the Internal Revenue
Code with respect to any Pension Plan (whether or not waived in accordance with
Section 412(d) of the Internal Revenue Code) or the failure to make by its due
date a required installment under Section 412(m) of the Internal Revenue Code
with respect to any Pension Plan or the failure to make any required
contribution to a Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such Pension
Plan resulting in material liability to Borrower, any of its Subsidiaries or
any of their respective Affiliates pursuant to Section 4063 or 4064 of ERISA;
(v) the institution by the PBGC of proceedings to terminate any Pension
Plan, or the occurrence of any event or condition which could reasonably be
expected to constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the
imposition of material liability on Borrower, any of its Subsidiaries or any of
their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA
or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal of Borrower, any of its Subsidiaries or any of their respective
ERISA Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any
potential liability therefore, or the receipt by Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or
4245 of ERISA, or that it intends to terminate or has terminated under Section
4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which
could reasonably be expected to give rise to the imposition on Borrower, any of
its Subsidiaries or any of their respective ERISA Affiliates of fines,
penalties, taxes or related charges under Chapter 43 of the Internal Revenue
Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA
in respect of any Employee Benefit Plan; (ix) the assertion of a material
claim (other than routine claims for benefits) against any Employee Benefit
Plan other than a Multiemployer Plan or the assets thereof, or against Borrower,
any of its Subsidiaries or any of their respective ERISA Affiliates in
connection with any Employee Benefit Plan; (x) receipt from the Internal
Revenue Service of notice of the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue
Code, or the failure of any trust forming part of any Pension Plan to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue Code;
or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n)
of the Internal Revenue Code or pursuant to ERISA with respect to any Pension
Plan.


 


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


 


“Event of Default” means each of the
conditions or events set forth in Section 8.01.


 


“Exchange Act” means the Securities Exchange
Act of 1934, as amended from time to time, and any successor statute.


 


“Excluded Taxes” means, with respect to
Administrative Agent, any Lender or any other recipient of any payment to be
made by or on account of any obligation of Borrower hereunder, (a) taxes
imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed


 


11

















 


on it (in lieu of net income
taxes), by the jurisdiction (or any political subdivision thereof) under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office
is located, (b) any branch profits taxes imposed by the United States of
America and (c) in the case of a Foreign Lender (other than an assignee
pursuant to a request by Borrower under Section 2.37), any United States
withholding tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party hereto (or designates a new
lending office) or is attributable to such Foreign Lender’s failure or
inability (other than as a result of a Change in Law) to comply with Section
2.36(e), except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from Borrower with respect to such
withholding tax pursuant to Section 2.36(a).


 


“Existing Indebtedness” means
(i) Indebtedness and other obligations outstanding under that certain
Credit Agreement dated as of November 15, 2006 between Chem Rx and Bank of
America, N.A., as amended prior to the Closing Date and (ii) up to
$7,500,000 of Indebtedness and other obligations owed by Chem Rx-NJ and Jerry
Silva.


 


“Exposure” means, with respect to any Lender,
as of any date of determination, the outstanding principal amount of the Loans
of such Lender; provided at any time prior to the making of the Loans,
the Exposure of any Lender shall be equal to such Lender’s Commitment.


 


“Facility” means any real property (including
all buildings, fixtures or other improvements located thereon) now, hereafter
or heretofore owned, leased, operated or used by Borrower or any of its
Subsidiaries or any of their respective predecessors or Affiliates.


 


“Fair Share” as defined in Section 7.02.


 


“Fair Share Contribution Amount” as defined
in Section 7.02.


 


“Fair Share Shortfall” as defined in Section
7.02.


 


“Federal Funds Effective Rate” means for any
day, the rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day; provided,
(i) if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if no such rate
is so published on such next succeeding Business Day, the Federal Funds Rate
for such day shall be the average rate charged to Administrative Agent, in its
capacity as a Lender, on such day on such transactions as determined by
Administrative Agent.


 


“Financial Officer Certification” means, with
respect to the financial statements for which such certification is required,
the certification of the chief financial officer of Borrower that such
financial statements fairly present, in all material respects, the financial
condition of Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end or quarter-end
adjustments, as applicable.


 


“Financial Plan” as defined in Section
5.01(h).


 


12

















 


“First Lien Credit Agreement” means the First
Lien Credit and Guaranty Agreement dated as of the Closing Date, among the
Borrower, certain Subsidiaries of Borrower, as guarantors, CIBC WM, as sole
lead arranger and sole bookrunner, CIBC, as administrative agent, and the other
agents and lenders party thereto, as it may be amended, modified, renewed,
refunded, replaced or refinanced from time to time pursuant to Section 6.14
hereof.


 


“First Lien Loans” means the loans under the First
Lien Credit Agreement.


 


“First Priority” means, with respect to any
Lien purported to be created in any Collateral pursuant to any Collateral
Document, that such Lien is the only Lien to which such Collateral is subject,
other than Permitted Liens.


 


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


 


“Fiscal Year” means the fiscal year of
Borrower and its Subsidiaries ending on December 31 of each calendar year.


 


“Flood Hazard Property” means any Real Estate
Asset subject to a Mortgage in favor of Collateral Agent, for the benefit of
Secured Parties, and located in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards.


 


“Foreign Lender” means any Lender that is not
a “United States person” as defined in Section 7701(a)(30) of the Internal
Revenue Code.


 


“Fund” means any Person (other than a natural
person) that is (or will be) engaged in making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit in the
ordinary course of its business.


 


“Funding Guarantor” as defined in Section
7.02.


 


“Funding Notice” means a notice substantially
in the form of Exhibit A-1.


 


“GAAP” means, subject to the limitations on
the application thereof set forth in Section 1.02, United States generally
accepted accounting principles in effect as of the date of determination
thereof.


 


“Governmental Acts” means any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority.


 


“Governmental Authority” means the government
of the United States of America or any other nation, or of any political
subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).


 


“Governmental Authorization” means any
permit, license, approval, agreement, provider number, registration,
certificate, filing, consent, authorization, plan, directive, consent order,
consent decree or other permission (including any supplements or amendments thereto)
of or from any Governmental Authority.


 


“Governmental Third Party Payor” as defined
in Section 4.23(c).


 


13

















 


“Governmental Third Party Payor Programs” as
defined in Section 4.23(c).


 


“Grantor” as defined in the Pledge and
Security Agreement.


 


“Guaranteed Obligations” as defined in
Section 7.01.


 


“Guarantor” means each Subsidiary of Borrower
other than a Consent Subsidiary.


 


“Guaranty” means the guaranty of each
Guarantor set forth in Article Seven.


 


“Hazardous Materials” means any chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any Governmental Authority or which may or could pose a hazard to the health
and safety of the owners, occupants or any Persons in the vicinity of any
Facility or to the indoor or outdoor environment.


 


“Hazardous Materials Activity” means any past
or current activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response action with respect to any of
the foregoing.


 


“Health Care Laws” means (a) the federal
Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the Stark
Anti-Self-Referral Law (42 U.S.C. § 1395nn), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.),
the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the
exclusion laws (42 U.S.C. § 1320a-7),
the civil monetary penalty laws (42 U.S.C. § 1320a-7a), the regulations
promulgated pursuant to such statutes and any comparable state laws, (b) the
Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §§ 1320d et seq.), the
regulations promulgated thereunder and any comparable state laws, (c) the
Federal Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.) and the regulations promulgated thereunder,
(d) the Controlled Substances Act (21 U.S.C. §§ 801 et seq.), the regulations promulgated thereunder and any
comparable state laws, (e) Medicare,
(f) Medicaid, (g) the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 (Pub. L. No. 108-173) and the regulations
promulgated thereunder, and (h) any other state or federal law or
regulation which regulates patient or program charges, recordkeeping, claims
process, documentation requirements, medical necessity, referrals, the hiring
of employees or acquisition of services or supplies from those who have been
excluded from government health care programs, quality, safety, privacy,
security, pharmacy practice and compounding, licensure, accreditation or any
other aspect of providing health care or pharmacy services.


 


“Hedge Agreement” means an Interest Rate
Agreement entered into with a Lender Counterparty in order to satisfy the
requirements of this Agreement or otherwise in the ordinary course of Borrower’s
or any of its Subsidiaries’ businesses.


 


“Highest Lawful Rate” means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to any Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.


 


14

















 


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


 


“HIPAA Compliance Plan” as defined in Section
4.23(g).


 


“HIPAA Compliant” means that to the extent
applicable, each of Borrower and its Subsidiaries (a) is in material
compliance with any and all of the applicable requirements of HIPAA and
(b) is not subject to, and could not reasonably be expected to become
subject to, any civil or criminal penalty or any investigation, claim or
process that could reasonably be expected to cause a Material Adverse Effect in
connection with any violation by Borrower or any Subsidiary of the then
effective requirements of HIPAA.


 


“Historical Financial Statements” means as of
the Closing Date, (i) the audited financial statements of Chem Rx for the
immediately preceding three Fiscal Years, consisting of balance sheets and the
related consolidated statements of income, stockholders’ equity and cash flows
for such Fiscal Years, and (ii) the unaudited monthly (with respect to
Chem Rx only) and quarterly consolidated financial statements of the Borrower,
Chem Rx and their respective Subsidiaries as at any Fiscal Quarter following
December 31, 2006 that is ended 45 days prior to the Closing Date and for any
month following December 31, 2006 that is ended 30 days prior to the Closing
Date, consisting of a balance sheet and the related consolidated statements of
income, stockholders’ equity and cash flows for the one-, three- or six-month
period, as applicable, ending on such date, and, in the case of clauses (i) and
(ii), certified by the chief executive officer of Borrower or the chief
financial officer of Chem Rx, as applicable, that they fairly present, in all
material respects, the financial condition of Chem Rx and their respective
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments.


 


“Indebtedness”, as applied to any Person,
means, without duplication, (i) all indebtedness of such Person for
borrowed money; (ii) that portion of obligations of such Person with
respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP; (iii) notes payable and drafts
accepted by such Person representing extensions of credit whether or not representing
obligations for borrowed money; (iv) any obligation owed for all or any
part of the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more
than six (6) months from the date of incurrence of the obligation in respect
thereof or (b) evidenced by a note or similar written instrument;
(v) all indebtedness of a third party secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person; provided that the amount of such nonrecourse
indebtedness shall be deemed not to exceed the value of the property on which
the Lien is attached; (vi) the face amount of any letter of credit issued
for the account of that Person or as to which that Person is otherwise liable
for reimbursement of drawings; (vii) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse to such Person, or sale with
recourse to such Person of the indebtedness of another; (viii) any
obligation of such Person the primary purpose or intent of which is to provide
assurance to an obligee that the indebtedness of the obligor thereof will be
paid or discharged, or any agreement relating thereto will be complied with, or
the holders thereof will be protected (in whole or in part) against loss in
respect thereof; (ix) any liability of such Person for the indebtedness of
another through any agreement (contingent or otherwise) (a) to purchase,
repurchase or otherwise acquire such indebtedness or any security therefor, or
to provide funds for the payment or discharge of such indebtedness (whether in
the form of loans, advances, stock purchases, capital contributions or
otherwise) or (b) to maintain the solvency or any balance sheet item,
level of income or financial condition of another if, in the case of any
agreement described under subclauses (a) or (b) of this clause (ix), the


 


15

















 


primary purpose or intent
thereof is as described in clause (viii) above; and (x) obligations of
such Person in respect of any exchange traded or over the counter derivative
transaction, including any Interest Rate Agreement, whether entered into for
hedging or speculative purposes; provided, in no event shall obligations
under any Interest Rate Agreement be deemed “Indebtedness” for any purpose
under Section 6.07.


 


“Indemnified Taxes” means Taxes other than
Excluded Taxes.


 


“Indemnitee” as defined in Section 10.02(b).


 


“Initial Earnout Payments” means (i) the
2007 Cash Earn Out (as defined in Section 1.8(a)(i) of the Stock Purchase
Agreement on the date hereof), together with any Earnout Interest payable
thereon, (ii) any portion of the 2007 Earn Out Shares (as defined in
Section 1.8(a)(i) of the Stock Purchase Agreement on the date hereof) that is
paid in cash pursuant to Section 1.12 of the Stock Purchase Agreement on the
date hereof and (iii) any portion of the shares issuable to the Sellers
pursuant to Section 1.9(a)(i) of the Stock Purchase Agreement on the date
hereof that is paid in cash pursuant to Section 1.12 of the Stock Purchase
Agreement on the date hereof; provided that any such payments shall be
made in Capital Stock of the Borrower to the maximum extent allowable pursuant
to the Stock Purchase Agreement on the date hereof and, in any event, made to
the maximum extent possible while still preserving an election under Section
338(h)(10) of the Internal Revenue Code.


 


“Initial Seller Notes” means any Indebtedness
of Borrower in favor of the Sellers (or their family members or to a trust,
partnership or other entity formed for the benefit of the Sellers or such
family members primarily for estate or family planning purposes) issued on the
Closing Date in the amount of $8,258,748.47; provided that (i) such
Indebtedness shall accrue interest quarterly at a rate not to exceed 13.0% per
annum in kind, (ii) such Indebtedness is unsecured and not guaranteed by
any of Borrower’s Subsidiaries, (iii) such Indebtedness does not bear
interest (other than the payment-in-kind interest described in clause (i)) and
is not subject to commissions, charges, expenses, fees, attorneys’ fees or
disbursements, indemnities or other amounts (other than any amounts that may
not be paid until the Termination Date has occurred), (iv) such
Indebtedness shall be subordinated to the Obligations in a manner reasonably
acceptable to the Administrative Agent and (v) the maturity date of such
Indebtedness shall be no earlier than six months following the Maturity Date
and such Indebtedness shall not be subject to amortization or prepayment prior
to such date; provided further that such Indebtedness may be required to
be prepaid on or after the Termination Date if on or prior to such date,
Borrower shall have received at least $30,000,000 of net cash proceeds from the
exercise of the Warrants or any equity offering.


 


“Intellectual Property” means (a) all
inventions and discoveries (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, (c) all copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, (d) all
broadcast rights, (e) all mask works and all applications, registrations
and renewals in connection therewith, (f) all know-how, trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice (including ideas, research and development,
know-how, formulas, compositions and manufacturing and production process and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (g) all computer software (including data and related documentation),
(h) all other proprietary rights, (i) all copies and tangible
embodiments thereof (in whatever form or medium) and (j) all licenses and
agreements in connection therewith.


 


16

















 


“Intercreditor Agreement”  means an Intercreditor Agreement
substantially in the form of Exhibit I, as it may be amended, supplemented
or otherwise modified from time to time.


 


“Interest Payment Date” means with respect to
(i) any Base Rate Loan, the last Business Day of each of the months of
March, June, September and December of each year, commencing on the
first such date to occur after the Closing Date and the Maturity Date; and
(ii) any Eurodollar Rate Loan, the last day of each Interest Period
applicable to such Loan; provided, in the case of each Interest Period
of longer than three months “Interest Payment Date” shall also include each
date that is three months, or an integral multiple thereof, after the
commencement of such Interest Period.


 


“Interest Period” means, in connection with a
Eurodollar Rate Loan, an interest period of one-, two-, three- or six-months
and, to the extent available to each applicable Lender, nine- or twelve-months,
as selected by Borrower in the applicable Funding Notice or
Conversion/Continuation Notice, (i) initially, commencing on the Closing
Date or Conversion/Continuation Date thereof, as the case may be; and
(ii) thereafter, commencing on the day on which the immediately preceding
Interest Period expires; provided, (a) if an Interest Period would
otherwise expire on a day that is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day unless no further Business Day
occurs in such month, in which case such Interest Period shall expire on the
immediately preceding Business Day; (b) any Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) of this definition, end on the last
Business Day of a calendar month; and (c) no Interest Period with respect
to any portion of the Loans shall extend beyond the Maturity Date.


 


“Interest Rate Agreement” means any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedging agreement or other similar agreement or
arrangement, each of which is for the purpose of hedging the interest rate
exposure associated with Borrower’s and its Subsidiaries’ operations and not for
speculative purposes.


 


“Interest Rate Determination Date” means,
with respect to any Interest Period, the date that is two Business Days prior
to the first day of such Interest Period.


 


“Internal Revenue Code” means the Internal
Revenue Code of 1986, as amended to the date hereof and from time to time
hereafter, and any successor statute.


 


“Investment” means (i) any direct or
indirect purchase or other acquisition by Borrower or any of its Subsidiaries
of, or of a beneficial interest in, any of the Securities of any other Person
(other than a Guarantor); (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of
Borrower from any Person (other than Borrower or any Guarantor), of any Capital
Stock of such Person; and (iii) any direct or indirect loan, advance
(other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Borrower or any of its Subsidiaries to any
other Person (other than Borrower or any Guarantor), including all indebtedness
and accounts receivable from that other Person that are not current assets or
did not arise from sales to that other Person in the ordinary course of
business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.


 


“IP Security Agreement” means each Second
Lien Trademark Security Agreement, Second Lien Patent Security Agreement or
Second Lien Copyright Security Agreement by and among Borrower, each Guarantor
and the Collateral Agent, as each may be amended, modified or supplemented in
accordance with the terms hereof and thereof.


 


17

















 


“Joint Venture” means a joint venture,
partnership or other similar arrangement, whether in corporate, partnership or
other legal form; provided, in no event shall any corporate Subsidiary
of any Person be considered to be a Joint Venture to which such Person is a
party.


 


“knowledge” means the actual knowledge of a
Responsible Officer of Borrower or any of its Subsidiaries.


 


“Landlord Collateral Access Agreement” means
a Landlord Collateral Access Agreement substantially in the form of
Exhibit H with such amendments or modifications as may be approved by
Collateral Agent in its reasonable discretion.


 


“Landlord Consent and Estoppel” means, with
respect to any Leasehold Property, a letter, certificate or other instrument in
writing from the lessor under the related lease, pursuant to which, among other
customary things, the landlord consents to the granting of a Mortgage on such
Leasehold Property by the Loan Party tenant and certifies to such other matters
under the related lease as are reasonably requested by the Collateral Agent,
such Landlord Consent and Estoppel to be in form and substance acceptable to
the Collateral Agent in its reasonable discretion, but in any event sufficient
for the Collateral Agent to obtain a title policy with respect to such
Mortgage.


 


“Lead Arranger” as defined in the preamble
hereto.


 


“Leasehold Property” means any leasehold
interest of any Loan Party as lessee under any lease of real property, other
than any such leasehold interest designated from time to time by Collateral
Agent in its reasonable discretion as not being required to be included in the
Collateral because the costs of including such leasehold interest in the
Collateral are excessive in relation to the security to be provided thereby.


 


“Lender” means each financial institution
that has become a party hereto pursuant to a Lender Addendum as a Lender, and
any other Person that becomes a party hereto pursuant to an Assignment and
Assumption Agreement.


 


“Lender Addendum” means with respect to any
Lender on the Closing Date, a lender addendum in the form of Exhibit J, to be
executed and delivered by such Lender on the Closing Date as provided in Section
10.23.


 


“Lender Counterparty” means each Lender
(which Lender is not also a “Lender” under the First Lien Credit Agreement),
each Agent and each of their respective Affiliates’ counterparty to a Hedge
Agreement (including any Person who is an Agent or a Lender or any Affiliate
thereof at the time of entering into a Hedge Agreement, but thereafter ceases
to be a Lender or an Agent).


 


“Lien” means (i) any lien, mortgage,
pledge, assignment as security, security interest, charge or encumbrance of any
kind (including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, and any lease in the nature thereof)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing and (ii) in the case of Securities, any
purchase option, call or similar right of a third party with respect to such
Securities.


 


“Lien Subordination Agreement”  means each Lien Subordination Agreement
among the Administrative Agent, the administrative agent under the First Lien
Credit Agreement, the Loan Parties and the applicable vendor, as it may be
amended, supplemented or otherwise modified from time to time.


 


18

















 


“Loan” means a term loan made by a Lender to
Borrower pursuant to Section 2.01(a).


 


“Loan Document” means any of this Agreement,
the Notes, if any, the Collateral Documents, and all other documents,
instruments or agreements executed and delivered by a Loan Party for the
benefit of any Agent or any Lender in connection herewith.


 


“Loan Party” means each Person (other than
any Agent or any Lender or any other representative thereof) from time to time
party to a Loan Document.


 


“Management Investors” means (i) Jerry
Silva and Steven Silva, and (ii) any trust, corporation, partnership or
other entity Controlled by any Person described in the immediately preceding
clause (i), in each case, who have been, are or become investors in, or
shareholders of, the Borrower.


 


“Margin Stock” as defined in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.


 


“Material Adverse Effect” means (i) as
of the Closing Date, any change, circumstance, development, state of facts,
event or effect (a) that has had or would reasonably be expected to have a
material adverse change or effect (taken alone or in the aggregate with any
other adverse change or effect) in or with respect to the business, assets,
condition (financial or otherwise) or results of operations of Chem Rx and its
Subsidiaries, taken as a whole or (b) that could reasonably be expected to
prevent or materially delay the consummation by the Sellers or Chem Rx of the
transactions contemplated by the Stock Purchase Agreement and the other
Transaction Agreements (as defined in the Stock Purchase Agreement), excluding,
in each case, any such change or effect that arises out of or is related
to:  (A) changes in (x) general
economic, regulatory or political conditions or (y) financial or
securities markets in general, (B) the announcement or public disclosure
of the Stock Purchase Agreement or the other Transaction Agreements (as defined
in the Stock Purchase Agreement), or (C) the institutional pharmacy or
pharmaceutical industries in general and not specifically related to Chem Rx;
and (ii) any time thereafter, a material adverse effect on (a) the
business, operations, properties, assets, or financial condition of Borrower
and its Subsidiaries taken as a whole; (b) the ability of the Loan Parties
to fully and timely perform their material Obligations; (c) the legality,
validity, binding effect or enforceability against a Loan Party of a material
Loan Document to which it is a party; or (d) the material rights, remedies
and benefits available to, or conferred upon, any Agent and any Lender or any
Secured Party under the Loan Documents.


 


“Material Contract” means any contract or
other arrangement to which Borrower or any of its Subsidiaries is a party
(other than the Loan Documents or the First Lien Credit Agreement and the
documents related thereto) for which breach, nonperformance, cancellation or
failure to renew could reasonably be expected to have a Material Adverse
Effect.


 


“Material Real Estate Asset” means
(i) all Leasehold Properties other than those with respect to which the
aggregate payments under the terms of the lease are less than $150,000 per
annum or (ii) any Real Estate Asset acquired after the Closing Date and
that (a) is a fee-owned Real Estate Asset having a fair market value in
excess of $1,000,000 as of the acquisition of such Real Estate Asset,
(b) is a Leasehold Property with aggregate payments under the term of the
lease of at least $150,000 per annum or (c) the Requisite Lenders have
determined in their reasonable discretion is material to the business,
operations, properties, assets or financial condition of Borrower and its
Subsidiaries, taken as a whole; provided that, as of the Closing Date, the
Leasehold Properties at (A) 750 Park Place, Long Beach, New York 11561,
(B) 4041 M. Hadley Road, South Plainfield, New Jersey 07080 and
(c) HCR 1, Box 30, Route 209, Bossardsville Road, Sciota, Pennsylvania
18354 are the only Material Real Estate Assets.


 


19

















 


“Maturity Date” means the earlier of
(i) the seventh anniversary of the Closing Date, and (ii) the date
that all Loans shall become due and payable in full hereunder, whether by
acceleration or otherwise.


 


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


 


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


 


“Merger Agreement” means the agreement and
plan of merger, dated as of June 15, 2007, among Borrower, Paramount Merger
Sub, Inc., Chem Rx-NJ, Chem Rx and the members of Chem Rx-NJ.


 


“Milestone Payments” means any holdback and
contingent payments in cash and stock that may be payable pursuant to Sections
1.8, 1.9, 1.10 and 1.12 of the Stock Purchase Agreement on the date hereof; provided
that any such payments shall be made in Capital Stock of the Borrower to the
maximum extent allowable pursuant to the Stock Purchase Agreement on the date
hereof and, in any event, made to the maximum extent possible while still
preserving an election under Section 338(h)(10) of the Internal Revenue Code.


 


“Moody’s” means Moody’s Investor Services,
Inc.


 


“Mortgage” means a fee mortgage in a form to
be agreed between Administrative Agent and Borrower, as it may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with Section 10.04(a).


 


“Multiemployer Plan” means any Employee
Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of
ERISA.


 


“Narrative Report” means, with respect to the
financial statements for which such narrative report is required, a
narrative report describing the operations of Borrower and its Subsidiaries in
the form prepared for presentation to senior management or the Board of
Directors thereof for the applicable month, Fiscal Quarter or Fiscal Year and
for the period from the beginning of the then current Fiscal Year to the end of
such period to which such financial statements relate, which shall include a
summary of operating metrics for the applicable period and a detailed summary
of accounts receivable aging.


 


20

















 


“Net Asset Sale Proceeds” means, with respect
to any Asset Sale, an amount equal to: 
(i) cash payments (including any cash received by way of deferred
payment pursuant to, or by monetization of, a note receivable or otherwise, but
only as and when so received) received by Borrower or any of its Subsidiaries
from such Asset Sale, minus (ii) any bona fide direct costs
incurred in connection with such Asset Sale, including (a) income or gains
taxes payable by the seller as a result of any gain recognized in connection
with such Asset Sale, (b) payment of the outstanding principal amount of,
premium or penalty, if any, and interest on any Indebtedness (other than the
Loans) that is secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such Asset Sale,
(c) a reasonable reserve for any indemnification payments (fixed or
contingent) attributable to seller’s indemnities and representations and
warranties to purchaser in respect of such Asset Sale undertaken by Borrower or
any of its Subsidiaries in connection with such Asset Sale and (d) any
legal, accounting, investment banking, title and recording fees, and other
expenses incurred in connection with such Asset Sale.


 


“Net Insurance/Condemnation Proceeds” means
an amount equal to:  (i) any cash
payments or proceeds received by Borrower or any of its Subsidiaries
(a) under any casualty insurance policy in respect of a covered loss
thereunder or (b) as a result of the taking of any assets of Borrower or
any of its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, minus
(ii) (a) any actual and reasonable costs incurred by Borrower or any
of its Subsidiaries in connection with the adjustment or settlement of any
claims of Borrower or such Subsidiary in respect thereof, (b) any bona
fide direct costs incurred in connection with any sale of such assets as
referred to in clause (i)(b) of this definition, including income taxes payable
as a result of any gain recognized in connection therewith and (c) any
legal, accounting, investment banking, title and recording fees, and other
expenses incurred in connection with the payments or proceeds referred to in
clause (i) of this definition.


 


“Non-Guarantor” means any Subsidiary of
Borrower that is not a Guarantor.


 


“Note” means a promissory note in the form of
Exhibit B, as it may be amended, supplemented, restated or otherwise
modified from time to time.


 


“Notice” means a Funding Notice or a
Conversion/Continuation Notice.


 


“Obligations” means all obligations of every
nature of each Loan Party from time to time owed to the Agents (including
former Agents), the Lenders or any of them and Lender Counterparties, under any
Loan Document or Hedge Agreement, whether for principal, interest (including
interest which, but for the filing of a petition in bankruptcy with respect to
such Loan Party, would have accrued on any Obligation, whether or not a claim
is allowed against such Loan Party for such interest in the related bankruptcy
proceeding), payments for early termination of Hedge Agreements, fees, premium,
expenses, indemnification or otherwise.


 


“Obligee Guarantor” as defined in Section
7.07.


 


“Organizational Documents” means
(i) with respect to any corporation, its certificate or articles of
incorporation or organization, as amended, and its bylaws, as amended,
(ii) with respect to any limited partnership, its certificate of limited
partnership, as amended, and its partnership agreement, as amended,
(iii) with respect to any general partnership, its partnership agreement,
as amended, and (iv) with respect to any limited liability company, its
articles of organization, as amended, and its operating agreement, as amended. In
the event any term or condition of this Agreement or any other Loan Document
requires any Organizational Document to be certified by a secretary of state or
similar


 


21

















 


governmental official, the
reference to any such “Organizational Document” shall only be to a document of
a type customarily certified by such governmental official.


 


“Other Taxes” means all present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or under any other Loan
Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document, including any interest,
additions to tax or penalties applicable thereto.


 


“Participant” as defined in Section 10.06(d).


 


“PBGC” means the Pension Benefit Guaranty
Corporation or any successor thereto.


 


“Pension Plan” means any Employee Benefit
Plan, other than a Multiemployer Plan, which is subject to Section 412 of the
Internal Revenue Code or Section 302 of ERISA.


 


“Permitted Acquisition” means any acquisition
by Borrower or any of its Wholly Owned Subsidiaries, whether by purchase,
merger or otherwise, of all or substantially all of the assets of, all of the
Capital Stock of, or a business line or unit or a division of, any Person (the “Target”);
provided,


 


(a)           immediately prior to, and
after giving effect thereto, no Default or Event of Default shall have occurred
and be continuing or would result therefrom;


 


(b)           all transactions in
connection therewith shall be consummated, in all material respects, in
accordance with all applicable laws and in conformity with all applicable
Governmental Authorizations;


 


(c)           in the case of the
acquisition of Capital Stock, all of the Capital Stock (except for any such
Securities in the nature of directors’ qualifying shares required pursuant to
applicable law) acquired or otherwise issued by the Target or any newly formed
Subsidiary of Borrower in connection with such acquisition shall be owned 100%
by Borrower or a Guarantor thereof, and Borrower shall have taken, or caused to
be taken, as of the date such Person becomes a Subsidiary of Borrower, each of
the actions set forth in Sections 5.11 and/or 5.12, as applicable;


 


(d)           Borrower and its
Subsidiaries shall be in compliance with the financial covenants set forth in
Section 6.07 on a pro forma basis after giving effect to such acquisition as of
the last day of the Fiscal Quarter most recently ended for which financial
statements have been provided pursuant to Section 5.01 (as determined in
accordance with Section 6.07(c));


 


(e)           Borrower shall have
delivered to Administrative Agent at least ten (10) Business Days prior to such
proposed acquisition (or such shorter period consented to by the Administrative
Agent), a Compliance Certificate evidencing compliance with Section 6.07
as required under clause (d) above, together with all relevant financial
and other information with respect to such acquired assets reasonably requested
by the Administrative Agent, including the aggregate consideration for such
acquisition;


 


22

















 


(f)            the Target shall be in same
or related business or lines of business in which Borrower and/or its
Subsidiaries are engaged as of the Closing Date;


 


(g)           at the time of such
acquisition and after giving effect thereto, the amount, if any, by which
(i) the Revolving Commitment (as defined in the First Lien Credit
Agreement) exceeds (ii) the sum of the Total Utilization of Revolving
Commitments (as defined in the First Lien Credit Agreement) shall not be less
than $5,000,000;


 


(h)           the Purchase Price to be paid
in respect of the Target (i) when aggregated with the Purchase Price paid
in respect of all prior acquisitions made in the applicable period is less than
an amount equal to (A) in respect of the period from the Closing Date to
December 31, 2008, $18,000,000 and (B) in each Fiscal Year thereafter,
$12,000,000, in each case plus the Available Warrant Credit and the Available
Equity Credit at such time and (ii) when aggregated with the Purchase
Price paid in respect of all prior acquisitions made from the Closing Date to
the date of determination is less than an aggregate amount equal to $48,000,000
plus the Available Warrant Credit and the Available Equity Credit at such time;
and


 


(i)            after giving effect to an
acquisition, Borrower shall demonstrate a pro forma Total Leverage Ratio of at
least twenty-five (25) basis points less than the then applicable Total
Leverage Ratio required by Section 6.07.


 


“Permitted Investments” means each of the
Investments permitted pursuant to Section 6.06.


 


“Permitted Liens” means each of the Liens
permitted pursuant to Section 6.02.


 


“Permitted Refinancing” means
(i) renewals and extensions expressly provided for in the agreements
evidencing any Indebtedness as the same are in effect on the date of this
Agreement and (ii) refinancings, renewals, replacements and extensions of
any such Indebtedness if the terms and conditions thereof are not materially
less favorable to the obligor thereon or to the Lenders than the Indebtedness
being refinanced, renewed, replaced or extended, and the average life to
maturity thereof is greater than or equal to that of the Indebtedness being
refinanced, renewed, replaced or extended, and the final maturity thereof is
equal to or later than the Indebtedness being refinanced, renewed, replaced or
extended; provided  that
(a) such Indebtedness permitted under the immediately preceding clause (i)
or (ii) above shall not (A) include Indebtedness of an obligor that was
not an obligor with respect to the Indebtedness being refinanced, renewed,
replaced or extended, (B) exceed in a principal amount the principal
amount of Indebtedness being refinanced, renewed, replaced or extended plus
interest, premium and reasonable transaction costs and fees and expenses, if
any, paid in connection with such refinancing, renewal, replacement or
extension or (C) be incurred, created or assumed if any Default or Event
of Default has occurred and is continuing or would result therefrom and
(b) if the Indebtedness being refinanced, renewed, replaced or extended is
subordinated in right of payment to the Obligations, such refinancing, renewal,
replacement or extension is subordinated in right of payment to the Obligations
on terms at least as favorable to the Lenders as those contained in the
documentation governing the Indebtedness being refinanced, renewed, replaced or
extended.


 


“Person” means any natural person,
corporation, limited liability company, trust, joint venture, association,
company, partnership, Governmental Authority or other entity.


 


23

















 


“Pledge and Security Agreement” means the
Second Lien Pledge and Security Agreement to be executed by Borrower and each
Guarantor substantially in the form of Exhibit G, as it may be amended,
supplemented, restated or otherwise modified from time to time.


 


“Prepayment Notice” means a notice
substantially in the form of Exhibit L.


 


“Prime Rate” means the rate of interest per
annum that CIBC announces from time to time as its prime lending rate, as in
effect from time to time. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
CIBC or any other Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.


 


“Principal Office” means the Administrative
Agent’s “Principal Office” as set forth in Section 10.01, or such other office
as such Person may from time to time designate in writing to Borrower and each
Lender.


 


“Privacy and Security Rules” as defined in
Section 4.23(g).


 


“Private Third Party Payor” as defined in
Section 4.23(c).


 


“Private Third Party Payor Programs” as
defined in Section 4.23(c).


 


“Pro Rata Share” means, relating to the Loan
of any Lender, the percentage obtained by dividing (a) the Exposure of
that Lender by (b) the aggregate Exposure of all Lenders.


 


“Projections” as defined in Section 4.08.


 


“Purchase Money Indebtedness” as defined in
Section 6.01(k).


 


“Purchase Price” means, without duplication,
with respect to any Permitted Acquisition, an amount equal to the sum of
(a) the aggregate consideration, whether cash, property or securities
(including any Indebtedness incurred pursuant to Section 6.01, including
potential earnout payments, and the fair market value of any Investments used
as consideration pursuant to Section 6.06(m)), paid or delivered by the
Borrower and the Subsidiaries in connection with such acquisition less
(b) the aggregate net proceeds received by Borrower and the Subsidiaries
from sales of assets of a Target for fair market value within one year
following the acquisition thereof.


 


“Real Estate Asset” means, at any time of
determination, any interest (fee, leasehold or otherwise) then owned by any
Loan Party in any real property.


 


“Record Document” means, with respect to any
Leasehold Property, (i) the lease evidencing such Leasehold Property or a
memorandum thereof, executed and acknowledged by the owner of the affected real
property, as lessor, or (ii) if such Leasehold Property was acquired or
subleased from the holder of a Recorded Leasehold Interest, the applicable
assignment or sublease document, executed and acknowledged by such holder, in
each case in form sufficient to give such constructive notice upon recordation
and otherwise in form reasonably satisfactory to Collateral Agent.


 


“Recorded Leasehold Interest” means a
Leasehold Property with respect to which a Record Document has been recorded in
all places necessary, in Collateral Agent’s reasonable judgment, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrancers of the affected real property.


 


24

















 


“Register” as defined in Section 10.06(c).


 


“Regulation D” means Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.


 


“Related Agreements” means, collectively:


 


(a)           the Stock Purchase Agreement;


 


(b)           the Merger Agreement;


 


(c)           the Unit Redemption Agreement;


 


(d)           the First Lien Credit Agreement


 


(e)           the Initial Seller Notes; and


 


(f)            the Earnout Seller Notes.


 


“Related Parties” means, with respect to any
Person, such Person’s Affiliates and the partners, directors, officers,
employees, agents and advisors of such Person and of such Person’s Affiliates.


 


“Release” means any release, spill, emission,
leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of any Hazardous Material into the
indoor or outdoor environment (including the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Material), including the movement of any Hazardous Material through the air,
soil, surface water or groundwater.


 


“Requisite Lenders” means one or more Lenders
having or holding Exposure and representing more than 50% of the sum of the
aggregate Exposure of all Lenders.


 


“Responsible Officer” means, as to any
Person, any individual holding the position of chairman of the board (if an
officer), chief executive officer, president or one of its vice presidents (or
the equivalent thereof), and such Person’s chief financial officer, secretary
or treasurer.


 


“Restricted Junior Payment” means
(i) any dividend or other distribution, direct or indirect, on account of
any shares of any class of stock of Borrower or any Subsidiary of Borrower now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class; (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Borrower or
any Subsidiary of Borrower now or hereafter outstanding; (iii) any payment
made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of Borrower or
any Subsidiary of Borrower now or hereafter outstanding; (iv) any Initial
Earnout Payment and the Milestone Payments (other than any such payment payable
in common stock of Borrower), and (v) any payment or prepayment of
principal of, premium, if any, or interest on, or redemption, purchase,
retirement, defeasance (including in-substance or legal defeasance), sinking
fund or similar payment with respect to the Initial Seller Notes and the
Earnout Seller Notes.


 


“S&P” means Standard & Poor’s Ratings
Group, a division of The McGraw Hill Corporation.


 


25

















 


“Second Priority” means, with respect to any
Lien purported to be created in any Collateral pursuant to any Collateral
Document, that such Lien is second in priority only to the Liens created under
or relating to the First Lien Credit Agreement, other than any Permitted Liens.


 


“Secured Parties” has the meaning assigned to
that term in the Pledge and Security Agreement.


 


“Securities” means any stock, shares,
partnership interests, voting trust certificates, certificates of interest or
participation in any profit-sharing agreement or arrangement, options,
warrants, bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as “securities” or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of
the foregoing.


 


“Securities Act” means the Securities Act of
1933, as amended from time to time, and any successor statute.


 


“Sellers” as defined in the definition of
Acquisition.


 


“Solvency Certificate” means a Solvency
Certificate of the chief financial officer of Borrower substantially in the
form of Exhibit E-2.


 


“Solvent” means, with respect to any Loan
Party, that as of the date of determination both (i) (a) the sum of
such Loan Party’s debt (including contingent liabilities) does not exceed the
present fair saleable value of such Loan Party’s present assets; (b) such
Loan Party’s capital is not unreasonably small in relation to its business as
contemplated on the Closing Date and reflected in the Projections or with
respect to any transaction contemplated or undertaken after the Closing Date;
and (c) such Person has not incurred and does not intend to incur, or
believe (nor should it reasonably believe) that it will incur, debts beyond its
ability to pay such debts as they become due (whether at maturity or
otherwise); and (ii) such Person is “solvent” within the meaning given
that term and similar terms under applicable laws relating to fraudulent
transfers and conveyances. For purposes of this definition, the amount of any
contingent liability at any time shall be computed as the amount that, in light
of all of the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability
(irrespective of whether such contingent liabilities meet the criteria for
accrual under Statement of Financial Accounting Standard No. 5).


 


“Stock Purchase Agreement” means the Stock
Purchase Agreement, dated as of June 1, 2007, entered into by Borrower, Chem Rx
and the Sellers, as it may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the provisions of Section 6.13
hereof.


 


“Subject Transaction” as defined in Section
6.07(c).


 


“Subsidiary” means, with respect to any
Person, any corporation, partnership, limited liability company, association,
joint venture or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interests entitled (without
regard to the occurrence of any contingency) to vote in the election of the
Person or Persons (whether directors, managers, trustees or other Persons
performing similar functions) having the power to direct or cause the direction
of the management and policies thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof; provided, in determining the
percentage of ownership interests of any Person controlled by another Person,
no ownership interest in the nature of a “qualifying share” of the former
Person shall be deemed to be outstanding.


 


26
















 


“Syndication Agent” shall mean a syndication
agent appointed by the Lead Arranger pursuant to Section 9.01.


 


“Target” as defined in the definition of
Permitted Acquisition.


 


“Target Sale” as defined in Section 6.08(c).


 


“Taxes” means all present or future taxes,
levies, imposts, duties, deductions, withholdings, assessments, fees or other
charges imposed by any Governmental Authority, including any interest,
additions to tax or penalties applicable thereto.


 


“Termination Date” means the date on which
all Commitments have been reduced to zero and the principal of and interest on
all Loans and all fees payable hereunder have been paid in full in accordance
herewith or shall no longer constitute Obligations hereunder.


 


“Title Policy” as defined in Section 5.12(b)(iv).


 


“Total Leverage Ratio” means the ratio as of
the last day of any Fiscal Quarter of (i) Consolidated Total Debt as of
such day (other than any Initial Seller Notes, Earnout Seller Notes, Initial
Earnout Payments and Milestone Payments) to (ii) Consolidated Adjusted
EBITDA for the four-Fiscal Quarter period ending on such date.


 


“Transaction Costs” means the fees, costs and
expenses payable by Borrower or any of Borrower’s Subsidiaries on or before the
Closing Date in connection with the transactions contemplated by the Loan
Documents and the Related Agreements.


 


“Transactions” means the Acquisition, the
Equity Contribution, the entering into and funding of the Loans, the entering
into and funding of the First Lien Loans, the
repayment of certain Existing Indebtedness and all related transactions.


 


“Transactions Rule” as defined in Section
4.23(g).


 


“Type of Loan” means, with respect to the
Loans, a Base Rate Loan or a Eurodollar Rate Loan.


 


“UCC” means the Uniform Commercial Code (or
any similar or equivalent legislation) as in effect in any applicable
jurisdiction.


 


“Unit Redemption Agreement” means the
agreement dated as of October 1, 2007 between Chem Rx and Salerno, pursuant to
which Chem Rx will acquire the 8.82352% interest owned by Salerno in Chem
Rx-PA.


 


“Warrant” means each warrant to purchase one
share of common Capital Stock of Borrower on or prior to October 20, 2009 that
was issued in connection with the initial public offering of Paramount
Acquisition Corp. (now Chem Rx Corporation) or that may be issued pursuant to
the exercise of the unit purchase option granted to EarlyBirdCapital, Inc.


 


“Wholly Owned Subsidiary” of any Person means
a Subsidiary of such Person of which securities (except for directors’
qualifying shares) or other ownership interests representing 100% of the
Capital Stock are, at the time any determination is being made, owned,
controlled or held by such Person


 


27

















 


or one or more Wholly Owned
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Subsidiaries of such Person.


 


“750 Park Place” means 750 Park Place Realty
Co., LLC, owner of the facility leased by Chem Rx in Long Beach, New York.


 


Section 1.02         Accounting
Terms.


 


Except as otherwise expressly provided herein, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Borrower to Lenders pursuant to Sections 5.01(a),
5.01(b) and 5.01(c) shall be prepared in accordance with GAAP as in effect at
the time of such preparation. Subject to the foregoing, calculations in
connection with the definitions, covenants and other provisions hereof shall
utilize accounting principles and policies in conformity with those used to
prepare the Historical Financial Statements. To the extent there are any
changes in GAAP from the date of this Agreement, if at any time such change in
GAAP would affect the computation of any financial ratio or requirement set
forth in any Loan Document, and Borrower or Administrative Agent shall so
request, Administrative Agent and Borrower shall negotiate in good faith to
amend such ratio or requirement to preserve the original intent thereof in
light of such change in GAAP; provided  that, until so amended,
such ratio or requirement shall continue to be computed in accordance with such
GAAP prior to such change therein.


 


Section 1.03         Interpretation,
etc.


 


The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words “include”, “includes” and “including” shall be deemed
to be followed by the phrase “without limitation.”  The word “will” shall be construed to have
the same meaning and effect as the word “shall.”  Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns,
(c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not
to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights. For the
avoidance of doubt, references to “Borrower and its Subsidiaries” herein shall
exclude 750 Park Place.


 


Section 1.04         Construction.


 


Each of the parties hereto acknowledges that
(i) it has been represented by counsel in the negotiation and
documentation of the terms of this Agreement; (ii) it has had full and
fair opportunity to review and revise the terms of this Agreement;
(iii) this Agreement has been drafted jointly by all of the parties
hereto; and (iv) neither Administrative Agent nor any Lender has any
fiduciary relationship with or duty to Borrower arising out of or in connection
with this Agreement or any of the other Loan Documents, and the relationship
between Administrative Agent and the Lenders, on the one hand, and Borrower, on
the other hand, in connection herewith or therewith is solely that of debtor
and creditor.


 


28

















 


Accordingly, each of the
parties hereto acknowledges and agrees that the terms of this Agreement shall
not be construed against or in favor of another party.


 


ARTICLE TWO

LOANS


 


Section 2.01         Commitments.


 


(a)           Subject to the terms and conditions hereof, each Lender
severally agrees to make, on the Closing Date, a Loan to Borrower in an amount
equal to such Lender’s Commitment.


 


(b)           Borrower may make only one borrowing under the Commitment
which shall be on the Closing Date. Any amount borrowed under this Section 2.01
and subsequently repaid or prepaid may not be reborrowed. Subject to Sections
2.27, all amounts owed hereunder with respect to the Loans shall be paid in
full no later than the Maturity Date. Each Lender’s Commitment shall terminate
immediately and without further action on the Closing Date after giving effect
to the funding of such Commitment on such date.


 


Section 2.02         Borrowing
Mechanics for Loans.


 


Borrower shall deliver to Administrative Agent a fully
executed Funding Notice at least three Business Days in advance of the Closing
Date, in the case of a Eurodollar Rate Loan, and at least one Business Day in
advance of the Closing Date, in the case of a Base Rate Loan. Promptly upon
receipt by Administrative Agent of such Funding Notice, Administrative Agent
shall notify each Lender of the proposed borrowing; provided that
Borrower shall have delivered to the Administrative Agent a funding indemnity
letter reasonably satisfactory to the Administrative Agent concurrently with
the Funding Notice.


 


Each Lender shall make its Loan available to
Administrative Agent not later than 12:00 p.m. (New York City time) on the
Closing Date, by wire transfer of same day funds in Dollars, at Administrative
Agent’s Principal Office. Upon satisfaction or waiver of the conditions
precedent specified herein, Administrative Agent shall make the proceeds of the
Loans available to Borrower on the Closing Date by causing an amount of same
day funds in Dollars equal to the proceeds of all such Loans received by
Administrative Agent from Lenders to be credited to the account of Borrower at
Administrative Agent’s Principal Office or to such other account as may be
designated in writing to Administrative Agent by Borrower.


 


29

















 


Section 2.03         [Reserved].


 


Section 2.04         [Reserved].


 


Section 2.05         [Reserved].


 


Section 2.06         [Reserved].


 


Section 2.07         [Reserved].


 


Section 2.08         [Reserved].


 


Section 2.09         [Reserved].


 


Section 2.10         [Reserved].


 


Section 2.11         [Reserved].


 


Section 2.12         [Reserved].


 


Section 2.13         [Reserved].


 


Section 2.14         [Reserved].


 


Section 2.15         [Reserved].


 


Section 2.16         Use of
Proceeds.


 


The proceeds of the Loans made on the Closing Date
shall be applied by Borrower to finance the Acquisition and the repayment of
the Existing Indebtedness and to pay the Transaction Costs. No portion of the
proceeds of any Credit Extension shall be used in any manner that causes or
might cause such Credit Extension or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation thereof or to
violate the Exchange Act.


 


Section 2.17         Lenders’
Evidence of Debt.


 


Each Lender shall maintain on its internal records
an account or accounts evidencing the Indebtedness of Borrower to such Lender,
including the amounts of the Loans made by it and each repayment and prepayment
in respect thereof. Any such recordation shall be conclusive and binding on
Borrower, absent manifest error; provided, failure to make any such
recordation, or any error in such recordation, shall not affect Borrower’s
Obligations in respect of any applicable Loans; and provided  further,
in the event of any inconsistency between the Register and any Lender’s
records, the recordations in the Register shall govern.


 


Section 2.18         Notes.


 


If so requested by any Lender by written notice to
Borrower (with a copy to Administrative Agent) at least two Business Days prior
to the Closing Date, or at any time thereafter, Borrower shall execute and
deliver to such Lender (and/or, if applicable and if so specified in such
notice, to any Person who is an assignee of such Lender pursuant to Section
10.06) on the Closing Date (or, if


 


30

















 


such notice is delivered
after the Closing Date, promptly after Borrower’s receipt of such notice) a
Note or Notes to evidence such Lender’s Loans.


 


Section 2.19         Interest
Rate on Loans.


 


Except as otherwise set forth herein, each Loan
shall bear interest on the unpaid principal amount thereof from the date made
through repayment (whether by acceleration or otherwise) thereof as follows:


 


(a)           if a Base Rate Loan, at the Base Rate plus the Applicable
Margin; or


 


(b)           if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate
plus the Applicable Margin.


 


Section 2.20         Interest
Rate.


 


(a)           The basis for determining the rate of interest with respect
to any Loan, and the Interest Period with respect to any Eurodollar Rate Loan,
shall be selected by Borrower and notified to Administrative Agent and Lenders
pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as
the case may be. If on any day a Loan is outstanding with respect to which a
Funding Notice or Conversion/Continuation Notice has not been delivered to
Administrative Agent in accordance with the terms hereof specifying the
applicable basis for determining the rate of interest, then for that day such
Loan shall be a Base Rate Loan.


 


(b)           In connection with Eurodollar Rate Loans there shall be no
more than eight (8) Interest Periods outstanding at any time. In the event
Borrower fails to specify between a Base Rate Loan or a Eurodollar Rate Loan in
the applicable Funding Notice or Conversion/Continuation Notice, such Loan (if
outstanding as a Eurodollar Rate Loan) will be automatically converted into a
Base Rate Loan on the last day of the then-current Interest Period for such
Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then
outstanding) will be made as, a Base Rate Loan). In the event Borrower fails to
specify an Interest Period for any Eurodollar Rate Loan in the applicable
Funding Notice or Conversion/Continuation Notice, Borrower shall be deemed to
have selected an Interest Period of one month. As soon as practicable after
10:00 a.m. (New York City time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent
manifest error, be final, conclusive and binding upon all parties) the interest
rate that shall apply to the Eurodollar Rate Loans for which an interest rate
is then being determined for the applicable Interest Period and shall promptly
give notice thereof (in writing or by telephone promptly confirmed in writing)
to Borrower and each Lender.


 


(c)           Interest payable pursuant to Section 2.19(a) shall be
computed (i) in the case of Base Rate Loans on the basis of a 365-day or
366-day year, as the case may be, and (ii) in the case of Eurodollar Rate
Loans, on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the making of such Loan or the first day of an Interest
Period applicable to such Loan or, with respect to a Base Rate Loan being
converted from a Eurodollar Rate Loan, the date of conversion of such
Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be
included, and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted to a Eurodollar Rate Loan, the date of conversion of such Base
Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided,
if a Loan is repaid on the same day on which it is made, one day’s interest
shall be paid on that Loan.


 


31

















 


(d)           Except as otherwise set forth herein, interest on each Loan
shall be payable in arrears on and to (i) each Interest Payment Date
applicable to that Loan; (ii) any prepayment of that Loan, whether
voluntary or mandatory, to the extent accrued on the amount being prepaid; and
(iii) at maturity, including final maturity; provided, however,
with respect to any voluntary prepayment of a Base Rate Loan, accrued interest
shall instead be payable on the applicable Interest Payment Date.


 


Section 2.21         Conversion/Continuation.


 


(a)           Subject to Section 2.33 and so long as no Default or Event of
Default shall have occurred and then be continuing, Borrower shall have the
option:


 


(i)            to
convert at any time all or any part of any Loan equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount from one Type of Loan
to another Type of Loan; provided a Eurodollar Rate Loan may only be
converted on the expiration of the Interest Period applicable to such
Eurodollar Rate Loan unless Borrower shall pay all amounts due under
Section 2.33 in connection with any such conversion; or


 


(ii)           upon
the expiration of any Interest Period applicable to any Eurodollar Rate Loan,
to continue all or any portion of such Loan, equal to $5,000,000 and integral
multiples of $1,000,000 in excess of that amount, as a Eurodollar Rate Loan.


 


(b)           Borrower shall deliver a Conversion/Continuation Notice to Administrative
Agent no later than 10:00 a.m. (New York City time) at least three Business
Days in advance of the proposed conversion date (in the case of a conversion to
a Base Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). Except as otherwise provided herein, a
Conversion/Continuation Notice for conversion to, or continuation of, any
Eurodollar Rate Loans shall be irrevocable on and after the related Interest
Rate Determination Date, and Borrower shall be bound to effect a conversion or
continuation in accordance therewith.


 


Section 2.22         Default
Interest.


 


Upon the occurrence and during the continuance of an
Event of Default, the principal amount of all Loans outstanding and, to the
extent permitted by applicable law, any interest payments on the Loans or any
fees or other amounts owed hereunder, shall thereafter bear interest (including
post-petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) payable on demand at a rate that is 2% per annum in
excess of the interest rate otherwise payable hereunder with respect to the
applicable Loans (or, in the case of any such fees and other amounts, at a rate
which is 2% per annum in excess of the interest rate otherwise payable
hereunder for Base Rate Loans); provided, in the case of Eurodollar Rate
Loans, upon the expiration of the Interest Period in effect at the time any
such increase in interest rate is effective such Eurodollar Rate Loans shall
thereupon become Base Rate Loans and shall thereafter bear interest payable
upon demand at a rate which is 2% per annum in excess of the interest rate
otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the
increased rates of interest provided for in this Section 2.22 is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative
Agent or any Lender.


 


Section 2.23         Fees;
Premium.


 


(a)           Borrower agrees to pay to Agents (i) all accrued fees
and expenses of each Agent, the Lead Arranger and the Lenders (including the
reasonable fees and expenses of counsel


 


32

















 


for each Agent and Lead Arranger
and any local counsel for Administrative Agent and Lead Arranger), and
(ii) such other reasonable fees in the amounts and at the times separately
agreed upon.


 


(b)           In the event that the Loans are voluntarily prepaid or repaid
in whole or in part pursuant to Section 2.25 prior to the third anniversary of
the Closing Date, Borrower shall pay to the Lenders hereunder a prepayment
premium on the principal amount so prepaid or repaid as follows (i) 3.00%
if such repayment occurs on or before the first anniversary of the Closing
Date; (ii) 2.00% if such repayment occurs after the first anniversary of
the Closing Date but on or before the second anniversary of the Closing Date;
and (iii) 1.00% if such repayment occurs after the second anniversary of
the Closing Date but on or before the third anniversary of the Closing Date.


 


Section 2.24         Repayment.


 


Borrower shall repay the entire principal amount of
the outstanding Loans, together with all other amounts owed hereunder with
respect thereto, in full on the Maturity Date.


 


Section 2.25         Voluntary
Prepayments.


 


(a)           So long as the Termination Date (as defined in the First Lien
Credit Agreement) shall have occurred, or as otherwise consented to by requisite
lenders under the First Lien Credit Agreement, any time and from time to time,
subject to Section 2.33 and Section 2.23(b), in whole or in part, without
premium or penalty:


 


(i)            with
respect to Base Rate Loans, Borrower may prepay any such Loans on any Business
Day in whole or in part, if in part in an aggregate minimum amount
of $1,000,000 and integral multiples of $100,000 in excess of that amount;
and


 


(ii)           with
respect to Eurodollar Rate Loans, Borrower may prepay any such Loans on any
Business Day in whole or in part, if in part in an aggregate minimum amount of
$5,000,000 and integral multiples of $100,000 in excess of that amount.


 


(b)           All such prepayments shall be made:


 


(i)            upon
not less than one Business Day’s prior written notice in the case of Base Rate
Loans; and


 


(ii)           upon
not less than three Business Days’ prior written notice in the case of
Eurodollar Rate Loans, unless Borrower compensates each Lender pursuant to
Section 2.33(c) for any losses, expenses or liabilities resulting from making
such prepayments on shorter notice;


 


in each case given in the
form of a Prepayment Notice to Administrative Agent by 12:00 p.m. (New York
City time) on the date required (and Administrative Agent will promptly
transmit such notice by telefacsimile or telephone to each Lender). Upon the
giving of any such notice, the principal amount of the Loans specified in such
notice shall become due and payable on the prepayment date specified therein.


 


33

















 


Section 2.26         [Reserved].


 


Section 2.27         Mandatory
Prepayments.


 


In the event that the Termination Date (as defined
in the First Lien Credit Agreement) occurs, or the requisite lenders under the
First Lien Credit Agreement decline an offer of prepayment (with a corresponding
permanent reduction of commitments) in accordance with the terms of the First
Lien Credit Agreement, or as otherwise consented to by requisite lenders under
the First Lien Credit Agreement, Borrower shall make mandatory prepayments as
follows:


 


(a)           Asset Sales. No later
than the second Business Day following the date of receipt by Borrower or any
of its Subsidiaries of any Net Asset Sale Proceeds, Borrower shall prepay the
Loans as set forth in Section 2.30(b) in an aggregate amount equal to such Net
Asset Sale Proceeds; provided, so long as no Default or Event of Default
shall have occurred and be continuing, Borrower shall have the option, directly
or through one or more of its Subsidiaries, within 365 days after receipt
thereof to consummate a Permitted Acquisition using such Net Asset Sale
Proceeds or to invest any Net Asset Sale Proceeds in assets of the general type
used in the business of Borrower and its Subsidiaries.


 


(b)           Insurance/Condemnation Proceeds. No later than the second Business Day following the date of
receipt by Borrower or any of its Subsidiaries, or Administrative Agent as loss
payee, of any Net Insurance/Condemnation Proceeds, Borrower shall prepay the
Loans as set forth in Section 2.30(b) in an aggregate amount equal to such Net
Insurance/Condemnation Proceeds; provided, so long as no Default or
Event of Default shall have occurred and be continuing, Borrower shall have the
option, directly or through one or more of its Subsidiaries, within 365 days
after receipt thereof, to invest any Net Insurance/Condemnation Proceeds in
assets of the general type used in the business of Borrower and its
Subsidiaries, which investment may include the repair, restoration or
replacement of the applicable assets thereof.


 


(c)           Issuance of Equity Securities.
Not later than the second Business Day following receipt by Borrower of any
cash proceeds from a capital contribution to, or the issuance of any Capital
Stock of, Borrower or any of its Subsidiaries (other than pursuant to
(i) any employee stock or stock option compensation plan or an employment
agreement or (ii) the issuance of common Capital Stock of Borrower upon
the exercise of the Warrants to the extent such issuance results in cash
proceeds in excess of the amount of the Restricted Junior Payment permitted to
be paid to the holders of such Warrants pursuant to Section 6.04(g)), Borrower
shall prepay the Loans as set forth in Section 2.30(b) in an aggregate amount
equal to 50% of such proceeds, net of underwriting discounts and commissions and
other reasonable costs and expenses associated therewith, including reasonable
legal fees and expenses.


 


(d)           Issuance of Debt. On the
date of receipt by Borrower or any of its Subsidiaries of any cash proceeds
from incurrence of any Indebtedness of Borrower or any of its Subsidiaries
(other than with respect to any Indebtedness permitted to be incurred pursuant
to Section 6.01), Borrower shall prepay the Loans as set forth in Section
2.30(b) in an aggregate amount equal to 100% of such proceeds, net of underwriting
discounts and commissions and other reasonable costs and expenses associated
therewith, including reasonable legal fees and expenses.


 


(e)           Consolidated Excess Cash Flow.
In the event that there shall be Consolidated Excess Cash Flow for any Fiscal
Year (commencing with Fiscal Year 2008), Borrower shall, no later than 105 days
after the end of such Fiscal Year, prepay the Loans as set forth in Section
2.30(b) in an aggregate amount equal to 75% of such Consolidated Excess Cash
Flow; provided that if on the last day of such Fiscal Year (commencing
with Fiscal Year 2009) the Total Leverage Ratio (determined for any such period
by reference to the most recent Compliance Certificate delivered


 


34

















 


pursuant to Section 5.01(d)
calculating the Total Leverage Ratio) shall be 3.75:1.00 or less, Borrower
shall only be required to make the prepayments and/or reductions otherwise
required hereby in an amount equal to 50% of such Consolidated Excess Cash Flow.


 


(f)            Available Warrant Credit. In the event
that the Borrower elects to utilize the Available Warrant Credit in order to
make a Permitted Acquisition, Borrower shall, no later than concurrently with
the making of such Permitted Acquisition, prepay the Loans as set forth in
Section 2.30(b) in an aggregate amount equal to the amount of the Available
Warrant Credit being utilized to make such Permitted Acquisition pursuant to
clause (h) of the definition of “Permitted Acquisition”; provided that,
three Business Days prior to the making of such Permitted Acquisition, Borrower
shall deliver to the Administrative Agent a certificate of an Authorized
Officer of Borrower stating the aggregate consideration necessary to consummate
such Permitted Acquisition and setting forth a calculation of the Available
Warrant Credit immediately before and immediately after such Permitted
Acquisition and the repayment required pursuant to this Section 2.27(f).


 


Section 2.28         [Reserved].


 


Section 2.29         Prepayment
Certificate.


 


Concurrently with any prepayment of the Loans,
Borrower shall deliver to Administrative Agent a certificate of an Authorized
Officer demonstrating the calculation of the amount of the applicable net
proceeds or Consolidated Excess Cash Flow, as the case may be. In the event
that Borrower shall subsequently determine that the actual amount received
exceeded the amount set forth in such certificate, Borrower shall promptly make
an additional prepayment of the Loans in an amount equal to such excess, and
Borrower shall concurrently therewith deliver to Administrative Agent a
certificate of an Authorized Officer demonstrating the derivation of such
excess.


 


Section 2.30         Application
of Prepayments/Reductions.


 


(a)           Application of Voluntary Prepayments by Type of Loans. Any prepayment of any Loan pursuant to Section 2.25 shall
be applied as specified by Borrower in the applicable Prepayment Notice; provided,
in the event Borrower fails to specify the Loans to which any such prepayment
shall be applied, such prepayment shall be applied to prepay the Loans on a pro
rata basis (in accordance with the respective outstanding principal amounts
thereof).


 


(b)           Application of Mandatory Prepayments by Type of Loans. Any amount required to be paid pursuant to Section 2.27
shall be applied to prepay the Loans on a pro rata basis (in accordance with
the respective outstanding principal amounts thereof).


 


(c)           Application of Prepayments of Loans to Base Rate Loans and
Eurodollar Rate Loans. Any
prepayment of Loans shall be applied first to Base Rate Loans to the full
extent thereof before application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments required to be made by
Borrower pursuant to Section 2.33(c).


 


Section 2.31         General
Provisions Regarding Payments.


 


(a)           All payments by Borrower of principal, interest, fees and
other Obligations shall be made in Dollars in same day funds, without defense,
setoff or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 1:00 p.m. (New York City time) on the date
due at the Administrative Agent’s Principal Office for the account of Lenders;


 


35

















 


funds received by Administrative
Agent after that time on such due date shall be deemed to have been paid by
Borrower on the next succeeding Business Day.


 


(b)           All payments in respect of the principal amount of any Loan
shall include payment of accrued interest on the principal amount being repaid
or prepaid, and all such payments (and, in any event, any payments in respect
of any Loan on a date when interest is due and payable with respect to such
Loan) shall be applied to the payment of interest before application to
principal.


 


(c)           Administrative Agent (or its agent or sub-agent appointed by
it) shall promptly distribute to each Lender at such address as such Lender
shall indicate in writing, such Lender’s applicable Pro Rata Share of all
payments and prepayments of principal and interest due hereunder, together with
all other amounts due thereto, including all fees payable with respect thereto,
to the extent received by Administrative Agent.


 


(d)           Notwithstanding the foregoing provisions hereof, if any
Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning payments received thereafter.


 


(e)           Subject to the provisos set forth in the definition of “Interest
Period”, whenever any payment to be made hereunder shall be stated to be due on
a day that is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder.


 


(f)            Administrative Agent shall deem any payment by or on behalf
of Borrower hereunder that is not made in same day funds prior to 1:00 p.m.
(New York City time) to be a non-conforming payment. Any such payment shall not
be deemed to have been received by Administrative Agent until the later of
(i) the time such funds become available funds, and (ii) the
applicable next Business Day. Administrative Agent shall give prompt telephonic
notice to Borrower and each applicable Lender (confirmed in writing) if any
payment is non-conforming. Any non-conforming payment may constitute or become
a Default or Event of Default in accordance with the terms of Section 8.01(a). Interest
shall continue to accrue on any principal as to which a non-conforming payment
is made until such funds become available funds (but in no event less than the
period from the date of such payment to the next succeeding applicable Business
Day) at the rate determined pursuant to Section 2.22 from the date such amount
was due and payable until the date such amount is paid in full.


 


(g)           If an Event of Default shall have occurred and not otherwise
been waived, and the maturity of the Obligations shall have been accelerated
pursuant to Section 8.01, all payments or proceeds received by Agents hereunder
in respect of any of the Obligations, shall be applied in accordance with the
application arrangements described in Section 7.02 of the Pledge and Security
Agreement.


 


Section 2.32         Sharing of
Payments by Lenders.


 


Except as otherwise provided in the Collateral
Documents with respect to amounts realized from the exercise of rights with
respect to Liens on Collateral if any Lender shall, by exercising any right of
setoff or counterclaim or otherwise, obtain payment in respect of any principal
of or interest on any of its Loans or other obligations hereunder resulting in
such Lender’s receiving payment of a proportion of the aggregate amount of its
Loans and accrued interest thereon or other such obligations greater than its
Pro Rata Share, then the Lender receiving such greater proportion shall
(a) notify


 


36

















 


Administrative Agent of such
fact, and (b) purchase (for cash at face value) participations in the
Loans and such other obligations of the other Lenders, or make such other
adjustments as shall be equitable, so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and other
amounts owing them; provided that:


 


(i)            if
any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and
the purchase price restored to the extent of such recovery, without interest,
and


 


(ii)           the
provisions of this paragraph shall not be construed to apply to (x) any
payment made by Borrower pursuant to and in accordance with the express terms
of this Agreement or (y) any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Loans to any
assignee or participant, other than to Borrower or any Subsidiary thereof (as
to which the provisions of this paragraph shall apply).


 


Each Loan Party consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against Borrower rights of setoff and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of each
Loan Party in the amount of such participation.


 


Section 2.33         Making or
Maintaining Eurodollar Rate Loans.


 


(a)           Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have
determined (which determination shall be final and conclusive and binding upon
all parties hereto), on any Interest Rate Determination Date with respect to
any Eurodollar Rate Loans, that by reason of circumstances affecting the London
interbank market adequate and fair means do not exist for ascertaining the
interest rate applicable to such Loans on the basis provided for in the
definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date
give notice (by telefacsimile or by telephone confirmed in writing) to Borrower
and each Lender of such determination, whereupon (i) no Loans may be made
as, or converted to, Eurodollar Rate Loans until such time as Administrative
Agent notifies Borrower and Lenders that the circumstances giving rise to such
notice no longer exist, and (ii) any Funding Notice or
Conversion/Continuation Notice given by Borrower with respect to the Loans in
respect of which such determination was made shall be deemed to be rescinded by
Borrower unless Borrower delivers written notice to Administrative Agent that
it desires to have the Loans funded or continued, as the case may be, as Base
Rate Loans, in which case they shall be so funded or continued, as the case may
be.


 


(b)           Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have
determined (which determination shall be final and conclusive and binding upon
all parties hereto but shall be made only after consultation with Borrower and
Administrative Agent) that the making, maintaining or continuation of its
Eurodollar Rate Loans (i) has become unlawful as a result of compliance by
such Lender in good faith with any law, treaty, governmental rule, regulation,
guideline or order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful), or (ii) has become
impracticable, as a result of contingencies occurring after the date hereof
which materially and adversely affect the London interbank market, then, and in
any such event, such Lender shall be an “Affected Lender” and it shall
on that day give written notice (by telefacsimile) to Borrower and
Administrative Agent of such determination (which notice Administrative Agent
shall promptly transmit to each other Lender). Thereafter (1) the
obligation of the Affected Lender to make Loans as, or to convert Loans to,
Eurodollar Rate Loans shall be suspended until such notice


 


37

















 


shall be withdrawn by the Affected
Lender, (2) to the extent such determination by the Affected Lender
relates to a Eurodollar Rate Loan then being requested by Borrower pursuant to
a Funding Notice or a Conversion/Continuation Notice, the Affected Lender shall
make such Loan as (or continue such Loan as or convert such Loan to, as the
case may be) a Base Rate Loan, (3) the Affected Lender’s obligation to
maintain its outstanding Eurodollar Rate Loans (the “Affected Loans”)
shall be terminated at the earlier to occur of the expiration of the Interest
Period then in effect with respect to the Affected Loans or when required by
law, and (4) the Affected Loans shall automatically convert into Base Rate
Loans on the date of such termination. Notwithstanding the foregoing, to the
extent a determination by an Affected Lender as described above relates to a
Eurodollar Rate Loan then being requested by Borrower pursuant to a Funding
Notice or a Conversion/Continuation Notice, Borrower shall have the option,
subject to the provisions of Section 2.33(c), to rescind such Funding
Notice or Conversion/Continuation Notice as to all Lenders by giving written
notice (by telefacsimile) to Administrative Agent of such rescission on the
date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this Section 2.33(b) shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to
convert Loans to, Eurodollar Rate Loans in accordance with the terms hereof.


 


(c)           Compensation for Breakage or Non-Commencement of Interest
Periods. Borrower shall compensate each
Lender, upon written request by such Lender (which request shall set forth the
basis for requesting such amounts), for all reasonable losses, expenses and
liabilities (including any interest paid by such Lender to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense
or liability sustained by such Lender in connection with the liquidation or re-employment
of such funds but excluding loss of anticipated profits) which such Lender may
sustain:  (i) if for any reason
(other than a default by Administrative Agent or such Lender) a borrowing of
any Eurodollar Rate Loan does not occur on a date specified therefor in a
Funding Notice, or a conversion to or continuation of any Eurodollar Rate Loan
does not occur on a date specified therefor in a Conversion/Continuation
Notice; (ii) if any prepayment or other principal payment or any
conversion of any of its Eurodollar Rate Loans occurs on a date prior to the
last day of an Interest Period applicable to that Loan; (iii) if any
prepayment of any of its Eurodollar Rate Loans is not made on any date
specified in a Prepayment Notice given by Borrower; or (iv) if any
prepayment of any of its Eurodollar Rate Loans is made on less than three
Business Days’ written notice pursuant to Section 2.25(b)(ii).


 


(d)           Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate
Loans at, to, or for the account of any of its branch offices or the office of
an Affiliate of such Lender.


 


(e)           Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this
Section 2.33 and under Sections 2.34 and 2.35 shall be made as though such
Lender had actually funded each of its relevant Eurodollar Rate Loans through
the purchase of a Eurodollar deposit bearing interest at the rate obtained
pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an
amount equal to the amount of such Eurodollar Rate Loan and having a maturity
comparable to the relevant Interest Period and through the transfer of such
Eurodollar deposit from an offshore office of such Lender to a domestic office
of such Lender in the United States of America; provided, however,
each Lender may fund each of its Eurodollar Rate Loans in any manner it sees
fit and the foregoing assumptions shall be utilized only for the purposes of
calculating amounts payable under this Section 2.33 and under Section 2.34 and
2.35.


 


Section 2.34         Compensation
For Increased Costs.


 


If any Change in Law shall:


 


38

















 


(i)            impose,
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except
any reserve requirement reflected in the definition of Adjusted Eurodollar
Rate);


 


(ii)           subject
any Lender to any tax of any kind whatsoever with respect to this Agreement, or
any Eurodollar Rate Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Indemnified Taxes or
Other Taxes covered by Section 2.36 and changes in the rate of any Excluded Tax
payable by such Lender); or


 


(iii)          impose
on any Lender or the London interbank market any other condition, cost or
expense affecting this Agreement or Eurodollar Rate Loans made by such Lender;


 


and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any Eurodollar Rate Loan (or of maintaining its obligation to make any such
Loan), or to increase the cost to such Lender or to reduce the amount of any
sum received or receivable by such Lender hereunder (whether of principal, interest
or any other amount), then upon request of such Lender, Borrower will pay to
such Lender such additional amount or amounts as will compensate such Lender
for such additional costs incurred or reduction suffered. Such Lender will
provide Borrower with reasonable calculation of any such increased costs and a
description of the reasons therefor.


 


Section 2.35         Capital
Requirements; Certificates for Reimbursement; Delay in Requests.


 


(a)           Capital Requirements.
If any Lender determines that any Change in Law affecting such Lender or any
lending office of such Lender or such Lender’s holding company, if any,
regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s capital or on the capital of such Lender’s
holding company, if any, as a consequence of this Agreement, the Commitments of
such Lender or the Loans made by such Lender to a level below that which such
Lender or such Lender’s holding company could have achieved but for such Change
in Law (taking into consideration such Lender’s policies and the policies of
such Lender’s holding company with respect to capital adequacy), then from time
to time Borrower will pay to such Lender such additional amount or amounts as
will compensate such Lender or such Lender’s holding company for any such
reduction suffered.


 


(b)           Certificates for Reimbursement.
A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in Sections 2.34 and 2.35(a) and delivered to Borrower shall be conclusive
absent manifest error, and shall also include reasonable back-up or other
evidence relating to the information contained therein. Borrower shall pay such
Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.


 


(c)           Delay in Requests. Failure
or delay on the part of any Lender to demand compensation pursuant to Sections
2.34, 2.35 and 2.36 shall not constitute a waiver of such Lender’s right to
demand such compensation, provided that Borrower shall not be required
to compensate a Lender pursuant to Sections 2.34, 2.35 and 2.36 for any
increased costs incurred or reductions suffered more than six months prior to
the date that such Lender notifies Borrower of the Change in Law giving rise to
such increased costs or reductions and of such Lender’s intention to claim
compensation therefor (except that,


 


39

















 


if the Change in Law giving rise to
such increased costs or reductions is retroactive, then the six-month period
referred to above shall be extended to include the period of retroactive effect
thereof).


 


Section 2.36         Taxes.


 


(a)           Payments Free of Taxes.
Any and all payments by or on account of any obligation of Borrower hereunder
or under any other Loan Document shall be made free and clear of and without
reduction or withholding for any Indemnified Taxes or Other Taxes, provided
that if any Person shall be required by applicable law to deduct any
Indemnified Taxes (including any Other Taxes) from such payments, then
(i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.36) each Agent or Lender, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and
(iii) Borrower shall timely pay or cause to be paid the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.


 


(b)           Payment of Other Taxes by Borrower. Without limiting the provisions of paragraph (a) above,
Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.


 


(c)           Indemnification by Borrower.
Borrower shall indemnify each Agent and each Lender, within 10 days after
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 2.36) paid by such Agent or
such Lender, as the case may be, and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to Borrower by an Agent or a Lender (with a copy
to Administrative Agent), or by Administrative Agent on its own behalf or on
behalf of an Agent or a Lender, shall be conclusive absent manifest error.


 


(d)           Evidence of Payments.
As soon as practicable after any payment of Indemnified Taxes or Other Taxes by
Borrower to a Governmental Authority, Borrower shall deliver to Administrative
Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to Administrative
Agent. Borrower shall indemnify each Agent and each Lender, within 10 days
after written demand therefor, for the full amount of any incremental taxes,
interest and penalties that may become payable by such Agent or such Lender as
a result of Borrower’s failure to remit the required receipts or other required
documentary evidence.


 


(e)           Foreign Lenders. Any
Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the United States, or any treaty to which the
United States is a party, with respect to payments hereunder or under any other
Loan Document shall deliver to Borrower (with a copy to Administrative Agent),
at the time or times prescribed by applicable law and reasonably requested in
writing by Borrower or Administrative Agent (it being understood that this
Section 2.36(e) shall constitute a written request for the applicable forms and
certificates described in Section 2.36(e)(i) through (iv)), such properly
completed and executed documentation prescribed by applicable law as will
permit such payments to be made without withholding or at a reduced rate of
withholding. In addition, any Lender, if requested in writing by Borrower or
Administrative Agent, shall deliver such other documentation prescribed by
applicable law and reasonably requested in writing by Borrower or
Administrative Agent as will enable Borrower or Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements.


 


40

















 


Without limiting the generality of the foregoing,
any Foreign Lender shall deliver to Borrower and Administrative Agent on or
prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the written request of
Borrower or Administrative Agent), but only if such Foreign Lender is legally
entitled to do so, two copies of whichever of the following is applicable:


 


(i)            duly
completed original copies of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States of
America is a party,


 


(ii)           duly
completed original copies of Internal Revenue Service Form W-8ECI,


 


(iii)          duly
completed original copies of Internal Revenue Service Form W-8IMY, together
with all applicable accompanying forms, certificates and statements required by
that Form W-81MY;


 


(iv)          in
the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Internal Revenue Code,
(x) a certificate to the effect that such Foreign Lender is not (A) a
“bank” within the meaning of section 881(c)(3)(A) of the Internal Revenue Code,
(B) a “10 percent shareholder” of Borrower within the meaning of section
881(c)(3)(B) of the Internal Revenue Code, or (C) a “controlled foreign
corporation” described in section 881(c)(3)(C) of the Internal Revenue Code and
(y) duly completed copies of Internal Revenue Service Form W-8BEN, or


 


(v)           any
other form prescribed by applicable law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together
with such supplementary documentation as may be prescribed by applicable law to
permit Borrower to determine the withholding or deduction required to be made.


 


Each Lender shall promptly
notify Borrower and Administrative Agent at any time it determines that it is
no longer in a position to provide any previously delivered form or certificate
to Borrower (or any other form of certification adopted by the taxing
authorities for such purpose).


 


(f)            Domestic Lenders. Each
Lender that is a “United States person” within the meaning of Section
7701(a)(30) of the Internal Revenue Code shall deliver to the Administrative
Agent two duly signed completed originals of Internal Revenue Service Form W-9.


 


(g)           Treatment of Certain Refunds.
If an Agent or a Lender determines, in its sole discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been
indemnified by Borrower or with respect to which Borrower has paid additional
amounts pursuant to this Section, it shall pay to Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional
amounts paid, by Borrower under this Section 2.36 with respect to the Taxes or
Other Taxes giving rise to such refund), net of all out-of-pocket expenses of
such Agent or such Lender, as the case may be, and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such
refund); provided that Borrower, upon the request of such Agent or such
Lender, agrees to repay the amount paid over to Borrower (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) to
such Agent or such Lender in the event such Agent or such Lender is required to
repay such refund to such Governmental Authority. This paragraph shall not be
construed to require any Agent or any Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to
Borrower or any other Person.


 


41

















 


Section 2.37         Mitigation
Obligations; Replacement of Lenders.


 


(a)           Designation of a Different Lending Office. If any Lender requests compensation under Section 2.34 or
2.35 or requires Borrower to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.36,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.34, 2.35 or 2.36 as
the case may be, in the future and (ii) would not subject such Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender. Borrower hereby agrees to pay all reasonable and documented costs
and expenses incurred by any Lender in connection with any such designation or
assignment.


 


(b)           Replacement of Lenders.
If (i) any Lender requests compensation under Section 2.34 or 2.35,
(ii) Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section
2.36 or (iii) any Lender refuses to consent to an amendment, modification
or waiver required pursuant to Section 10.04 with respect to any Loan Document
which has otherwise been approved by Requisite Lenders, then Borrower may, at
its sole expense and effort, upon notice to such Lender and Administrative
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in, and consents
required by, Section 10.06), all of its interests, rights and obligations under
this Agreement and the related Loan Documents to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts
such assignment); provided that:


 


(i)            Borrower
shall have paid to Administrative Agent the assignment fee specified in Section
10.06,


 


(ii)           such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder and under the other Loan Documents (including,
if applicable, any amounts under Section 2.33(c)) from the assignee (to
the extent of such outstanding principal and accrued interest and fees) or
Borrower (in the case of all other amounts),


 


(iii)          in
the case of any such assignment resulting from a claim for compensation under
Section 2.34 or 2.35 or payments required to be made pursuant to Section 2.36,
such assignment will result in a reduction in such compensation or payments
thereafter, and


 


(iv)          such
assignment does not conflict with applicable law.


 


A Lender shall not be required to make any such
assignment or delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling Borrower to require such
assignment and delegation cease to apply.


 


ARTICLE THREE

CONDITIONS PRECEDENT


 


Section 3.01         Closing
Date.


 


The obligation of any Lender to make a Credit
Extension on the Closing Date is subject to the satisfaction, or waiver in
accordance with Section 10.04, of the following conditions on or before the
Closing Date:


 


42

















 


(a)           Loan Documents. Administrative
Agent shall have received sufficient copies of each Loan Document originally
executed and delivered by each applicable Loan Party for each Lender.


 


(b)           Organizational Documents; Incumbency. Administrative Agent shall have received (i) copies of
each Organizational Document executed and delivered by each Loan Party, as
applicable, and, to the extent applicable, certified as of a recent date by the
appropriate governmental official, each dated the Closing Date or a recent date
prior thereto; (ii) signature and incumbency certificates of the officers
of such Person executing the Loan Documents to which it is a party;
(iii) resolutions of the Board of Directors of each Loan Party approving
and authorizing the execution, delivery and performance of this Agreement and
the other Loan Documents and the Related Agreements to which it is a party or
by which it or its assets may be bound as of the Closing Date, certified as of
the Closing Date by its secretary or an assistant secretary as being in full
force and effect without modification or amendment; (iv) a good standing
certificate from the applicable Governmental Authority of each Loan Party’s
jurisdiction of incorporation, organization or formation and in each
jurisdiction in which it is qualified as a foreign corporation or other entity
to do business, each dated a recent date prior to the Closing Date; and
(v) such other documents as Administrative Agent may reasonably request.


 


(c)           Organizational and Capital Structure. The organizational structure and capital structure of
Borrower and its Subsidiaries, both before and after giving effect to the  Transactions, shall be as set forth on Schedule 4.02. The
Administrative Agent shall have received reasonably satisfactory evidence that
all ownership interests in Borrower’s Subsidiaries (including Chem Rx) shall be
owned by Borrower or its Subsidiaries in each case free and clear of any lien,
charge, or encumbrance not permitted hereunder.


 


(d)           Consummation of Transactions Contemplated by Related
Agreements.


 


(i)            (1) All
conditions to the Acquisition set forth in each of the Stock Purchase
Agreement, the Merger Agreement and the Unit Redemption Agreement shall have
been satisfied or the fulfillment of any such conditions shall have been waived,
provided that no provision thereof shall have been waived in a manner adverse
to the Lenders without the consent of Administrative Agent, and (2) the
Acquisition shall have been consummated in accordance with the terms thereof
and in compliance with applicable law and regulatory approvals.


 


(ii)           The
Lenders shall be satisfied that the Equity Contribution shall have occurred.


 


(iii)          (1) The
Borrower shall have received the gross proceeds from the borrowings of the
First Lien Loans in an aggregate amount in cash of not less than $84,000,000;
and (2) the Borrower shall have delivered to Administrative Agent
complete, correct and conformed copies of the First Lien Credit Agreement.


 


(e)           Existing Indebtedness.
On the Closing Date, Borrower and its Subsidiaries shall have (i) repaid
in full all Existing Indebtedness, (ii) terminated any commitments to lend
or make other extensions of credit thereunder, (iii) delivered to
Administrative Agent all documents or instruments necessary to release all
Liens securing Existing Indebtedness or other obligations of Borrower and its
Subsidiaries thereunder being repaid on the Closing Date, (iv) made
arrangements reasonably satisfactory to Administrative Agent with respect to
the subordination of any existing liens on the Collateral made in favor of
certain vendors to the Borrower, and (v) made arrangements reasonably
satisfactory to Administrative Agent with respect to cancellation of any
Existing Letters of Credit (as


 


43

















 


defined in the First Lien Credit
Agreement) outstanding thereunder or the issuance of Letters of Credit (as
defined in the First Lien Credit Agreement) to support the obligations of
Borrower and its Subsidiaries with respect thereto.


 


(f)            Personal Property Collateral.
In order to create in favor of Collateral Agent, for the benefit of Secured
Parties, a valid, perfected First Priority security interest in the personal
property Collateral, Collateral Agent shall have received:


 


(i)            evidence
reasonably satisfactory to the Collateral Agent of the compliance by each Loan
Party of their obligations under the Pledge and Security Agreement and the
other Collateral Documents (including their obligations to authorize and
deliver UCC financing statements)


 


(ii)           delivery
of originals of securities, promissory notes or instruments and chattel paper
to be pledged under the Pledge and Security Agreement;


 


(iii)          a
Second Lien Trademark Security Agreement (the form of which is set forth as
Exhibit B to the Pledge and Security Agreement), completed, originally executed
and delivered by each applicable Loan Party; and


 


(iv)          a
completed Collateral Questionnaire dated the Closing Date and executed by an
Authorized Officer of each Loan Party, together with all attachments contemplated
thereby, including (A) the results of a recent search, by a Person
satisfactory to Collateral Agent, of all effective UCC financing statements (or
equivalent filings) made with respect to any personal or mixed property of any
Loan Party in the jurisdictions specified in the Collateral Questionnaire,
together with copies of all such filings disclosed by such search, (B) the
results of a recent search, by a Person satisfactory to Collateral Agent, of
all effective filings made with respect to any Intellectual Property of any
Loan Party in the United States Patent and Trademark Office and Copyright
Office and (B) UCC termination statements (or similar documents) duly
authorized by all applicable Persons for filing in all applicable jurisdictions
as may be necessary to terminate any effective UCC financing statements (or
equivalent filings) disclosed in such search (other than any such financing
statements in respect of Permitted Liens).


 


(g)           Financial Statements; Projections. Lenders shall have received from Borrower (i) the
Historical Financial Statements and (ii) the Projections.


 


(h)           Evidence of Insurance.
Collateral Agent shall have received evidence reasonably satisfactory to it
that all insurance required to be maintained pursuant to Section 5.05 is in
full force and effect and that Collateral Agent, for the benefit of Secured
Parties has been named as additional insured and loss payee, as applicable,
thereunder to the extent required under Section 5.05.


 


(i)            Opinions of Counsel to Loan Parties. Lenders and their respective counsel shall have received
originally executed copies of the favorable written opinions of Covington &
Burling LLP, counsel for Loan Parties, and Troutman Sanders LLP, New Jersey
counsel for Loan Parties, as to such other matters as Administrative Agent may
reasonably request, dated as of the Closing Date and otherwise in form and
substance reasonably satisfactory to Administrative Agent (and each Loan Party
hereby instructs such counsel to deliver such opinions to Agents and Lenders).


 


(j)            Fees. Borrower
shall have paid to Administrative Agent, the fees payable on the Closing Date
referred to in Section 2.23.


 


44
















 


(k)           Solvency Certificate.
On the Closing Date, Administrative Agent shall have received a Solvency
Certificate from Borrower affirming that immediately after giving effect to the
consummation of the Transactions, Borrower and its Subsidiaries are and will be
Solvent.


 


(l)            Closing Date Certificate.
Borrower shall have delivered to Administrative Agent an originally executed
Closing Date Certificate, together with all attachments thereto.


 


(m)          U.S.A. Patriot Act. The
Lenders shall have received all documentation and other information required by
bank regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including the U.S.A. Patriot Act.


 


(n)           Notice. Administrative
Agent shall have received a fully executed and delivered Funding Notice in
writing executed by an Authorized Officer.


 


(o)           Representations and Warranties.
(y) The representations and warranties made by Chem Rx in the Stock
Purchase Agreement and the Merger Agreement as are material to the interests of
the Lenders, but only to the extent that the Borrower has the right to
terminate its obligations under the Stock Purchase Agreement or the Merger
Agreement, respectively, as a result of breach of such representations and
warranties, and (z) the representations and warranties made in Sections
4.01, 4.03,  4.06, 4.16 and 4.17 in each
case shall be true and correct in all material respects on and as of the
Closing Date (or, if any such representation and warranty is expressly stated
to have been made as of a specific date, as of such specific date); and


 


(p)           Event of Default. No event
shall have occurred and be continuing or would result from the consummation of
the Credit Extension that would constitute an Event of Default or a Default.


 


Each Lender, by delivering
its signature page to this Agreement, a Lender Addendum or an Assignment
Agreement and funding a Loan on the Closing Date shall be deemed to have
acknowledged receipt of, and consented to and approved, each Loan Document and
each other document required to be approved by any Agent, Requisite Lenders or
Lenders, as applicable on the Closing Date.


 


ARTICLE FOUR

REPRESENTATIONS AND WARRANTIES


 


In order to induce Lenders to enter into this
Agreement and to make each Credit Extension to be made thereby, each Loan Party
represents and warrants to each Lender, on the Closing Date (only with respect
to the sections referred to in Section 3.01(o)), that the following statements
are true and correct (it being understood and agreed that the representations and
warranties made on the Closing Date are deemed to be made concurrently with the
consummation of the Transactions):


 


Section 4.01         Organization;
Requisite Power and Authority; Qualification.


 


Each of Borrower and its Subsidiaries (a) is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization as identified in Schedule 4.01, (b) has
all requisite power and authority to own and operate its properties, to carry
on its business as now conducted and as proposed to be conducted, to enter into
the Loan Documents to which it is a party and to carry out the transactions
contemplated thereby, and (c) is qualified to do business and in good
standing in every jurisdiction where its assets are located and wherever necessary
to carry out its business and operations,


 


45

















 


except in jurisdictions
where the failure to be so qualified or in good standing could not be
reasonably expected to have, a Material Adverse Effect.


 


Section 4.02         Capital
Stock and Ownership.


 


The Capital Stock of each of Borrower and its
Subsidiaries has been duly authorized and validly issued and is fully paid and
non-assessable. Except as set forth on Schedule 4.02 and other than the
Warrants, as of the Closing Date, there is no existing option, warrant, call,
right, commitment or other agreement to which Borrower or any of its
Subsidiaries is a party requiring, and there is no membership interest or other
Capital Stock of Borrower or any of its Subsidiaries outstanding which upon
conversion or exchange would require, the issuance by Borrower or any of its
Subsidiaries of any additional membership interests or other Capital Stock of
Borrower or any of its Subsidiaries or other Securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase, a
membership interest or other Capital Stock of Borrower or any of its
Subsidiaries. Schedule 4.02 correctly sets forth the ownership interest of
Borrower and each of its Subsidiaries in their respective Subsidiaries as of
the Closing Date both before and after giving effect to the Transaction.


 


Section 4.03         Due
Authorization.


 


The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary action on the part of each
Loan Party that is a party thereto.


 


Section 4.04         No Conflict.


 


The execution, delivery and performance by Loan
Parties of the Loan Documents to which they are parties and the consummation of
the transactions contemplated by the Loan Documents do not and will not
(a) violate any provision of any law or any governmental rule or
regulation applicable to Borrower or any of its Subsidiaries, any of the
Organizational Documents of Borrower or any of its Subsidiaries, or any order,
judgment or decree of any court or other agency of government binding on
Borrower or any of its Subsidiaries, except to the extent any such violation
could not be reasonably expected to have a Material Adverse Effect;
(b) conflict with, result in a material breach of or constitute (with due
notice or lapse of time or both) a material default under any material
Contractual Obligation of Borrower or any of its Subsidiaries; (c) result
in or require the creation or imposition of any Lien upon any of the properties
or assets of Borrower or any of its Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of Collateral Agent, on behalf of
Secured Parties and Liens securing the obligations under the First Lien Credit
Agreement); or (d) require any approval of stockholders, members or
partners or any approval or consent of any Person under any material
Contractual Obligation of Borrower or any of its Subsidiaries, except for such
approvals or consents which will be obtained on or before the Closing Date and
disclosed in writing to Lenders.


 


Section 4.05         Governmental
Consents.


 


The execution, delivery and performance by Loan
Parties of the Loan Documents to which they are parties and the consummation of
the transactions contemplated by the Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other action
to, with or by, any Governmental Authority except (a) for consents,
approvals or notices that could not be reasonably expected to have a Material
Adverse Effect and (b) for filings and recordings with respect to the
Collateral to be made, or otherwise delivered to Collateral Agent and to the
agents under the First Lien Credit Agreement for filing and/or recordation, as
of the Closing Date.


 


46

















 


Section 4.06         Binding
Obligation.


 


Each Loan Document has been duly executed and
delivered by each Loan Party that is a party thereto and is the legally valid
and binding obligation of such Loan Party, enforceable against such Loan Party
in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors’ rights generally or by equitable principles relating to
enforceability.


 


Section 4.07         Historical
Financial Statements.


 


The Historical Financial Statements were prepared in
conformity with GAAP (except as reflected in the notes thereto) and are
accurate and complete and fairly present, in all material respects, the
financial position, on a consolidated basis, of the Persons described in such
financial statements as at the respective dates thereof and the results of
operations and cash flows, on a consolidated basis, of the entities described
therein for each of the periods then ended, subject, in the case of any such
unaudited financial statements, to the absence of notes that would be required
by GAAP and to changes resulting from audit and normal year-end adjustments. As
of the Closing Date, neither Borrower nor any of its Subsidiaries has any
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that (a) would be required to be included on a
balance sheet in accordance with GAAP, (b) is not reflected in the Historical
Financial Statements or the notes thereto and (c) is material in relation
to the business, operations, properties, assets, or condition (financial or
otherwise) of Borrower and its Subsidiaries taken as a whole.


 


Section 4.08         Projections.


 


On and as of the Closing Date, the projections of
Borrower and its Subsidiaries quarterly for the first year following the
Closing Date and annually through Fiscal Year 2012 (the “Projections”)
are based on good faith estimates and assumptions that were reasonable when
made by the management of Chem Rx; provided the Projections are not to
be viewed as facts and that actual results during the period or periods covered
by the Projections may differ from such Projections and that the differences
may be material.


 


Section 4.09         No Material
Adverse Effect.


 


Since December 31, 2006, no event, circumstance or
change has occurred that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect.


 


Section 4.10         Adverse Proceedings, etc.


 


There are no Adverse Proceedings, individually or in
the aggregate, that could reasonably be expected to have a Material Adverse
Effect. Neither Borrower nor any of its Subsidiaries (a) is in violation
of any applicable laws (including Environmental Laws and Health Care Laws)
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, or (b) is subject to or in default with respect
to any final judgments, writs, injunctions, decrees, rules or regulations of
any court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.


 


47

















 


Section 4.11         Payment of
Taxes.


 


Except as otherwise permitted under Section 5.03,
all material tax returns and reports of Borrower and its Subsidiaries required
to be filed by any of them have been timely filed, and all material taxes shown
on such tax returns to be due and payable and all assessments, fees and other
governmental charges upon Borrower and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Borrower knows of no proposed
tax assessment against Borrower or any of its Subsidiaries that is not being
actively contested by Borrower or such Subsidiary in good faith and by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of Borrower and/or its Subsidiaries, as
the case may be; and as of the Closing Date no tax Lien has been filed, and to
the knowledge of Borrower or any of its Subsidiaries, no claim is being
asserted, with respect to any such material tax, fee or other charge.


 


Section 4.12         Properties.


 


(a)           Title. Each of
Borrower and its Subsidiaries has (i) good and legal title to (in the case
of fee interests in real property), (ii) valid leasehold interests in (in
the case of leasehold interests in real or personal property), and
(iii) good title to (in the case of all other personal property,
including, but not limited to, Intellectual Property and licenses) all of their
respective properties and assets material to the business of Borrower and its
Subsidiaries, taken as a whole, and reflected in their respective most recent
balance sheet contained in the Historical Financial Statements referred to in
Section 4.07 and in the most recent balance sheet delivered pursuant to Section
5.01, in each case except for assets disposed of since the date of such
financial statements in the ordinary course of business or as otherwise
permitted under Section 6.08. Except as permitted by this Agreement, all such
properties and assets are free and clear of Liens.


 


(b)           Real Estate. As of the
Closing Date, Schedule 4.12 contains a true, accurate and complete list of
(i) all Real Estate Assets, and (ii) all real estate leases,
subleases or assignments of leases (together with all amendments,
modifications, supplements, renewals or extensions of any thereof) affecting
each Real Estate Asset of any Loan Party, regardless of whether such Loan Party
is the landlord or tenant (whether directly or as an assignee or successor in
interest) under such lease, sublease or assignment. Except as could not
reasonably be expected to have a Material Adverse Effect, each agreement listed
in clause (ii) of the immediately preceding sentence is in full force and
effect and Borrower does not have knowledge of any default that has occurred
and is continuing thereunder, and each such agreement constitutes the legally
valid and binding obligation of each applicable Loan Party, enforceable against
such Loan Party in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles.


 


Section 4.13         Environmental
Matters.


 


Neither Borrower nor any of its Subsidiaries nor any
of their respective Facilities or operations are subject to any outstanding
written order, consent decree or settlement agreement with any Person relating
to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Neither Borrower nor any of its Subsidiaries has
received any letter or request for information under Section 104 of
the Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. § 9604) or any comparable state law that could reasonably
be expected to result in an Environmental Claim against Borrower or any of its
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. There are and, to each of Borrower’s



 


48

















 


and its Subsidiaries’
knowledge, have been, no conditions, occurrences, or Hazardous Materials
Activities which could reasonably be expected to form the basis of an
Environmental Claim against Borrower or any of its Subsidiaries that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Compliance with all current or reasonably foreseeable
future requirements pursuant to or under Environmental Laws could not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. No event or condition has occurred or is occurring with respect
to Borrower or any of its Subsidiaries relating to any Environmental Law, any
Release of Hazardous Materials, or any Hazardous Materials Activity which
individually or in the aggregate has had, or could reasonably be expected to
have, a Material Adverse Effect.


 


Section
4.14         No
Defaults.


 


Neither Borrower nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any of its Contractual
Obligations (other than this Agreement), and no condition exists which could
constitute such a default, except where the consequences, direct or indirect,
of such default or defaults, if any, could not reasonably be expected to have a
Material Adverse Effect.


 


Section 4.15         Material
Contracts.


 


Schedule 4.15 contains a true, correct and
complete list of all the Material Contracts in effect on the Closing Date, and
except as described thereon, all such Material Contracts are in full force and
effect and no defaults currently exist thereunder, except as could not
reasonably be expected to have a Material Adverse Effect.


 


Section 4.16         Governmental
Regulation.


 


Neither Borrower nor any of its Subsidiaries is a “registered
investment company” or a company “controlled” by a “registered investment company”
or a “principal underwriter” of a “registered investment company” as such terms
are defined in the Investment Company Act of 1940.


 


Section 4.17         Margin
Stock.


 


Neither Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. No
part of the proceeds of the Loans made to such Loan Party will be used to
purchase or carry any such 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 Regulation T, U or X of
said Board of Governors.


 


Section 4.18         Employee
Matters.


 


Neither Borrower nor any of its Subsidiaries is
engaged in any unfair labor practice that could reasonably be expected to have
a Material Adverse Effect. Except as set forth on Schedule 4.18, there is
(a) no unfair labor practice complaint pending against Borrower or any of
its Subsidiaries, or to the best knowledge of Borrower and its Subsidiaries,
threatened against any of them before the National Labor Relations Board and no
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement that is so pending against Borrower or any of its
Subsidiaries or to the best knowledge of Borrower and its Subsidiaries,
threatened against any of them, (b) no strike or work stoppage in
existence, or, to the knowledge of the Borrower, threatened, involving Borrower
or any of its Subsidiaries, and (c) to the best knowledge of Borrower and
its Subsidiaries, no union representation


 


49

















 


question existing with
respect to the employees of Borrower or any of its Subsidiaries and, to the
best knowledge of Borrower and its Subsidiaries, no union organization activity
that is taking place, except (with respect to any matter specified in clause
(a), (b) or (c) above, either individually or in the aggregate) such as could
not reasonably be expected to have a Material Adverse Effect.


 


Section 4.19         Employee
Benefit Plans.


 


(a)           Borrower, each of its Subsidiaries and each of their
respective ERISA Affiliates are in compliance in all material respects with all
applicable provisions and requirements of ERISA and the Internal Revenue Code
and the regulations and published interpretations thereunder with respect to
each Employee Benefit Plan, and have performed all their material obligations
under each Employee Benefit Plan.


 


(b)           Each Employee Benefit Plan which is intended to qualify under
Section 401(a) of the Internal Revenue Code has received a favorable
determination or opinion letter from the Internal Revenue Service indicating
that such Employee Benefit Plan is so qualified and, nothing has occurred
subsequent to the issuance of such determination letter which would cause such
Employee Benefit Plan to lose its qualified status.


 


(c)           No material liability to the PBGC (other than required
premium payments), the Internal Revenue Service, any Employee Benefit Plan or
any trust established under Title IV of ERISA (other than contributions in the
ordinary course of business) has been or, is expected to be incurred by
Borrower, any of its Subsidiaries or any of their ERISA Affiliates.


 


(d)           No ERISA Event that could reasonably be expected to result in
a material liability to Borrower of any of its Subsidiaries has occurred or is
reasonably expected to occur.


 


(e)           Except as set forth on Schedule 4.19 or to the extent
required under Section 4980B of the Internal Revenue Code or similar state
laws, no Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employee of
Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates,
except to any Person, and in such amounts, approved by the Board of Directors
of Borrower.


 


(f)            The present value of the aggregate benefit liabilities under
each Pension Plan sponsored, maintained or contributed to by Borrower, any of
its Subsidiaries or any of their ERISA Affiliates, (determined as of the end of
the most recent plan year on the basis of the actuarial assumptions specified
for funding purposes in the most recent actuarial valuation for such Pension
Plan), did not exceed the aggregate current value of the assets of such Pension
Plan by more than $3,000,000.


 


(g)           As of the most recent valuation date for each Multiemployer
Plan, the potential liability of Borrower, its Subsidiaries and their
respective ERISA Affiliates for a complete withdrawal from each such
Multiemployer Plan (within the meaning of Section 4203 of ERISA), based on
information available pursuant to Section 4221(e) of ERISA would not be more
than $3,000,000.


 


(h)           Borrower, each of its Subsidiaries and each of their ERISA
Affiliates have complied and are in compliance in all material respects with
the requirements of Section 515 of ERISA with respect to each Multiemployer
Plan and are not in material “default” (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan.


 


50

















 


Section 4.20         Solvency.


 


Each Loan Party is and, upon the incurrence of any
Obligation by such Loan Party on any date on which this representation and
warranty is made, will be, Solvent.


 


Section 4.21         Compliance with Statutes, etc.


 


Each of Borrower and its Subsidiaries is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all Governmental Authorities, in respect of
the conduct of its business and the ownership of its property (including
compliance with all applicable Environmental Laws with respect to any Real
Estate Asset or governing its business and the requirements of any permits
issued under such Environmental Laws with respect to any such Real Estate Asset
or the operations of Borrower or any of its Subsidiaries), except such non-compliance
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.


 


Section 4.22         Disclosure.


 


The representations and warranties of the Loan
Parties contained in the Loan Documents and in any other documents,
certificates or written statements furnished to Lenders by or on behalf of
Borrower or any of its Subsidiaries for use in connection with the transactions
contemplated hereby, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact (known to Borrower, in the case
of any document not furnished by it) necessary in order to make the statements
contained herein and therein not misleading in light of the circumstances in
which the same were made. Any projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by Borrower to be reasonable at the time made, it being recognized by
Lenders that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results.


 


Section 4.23         Health Care
Matters.


 


(a)           Compliance with Health Care Laws. Except as set
forth on Schedule 4.23, each of Borrower and its Subsidiaries is and has
been in compliance in all material respects with all Health Care Laws
applicable to it, its products and its properties or other assets or its
business or operation. Except as set forth on Schedule 4.23, each of
Borrower and its Subsidiaries has in effect all Governmental Authorizations
necessary for it to carry on its business and operations, in all material
respects, as presently conducted. All such Governmental Authorizations are in
full force and effect and there exists no default under, or violation of, any
such Governmental Authorization and neither Borrower nor any of its
Subsidiaries has received written notice or has knowledge that any Governmental
Authority is considering limiting, suspending, terminating, adversely amending
or revoking any such Governmental Authorization, except as could not reasonably
be expected to have a material effect on Borrower and its Subsidiaries, taken
as a whole.


 


(b)           Filings. Except as set forth on Schedule
4.23, all material reports, documents, claims, notices or approvals
required to be filed, obtained, maintained or furnished pursuant to any Health
Care Law to any Governmental Authority have been so filed, obtained, maintained
or furnished, and all such reports, documents, claims and notices were complete
and correct in all material respects on the date filed (or were corrected in or
supplemented by a subsequent filing).


 


(c)           Billing. Except as set forth on Schedule
4.23 or as could not reasonably be expected to have a material effect on
Borrower and its Subsidiaries, taken as a whole, each of Borrower


 


51

















 


and its Subsidiaries has the
requisite provider number or other Governmental Authorization to bill under
Medicare, the respective Medicaid program in the state or states in which such
entity operates, or Private Third Party Payor Programs, in each case to the
extent the Borrower and its Subsidiaries bill or otherwise receive payment from
such programs. Except as could not reasonably be expected to have a material
effect on Borrower and its Subsidiaries, taken as a whole, there is no
investigation, audit, claim review, or other action pending, or to the
knowledge of Borrower and its Subsidiaries, threatened, which could reasonably
be expected to result in a revocation, suspension, termination, probation,
restriction, limitation, or non-renewal of any Governmental Third Party Payor
or Private Third Party Payor (as defined below) provider number or result in
any Group Members’ exclusion from any Governmental Third Party Payor Program or
Private Third Party Payor Program. For purposes of this Agreement, a “Governmental
Third Party Payor” means Medicare, Medicaid, TRICARE, state government insurers
and any other person or entity which presently or in the future maintains
Governmental Third Party Payor Programs. In addition, for purposes of this
Agreement, “Governmental Third Party Payor Programs” means all
governmental third party payor programs in which Borrower or any of its
Subsidiaries participates (including Medicare, Medicaid, TRICARE or any other
federal or state health care programs). For purposes of this Agreement, a “Private
Third Party Payor” means private insurers and any other person or entity
which presently or in the future maintains Private Third Party Payor Programs. In
addition, for purposes of this Agreement, “Private Third Party Payor
Programs” means all non-governmental third party payor programs in which
Borrower or any of its Subsidiaries participates (including managed care plans,
or any other private insurance programs).


 


(d)           Accreditation. Except as could not reasonably
be expected to have a material effect on Borrower and its Subsidiaries, taken
as a whole, each of Borrower and its Subsidiaries has received and maintains
accreditation in good standing and without limitation or impairment by all
applicable accrediting organizations, to the extent required by law or
otherwise reasonably necessary for the operation of its business.


 


(e)           Proceedings. Except as could not
reasonably be expected to have a material effect on Borrower and its
Subsidiaries, taken as a whole, neither Borrower nor any of its Subsidiaries
(1) is a party to a corporate integrity agreement with a Governmental
Authority that imposes restrictions or costs on the Borrower, or (2) has
any reporting obligations pursuant to a settlement agreement, plan of
correction, or other remedial measure entered into with any Governmental
Authority.


 


(f)            Exclusion. Neither Borrower, nor any
of its Subsidiaries is, has been, or has been threatened to be,
(i) excluded from any Governmental Third Party Payor Program pursuant to
42 U.S.C. § 1320a-7b and related regulations, or (ii) made a party to
any other action by any Governmental Authority that may prohibit it from
selling products to any governmental or other purchaser pursuant to any
federal, state or local laws or regulations, except, in the case of clause (ii)
above, where the same could not reasonably be expected to have a Material
Adverse Effect.


 


(g)           HIPAA Compliance. To the extent applicable
to Borrower or any of its Subsidiaries, and for so long as (1) Borrower or
any of its Subsidiaries is a “covered entity” as defined in 45 C.F.R.
§ 160.103, (2) Borrower or any of its Subsidiaries is a “business associate” as defined in 45 C.F.R. § 160.103,
(3) Borrower or any of its Subsidiaries is subject to or covered by
the HIPAA Administrative Simplification Requirements pertaining to standard
transaction formats codified at 45 C.F.R. Parts 160 & 162 (the “Transactions
Rule”) and/or pertaining to the security and privacy of certain protected
health information codified at 45 C.F.R. Parts 160 & 164 (the “Privacy
and Security Rules”), and/or (4) Borrower or any of its Subsidiaries
sponsors any “group health plans” as defined in 45 C.F.R. § 160.103,
Borrower and its Subsidiaries as the case may be, has:  (i) completed thorough and detailed
surveys, audits, inventories, reviews, analyses and/or assessments, including
risk assessments, (collectively “Assessments”) of all material areas of
its business and operations subject to HIPAA and/or


 


52

















 


that could be materially and
adversely affected by the failure of Borrower or any of its Subsidiaries, as
the case may be, to the extent these Assessments are appropriate or required
for Borrower or its Subsidiaries, as the case may be, to be HIPAA Compliant;
(ii) developed a detailed plan and time line for becoming HIPAA Compliant
(a “HIPAA Compliance Plan”); and (iii) implemented those provisions
of its HIPAA Compliance Plan necessary to ensure that such Borrower and its
Subsidiaries is HIPAA Compliant.


 


Section 4.24         Intellectual
Property.


 


Each of Borrower and its Subsidiaries owns or
possesses, or could obtain ownership or possession of, on terms not materially
adverse to it, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect thereto necessary for the present conduct of
its business, without any known material conflict with the rights of others,
and free from any material burdensome restrictions.


 


Section 4.25         No Default.


 


Each component of the Transactions was consummated,
as of the Closing Date (i) in accordance with the respective terms of the
applicable Related Agreements in the form supplied to the Administrative Agent,
without modification, waiver or amendment, except those which had the prior
written consent of the Administrative Agent or which were not adverse to the
Lenders and (ii) in compliance in all material respects with all
applicable laws, including the Delaware General Corporation Law (to the extent
relevant), the Bankruptcy Code, all regulations of the Internal Revenue Code
and the United States Department of Labor applicable to employee stock
ownership plans, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the corporate laws of each state in which any corporation now
controlled by Borrower is or was incorporated.


 


Section 4.26         Investigations, Audits, Etc.


 


Except as could not reasonably be expected to have a
Material Adverse Effect, to the knowledge of Borrower or its Subsidiaries,
neither Borrower nor any of its Subsidiaries is the subject of (x) any
pending review or audit by the Internal Revenue Service or any investigation by
a Governmental Authority concerning the violation or possible violation of any
law or (y) any pending litigation, judgment, action, audit, charge, claim,
demand, suit, petition, or arbitration.


 


Section 4.27         Patriot Act.


 


To the extent applicable, each Loan Party is in
compliance, in all material respects, with the (i) Trading with the Enemy
Act, as amended, and each of the foreign assets control regulations of the
United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as
amended) and any other enabling legislation or executive order relating
thereto, and (ii) Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001)
(the “Act”). No part of the proceeds of the Loans will be used, directly
or indirectly, for any payments to any governmental official or employee,
political party, official of a political party, candidate for political office,
or anyone else acting in an official capacity, in order to obtain, retain or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.


 


53

















 


ARTICLE FIVE

AFFIRMATIVE COVENANTS


 


Each Loan Party covenants and agrees that until the
Termination Date, each Loan Party shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Article Five.


 


Section 5.01         Financial
Statements and Other Reports.


 


Borrower will deliver to Administrative Agent and
Lenders:


 


(a)           Monthly Reports. As soon
as available, and in any event within thirty (30) days after the end of each of
the first two months of each Fiscal Quarter ending after the Closing Date (or,
in the case of the first six months ended after the Closing Date, forty-five
(45) days), the consolidated and consolidating balance sheet of Borrower and
its Subsidiaries (excluding, for the avoidance of doubt, 750 Park Place) as at
the end of such month and the related consolidated statements of income,
stockholders’ equity and cash flows of Borrower and its Subsidiaries for such
month and for the period from the beginning of the then current Fiscal Year to
the end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year, all in reasonable detail, together with a Financial Officer Certification
and a Narrative Report with respect thereto; provided that if the Total
Leverage Ratio (determined for any such period by reference to the most recent
Compliance Certificate delivered pursuant to Section 5.01(d) calculating
the Total Leverage Ratio) shall be 3.75:1.00 or less, Borrower shall not be
required to make deliveries under this subsection (a).


 


(b)           Quarterly Financial Statements.
(1) As soon as available, and in any event within forty-five (45) days
after the end of each of the first three  Fiscal Quarters
of each Fiscal Year (or such earlier period as required by the rules and
regulations of the Exchange Act), the consolidated and consolidating balance
sheets of Borrower and its Subsidiaries (excluding, for the avoidance of doubt,
750 Park Place) as at the end of such Fiscal Quarter and the related
consolidated (and with respect to statements of income, consolidating)
statements of income, stockholders’ equity and cash flows of Borrower and its
Subsidiaries for such Fiscal Quarter and for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, setting forth
in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding figures
from the Financial Plan for the current Fiscal Year, all in reasonable detail,
together with a Financial Officer Certification and a Narrative Report with
respect thereto, and (2) in addition to the foregoing, a copy of Borrower’s
quarterly report on Form 10-Q for the applicable Fiscal Quarter as filed by
Borrower with the Securities and Exchange Commission;


 


(c)           Annual Financial Statements.
(1) As soon as available, and in any event within ninety (90) days after
the end of each Fiscal Year (or such earlier period as required by the rules
and regulations of the Exchange Act), (i) the consolidated and
consolidating balance sheets of Borrower and its Subsidiaries (excluding, for
the avoidance of doubt, 750 Park Place) as at the end of such Fiscal Year and
the related consolidated (and with respect to statements of income,
consolidating) statements of income, stockholders’ equity and cash flows of
Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case
in comparative form the corresponding figures for the previous Fiscal Year and
the corresponding figures from the Financial Plan for the Fiscal Year covered
by such financial statements, in reasonable detail, together with a Financial
Officer Certification and a Narrative Report with respect thereto; and (ii) with
respect to such consolidated financial statements a report thereon of KGS LLP
in respect of the Fiscal Year ended December 31, 2007 and thereafter, an
independent certified public accountant of recognized national standing as
selected by Borrower, and reasonably satisfactory to Administrative Agent
(which report shall be unqualified as to going concern and scope of audit, and
shall


 


54

















 


state that such consolidated
financial statements fairly present, in all material respects, the consolidated
financial position of Borrower and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards) together with a written statement, during the normal course of the
annual audit, by such independent certified public accountants stating whether
any condition or event that constitutes a Default or an Event of Default in
respect of Section 6.07 has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof or a similar written statement reasonably acceptable to the
Administrative Agent; and (2) in addition to the foregoing, a copy of
Borrower’s annual report on Form 10-K for the applicable Fiscal Year as filed
by Borrower with the Securities and Exchange Commission;


 


(d)           Compliance Certificate.
Together with each delivery of financial statements of Borrower and its
Subsidiaries pursuant to Sections 5.01(b)(1) and 5.01(c)(1), a duly executed
and completed Compliance Certificate;


 


(e)           Notice of Default. Promptly
upon any Responsible Officer of Borrower and its Subsidiaries obtaining
knowledge (i) of any condition or event that constitutes a Default or an
Event of Default or that notice has been given to Borrower with respect
thereto; (ii) that any Person has given any notice to Borrower or any of
its Subsidiaries or taken any other action with respect to any event or condition
set forth in Section 8.01(b); or (iii) of the occurrence of any event or
change that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, a certificate of its Authorized Officers specifying
the nature and period of existence of such condition, event or change, or
specifying the notice given and action taken by any such Person and the nature
of such claimed Event of Default, Default, default, event or condition, and
what action Borrower has taken, is taking and proposes to take with respect
thereto;


 


(f)            Notice of Litigation.
Promptly upon any Responsible Officer of Borrower and its Subsidiaries
obtaining knowledge of (i) the institution of, or non-frivolous written
threat of, any Adverse Proceeding not previously disclosed in writing by
Borrower to Lenders, or (ii) any material development in any Adverse
Proceeding that, in the case of either clause (i) or (ii) if adversely
determined, could be reasonably expected to result in damages not otherwise
covered by insurance in excess of $3,000,000, or seeks to enjoin or otherwise
prevent the consummation of, or to recover any damages or obtain relief as a
result of, the transactions contemplated hereby, written notice thereof
together with such other information as may be reasonably available to Borrower
to enable Lenders and their counsel to evaluate such matters;


 


(g)           ERISA. (i) As
soon as reasonably practicable (but in any event within ten Business Days) upon
any Responsible Officer of Borrower and its Subsidiaries becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written notice
specifying the nature thereof, what action Borrower, any of its Subsidiaries or
any of their respective ERISA Affiliates has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or threatened by
the Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto; and (ii) with reasonable promptness, copies of (1) each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by Borrower, any of its Subsidiaries or any of their respective ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan;
(2) all notices received by Borrower, any of its Subsidiaries or any of
their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning
an ERISA Event; and (3) copies of such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Administrative
Agent shall reasonably request;


 


55

















 


(h)           Financial Plan. As soon
as practicable and in any event no later than January 31 of each Fiscal Year
(or, if earlier, ten (10) Business Days after approval by the Board of
Directors of Borrower), a consolidated plan and financial forecast for such
Fiscal Year and for the one Fiscal Year thereafter (a “Financial Plan”),
including a forecasted consolidated balance sheet and forecasted consolidated
statements of income and cash flows of Borrower and its Subsidiaries
(excluding, for the avoidance of doubt, 750 Park Place) for each Fiscal Quarter
of such Fiscal Year and annually for the one Fiscal Year thereafter, together
with an explanation of the assumptions on which such forecasts are based
(including detail with respect to long-term care beds served in each State in
which the Borrower and its Subsidiaries will operate, forecasted revenues per
bed served and the projected capital expenditure and working capital needs of
the Borrower and its Subsidiaries);


 


(i)            Insurance Report. As soon
as practicable and in any event no later than March 31 of each Fiscal Year, a
report outlining all material insurance coverage maintained as of the date of
such report by Borrower and its Subsidiaries and all material insurance
coverage planned to be maintained by Borrower and its Subsidiaries in the
immediately succeeding Fiscal Year;


 


(j)            Environmental Reports and Audits. As soon as practicable following receipt thereof, copies of
all environmental audits and reports with respect to environmental matters at
any Facility or which relate to any environmental liabilities of Borrower or
its Subsidiaries which, in any such case, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect;


 


(k)           Information Regarding Collateral. (a) Borrower will furnish to the Collateral Agent
prompt written notice of any change (i) in any Loan Party’s corporate name
(other than the change of the Borrower’s name to “Chem Rx Corporation”),
(ii) in any Loan Party’s identity or corporate structure or (iii) in
any Loan Party’s Federal Taxpayer Identification Number. Borrower agrees not to
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected security interest in all the
Collateral and for the Collateral at all times following such change to have a
valid, legal and perfected security interest as contemplated in the Collateral
Documents. Borrower also agrees promptly to notify the Collateral Agent if any
material portion of the Collateral is damaged or destroyed;


 


(l)            Annual Collateral Verification.
Each year, at the time of delivery of annual financial statements with respect
to the preceding Fiscal Year pursuant to Section 5.01(c), Borrower shall
deliver to the Collateral Agent an Officer’s Certificate confirming that there
has been no change in such information since the date of the Collateral
Questionnaire delivered on the Closing Date or the date of the most recent
certificate delivered pursuant to this Section and/or identifying such changes;


 


(m)          Health Care Matters.


 


(i)            copies
of any written recommendation from any Governmental Authority or other
regulatory body that Borrower or any of its Subsidiaries should have any of its
Governmental Authorizations, Governmental Third Party Payor Program provider or
supplier numbers, or accreditations suspended, revoked, or limited in any way,
or any penalties or sanctions imposed;


 


(ii)           notice
of any claim to recover any alleged material overpayments with respect to any
sales in excess of $300,000;


 


56

















 


(iii)          voluntary
disclosure by Borrower or any Subsidiary to the Office of the Inspector General
of the United States Department of Health and Human Services, a Medicare fiscal
intermediary or any state’s Medicaid program of a potential overpayment matter
involving the submission of claims to such payor in any amount greater than
$300,000;


 


(iv)          notice
of termination of eligibility of Borrower or any of its Subsidiaries to
participate in any reimbursement program of any Private Third Party Payor
Program;


 


(v)           notice
of any material reduction in the level of reimbursement expected to be received
with respect to sales;


 


(vi)          copies
of any report or communication from any Governmental Authority in connection
with any adverse inspection of any facility of Borrower or any of its
Subsidiaries other than those which are routine and non-material; and


 


(n)           Notice of Management Investors’ Ownership of Borrower. Promptly upon any Responsible Officer of Borrower obtaining
the knowledge that the Management Investors shall have ceased to own and
control at least 10% on a fully diluted basis of the economic and voting
interests in the Capital Stock of Borrower, written notice thereof.


 


(o)           Other Information. (A) Promptly
upon their becoming available, copies of (i) all financial statements,
reports, notices and proxy statements sent or made available generally by
Borrower to its security holders acting in such capacity or by any Subsidiary
of Borrower to its security holders other than Borrower or another Subsidiary
of Borrower, (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by Borrower or any of its
Subsidiaries with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority (including a
copy of each Form 8-K), (iii) all press releases and other statements made
available generally by Borrower or any of its Subsidiaries to the public
concerning material developments in the business of Borrower or any of its
Subsidiaries, and (B) such other information and data with respect to
Borrower or any of its Subsidiaries as from time to time may be reasonably
requested by Administrative Agent or any Lender.


 


Section 5.02         Existence.


 


Except as otherwise permitted under Section 6.08,
each Loan Party will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect its existence and all rights
(charter and statutory) and franchises, licenses, approvals and permits
material to its business; provided, no Loan Party or any of its
Subsidiaries shall be required to preserve any such existence, right or
franchise, licenses and permits if such Person’s Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of such Person, and that the loss thereof is not
disadvantageous in any material respect to such Person or to Lenders.


 


Section 5.03         Payment of
Taxes and Claims.


 


(a)           Each Loan Party will, and will cause each of its Subsidiaries
to, pay all material Taxes imposed upon it or any of its properties or assets
or in respect of any of its income, businesses or franchises before any penalty
or fine accrues thereon, and all claims (including claims for labor, services,
materials and supplies) for sums that have become due and payable and that by
law have or may become a Lien upon any of its properties or assets, prior to
the time when any penalty or fine shall be incurred with respect thereto; provided,
no such Tax or claim need be paid if it is being contested in


 


57

















 


good faith by appropriate
proceedings promptly instituted and diligently conducted, so long as
(a) adequate reserve or other appropriate provision, as shall be required
in conformity with GAAP shall have been made therefor, and (b) in the case
of a charge or claim that has or may become a Lien against any of the
Collateral, such contest proceedings conclusively operate to stay the sale of
any portion of the Collateral to satisfy such Tax or claim. No Loan Party will,
nor will it permit any of its Subsidiaries to, file or consent to the filing of
any consolidated income Tax return with any Person (other than Borrower or any
of its Subsidiaries).


 


(b)           Within 60 days following the Closing Date, the Borrower will
file a properly completed and valid Internal Revenue Service Form 8023 on which
Borrower and the Sellers will jointly make an election under Section 338(h)(10)
of the Internal Revenue Code to treat the Acquisition as an asset purchase.


 


Section 5.04         Maintenance
of Properties.


 


Each Loan Party will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Borrower and its Subsidiaries and from time
to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof.


 


Section 5.05         Insurance.


 


Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers (i) business interruption
insurance and (ii) casualty insurance, public liability insurance, third
party property damage insurance with respect to liabilities, losses or damage
in respect of the assets, properties and businesses of Borrower and its
Subsidiaries as may customarily be carried or maintained under similar
circumstances by Persons of established reputation engaged in similar
businesses, in such amounts (giving effect to self-insurance), with such deductibles,
covering such risks and otherwise on such terms and conditions as shall be
customary for such Persons. Without limiting the generality of the foregoing,
Borrower will maintain or cause to be maintained (a) flood insurance with
respect to each Flood Hazard Property that is located in a community that
participates in the National Flood Insurance Program, in each case in
compliance with any applicable regulations of the Board of Governors of the
Federal Reserve System, and (b) replacement value casualty insurance on
the Collateral under such policies of insurance, with such insurance companies,
in such amounts, with such deductibles, and covering such risks as are at all
times carried or maintained under similar circumstances by Persons of
established reputation engaged in similar businesses. Each such policy of
insurance shall (i) name Administrative Agent, on behalf of Lenders, as an
additional insured thereunder as its interests may appear and (ii) in the
case of each casualty insurance policy, contain a loss payable clause or
endorsement, reasonably satisfactory in form and substance to Administrative
Agent, that names Administrative Agent, on behalf of Lenders as the loss payee
thereunder and provides for at least thirty (30) days’ prior written notice to
Administrative Agent of any modification or cancellation of such policy. Any
payments under each policy of insurance shall be directed to be made to
Borrower or its Subsidiaries unless an Event of Default has occurred and is
continuing and the Collateral Agent has delivered notice to Borrower that such
payment may not be made to Borrower or its Subsidiaries.


 


Section 5.06         Inspections.


 


Each Loan Party will, and will cause each of its
Subsidiaries to, permit any authorized representatives designated by any Lender
(as coordinated through the Collateral Agent) to visit and inspect any of the
properties of any Loan Party and any of its respective Subsidiaries, to
inspect, copy and take extracts from its and their financial and accounting
records, and to discuss its and their affairs,


 


58

















 


finances and accounts with
its and their officers and independent public accountants, all upon reasonable
notice and at such reasonable times during normal business hours and as often
as may reasonably be requested; provided that the Collateral Agent shall
give Borrower the opportunity to participate in any discussions with its
independent public accountants and, so long as no Event of Default has occurred
and is continuing, no Lender may exercise its rights hereunder more than once
in any calendar year.


 


Section 5.07         Lenders’
Meetings.


 


Borrower will, upon the request of Administrative
Agent or Requisite Lenders, participate in a meeting of Administrative Agent
and Lenders once during each Fiscal Year to be held at Borrower’s corporate
offices (or at such other location as may be agreed to by Borrower and
Administrative Agent) at such time as may be agreed to by Borrower and
Administrative Agent.


 


Section 5.08         Compliance
with Laws.


 


Each Loan Party will comply, and shall cause each of
its Subsidiaries to comply, with the requirements of all applicable laws,
rules, regulations and orders of any Governmental Authority (including ERISA
and all Environmental Laws and Health Care Laws), non-compliance with which
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.


 


Section 5.09         Environmental
Disclosure.


 


Borrower will deliver to Administrative Agent and
Lenders:


 


(a)           as soon as practicable following receipt thereof, copies of
all environmental audits, investigations, analyses and reports of any kind or
character, whether prepared by personnel of Borrower or any of its Subsidiaries
or by independent consultants, governmental authorities or any other Persons,
with respect to material environmental matters at any Facility or with respect
to any material Environmental Claims;


 


(b)           promptly upon the occurrence thereof, written notice
describing in reasonable detail (1) any Release required to be reported to
any federal, state or local governmental or regulatory agency under any
applicable Environmental Laws, (2) any remedial action taken by Borrower
or any other Person in response to (A) any Hazardous Materials Activities
the existence of which could reasonably be expected to result in one or more
Environmental Claims having, individually or in the aggregate, a Material
Adverse Effect, or (B) any Environmental Claims that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect, and (3) Borrower’s discovery of any occurrence or condition on any
Facility that could reasonably be expected to cause such Facility or any part
thereof to be subject to any material restrictions on the ownership, occupancy,
transferability or use thereof under any Environmental Laws;


 


(c)           as soon as practicable following the sending or receipt
thereof by Borrower or any of its Subsidiaries, a copy of any and all written
communications with respect to (1) any Environmental Claims that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, (2) any Release required to be reported to any
federal, state or local governmental or regulatory agency, and (3) any
request for information from any governmental agency stating, or would be
reasonably expected to mean, that such agency is investigating whether Borrower
or any of its Subsidiaries may be subject to an Environmental Claim arising in
connection with any Hazardous Materials Activity;


 


59

















 


(d)           prompt written notice describing in reasonable detail
(1) any proposed acquisition of stock, assets, or property by Borrower or
any of its Subsidiaries that could reasonably be expected to (A) expose Borrower
or any of its Subsidiaries to, or result in, Environmental Claims that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or (B) affect the ability of Borrower or any of its
Subsidiaries to maintain in full force and effect all material Governmental
Authorizations required under any Environmental Laws for their respective
operations and (2) any proposed action to be taken by Borrower or any of
its Subsidiaries to modify current operations in a manner that could reasonably
be expected to subject Borrower or any of its Subsidiaries to any additional
material obligations or requirements under any Environmental Laws; and


 


(e)           with reasonable promptness, such other documents and
information as from time to time may be reasonably requested by Administrative
Agent in relation to any matters disclosed pursuant to this Section 5.09.


 


Section 5.10         Hazardous Materials Activities, etc.


 


Each Loan Party shall promptly take, and shall cause
each of its Subsidiaries promptly to take, any and all actions necessary to
(i) cure any violation of applicable Environmental Laws by such Loan Party
or its Subsidiaries that could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, and (ii) make an appropriate
response to any Environmental Claim against such Loan Party or any of its
Subsidiaries and discharge any obligations it may have to any Person thereunder
where failure to do so could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.


 


Section 5.11         Subsidiaries.


 


In the event that any Person becomes a Subsidiary of
Borrower (other than a Consent Subsidiary), Borrower shall (a) promptly
cause such Subsidiary to become a Guarantor hereunder and a Grantor under
the Pledge and Security Agreement by executing and delivering to Administrative
Agent and Collateral Agent a Counterpart Agreement, and (b) take all such
actions and execute and deliver, or cause to be executed and delivered, all
such documents, instruments, agreements, and certificates as are similar to
those described in Sections 3.01(b), 3.01(f) and 3.01(i). With respect to each
such Subsidiary, Borrower shall promptly send to Administrative Agent written
notice setting forth with respect to such Person (i) the date on which
such Person became a Subsidiary of Borrower, and (ii) all of the data
required to be set forth in Schedules 4.01 and 4.02 with respect to such
Subsidiaries; provided, such written notice shall be deemed to
supplement Schedule 4.01 and 4.02 for all purposes hereof. Notwithstanding
the foregoing, the creation or perfection of pledges of or security interests
in, or the obtaining of title insurance with respect to, particular assets
shall not be required if, and for so long as, in the reasonable judgment of the
Administrative Agent, the cost of creating or perfecting such pledges or
security interests in such assets or obtaining title insurance in respect of
such assets shall be excessive in view of the benefits to be obtained by the
Lenders therefrom.


 


Section 5.12         Additional
Material Real Estate Assets. In the event
that any Loan Party acquires a Material Real Estate Asset or a Real Estate
Asset owned on the Closing Date becomes a Material Real Estate Asset and such
interest has not otherwise been made subject to the Lien of the Collateral
Documents in favor of Collateral Agent, for the benefit of Secured Parties,
then such Loan Party, contemporaneously with acquiring such Material Real
Estate Asset, shall (a) in the case of each Leasehold Property that is a
Material Real Estate Asset, use commercially reasonable efforts to take all
such actions and execute and deliver, or cause to be executed and delivered, as
requested by the Collateral Agent, (i) a Landlord Consent and Estoppel and
evidence that such Leasehold Property is a Recorded Leasehold Interest or
(ii) a Landlord Collateral Access Agreement and (b) in the case of
any fee interests


 


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in a Material Real Estate
Asset, take all such actions and executed and deliver or cause to be executed
and delivered, all such mortgages, documents, instruments, agreements,
opinions, title insurance, survey, flood certificates and certificates with
respect to each such Material Real Estate Asset that Collateral Agent shall
reasonably request to create in favor of Collateral Agent, for the benefit of
Secured Parties, a valid and, subject to any necessary filing and/or recording,
perfected First Priority security interest in such Material Real Estate Assets.
In addition to the foregoing, Borrower shall, at the request of Requisite
Lenders, deliver, from time to time, to Administrative Agent such appraisals as
are required by law or regulation of Real Estate Assets with respect to which
Collateral Agent has been granted a Lien.


 


Notwithstanding the foregoing, the creation or
perfection of pledges of or security interests in, or the obtaining of title
insurance with respect to, particular assets shall not be required if, and for
so long as, in the reasonable judgment of the Administrative Agent, the cost of
creating or perfecting such pledges or security interests in such assets or
obtaining title insurance in respect of such assets shall be excessive in view
of the benefits to be obtained by the Lenders therefrom.


 


Section 5.13         Interest
Rate Protection.


 


No later than ninety (90) days following the Closing
Date, the Borrower shall maintain, or caused to be maintained, in effect one or
more Interest Rate Agreements for a term of not less than three (3) years and
pursuant to which not less than 50% of the total funded Indebtedness of the
Borrower and its Subsidiaries at the Closing Date under this Agreement and the
First Lien Credit Agreement (excluding any Revolving Loans, the Delayed Draw
Term Loans and the face amounts of any Letters of Credit (each, as defined in
the First Lien Credit Agreement))  shall
be subject to Interest Rate Agreements in form and substance reasonably
satisfactory to Administrative Agent.


 


Section 5.14         Further
Assurances.


 


At any time or from time to time upon the request of
Administrative Agent, each Loan Party will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and
things as Administrative Agent or Collateral Agent may reasonably request in
order to effect fully the purposes of the Loan Documents. In furtherance and
not in limitation of the foregoing, each Loan Party shall take such actions as
Administrative Agent or Collateral Agent may reasonably request from time to
time to ensure that the Obligations are guarantied by the Guarantors and are
secured by validly perfected, First Priority liens on all of the assets of
Borrower and its Subsidiaries and all of the outstanding Capital Stock of
Borrower and its Subsidiaries, in each case to the extent contemplated by the
Loan Documents.


 


Section 5.15         Cash
Management Systems.


 


Borrower and its Subsidiaries shall establish and
maintain cash management systems as set forth on Schedule 5.15 or as reasonably
acceptable to Administrative Agent. Borrower and its Subsidiaries shall at all
times on and after 60 days following the Closing Date ensure that all Cash and
Cash Equivalents held by it are subject to a valid and perfected First Priority
security interest in favor of the Collateral Agent for the benefit of the
Secured Parties; provided that Cash and Cash Equivalents of up to
$100,000 in the aggregate at any one time for all such entities and any Deposit
Accounts into which receivables from Governmental Authorities are paid shall
not be required to be subject to such perfected security interests.


 


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Section 5.16         Books and
Records.


 


The Loan Parties will, and will cause each of its
Subsidiaries to, in all material respects, keep proper books of record and
account in which full, true and correct entries in accordance with GAAP are
made of all dealings and transactions in relation to its business and
activities.


 


Section 5.17         Performance
of Leases, Related Documents and Other Material Agreements.


 


Borrower and its Subsidiaries shall take reasonable
efforts to ensure that all material leases of real and personal property and
all Material Contracts (including material debt agreements and material Capital
Leases) to which they are a party are without material default of the Loan
Party to such lease or Material Contract beyond any applicable notice and cure
period or right of the lessor or other obligee to terminate or accelerate
thereunder.


 


Section 5.18         Compliance
Program.


 


Each of Borrower and its Subsidiaries shall
regularly (a) review and revise its policies and procedures to ensure
continuing compliance in all material respects with all applicable material
Health Care Laws, (b) maintain appropriate programs and procedures for
communicating such policies and procedures to all officers, directors and
employees of Borrower and its Subsidiaries, (c) take appropriate actions
designed to permit all officers, directors and employees of Borrower and its
Subsidiaries to report violations of any material Health Care Laws, and
(d) maintain appropriate programs and procedures designed to address and
correct reported violations as soon as practicable.


 


Section 5.19         Condition
of Participation in Third Party Payor Programs.


 


To the extent applicable to Borrower or any of its
Subsidiaries in the conduct of their business, each of Borrower and its
Subsidiaries shall maintain its qualification for participation in, and payment
under, Governmental Third Party Payor Programs and Private Third Party Payor Programs,
that provide for payment or reimbursement for services, except to the extent
such loss or relinquishment could not reasonably be expected to have a Material
Adverse Event. Borrower and each of its Subsidiaries shall promptly furnish or
cause to be furnished to Administrative Agent and Lenders copies of all
material reports and correspondence, if any, it sends or receives relating to
any material loss or revocation (or material threatened loss or revocation) of
any qualification described in this Section 5.19.


 


Section 5.20         Certain Post-Closing Obligations.


 


(a)           Borrower and its Subsidiaries shall use commercially
reasonable efforts to provide to the Administrative Agent within 45 days
following the Closing Date (or such longer period reasonably determined by the
Administrative Agent): (a) a Landlord Collateral Access Agreement in
respect of the Leasehold Property at 750 Park Place, Long Beach, New York
11561; (b) a Landlord Collateral Access Agreement in respect of the
Leasehold Property at 4041 M. Hadley Road, South Plainfield, New Jersey 07080
and (c) a Landlord Collateral Access Agreement in respect of the Leasehold
Property at HCR 1, Box 30, Route 209, Bossardsville Road, Sciota, Pennsylvania
18354.


 


(b)           Within 60 days following the Closing Date, Borrower and its
Subsidiaries shall obtain duly executed Control Agreements with respect to its
Deposit Accounts, in substantially the form attached to the Pledge and Security
Agreement as Exhibit D (or such other form as reasonably acceptable to the
Administrative Agent), to the extent required by Section 5.15.


 


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Section 5.21                            Maintenance of Ratings.


 


At all times, Borrower shall use commercially
reasonable efforts to maintain ratings issued by Moody’s and S&P with
respect to its first lien senior secured debt and second lien senior secured
debt.


 


ARTICLE SIX

NEGATIVE COVENANTS


 


Each Loan Party covenants and agrees that, until the
Termination Date, such Loan Party shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Article Six.


 


Section 6.01                            Indebtedness.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness, except:


 


(a)                                  the Obligations;


 


(b)                                 Indebtedness of any Guarantor to Borrower or to any
Subsidiary of Borrower, of Borrower to any Guarantor, of any Non-Guarantor
Subsidiary to any Non-Guarantor Subsidiary, or up to $1,200,000 of Indebtedness
of any Non-Guarantor Subsidiary to Borrower or any Guarantor; provided,
(i) all such Indebtedness shall be subject to a First Priority Lien
pursuant to the Pledge and Security Agreement, (ii) all such Indebtedness
shall be unsecured, and (iii) any payment by any such Guarantor under any
guaranty of the Obligations shall result in a pro tanto reduction of the amount
of any Indebtedness owed by such Subsidiary to Borrower or to any of its
Subsidiaries for whose benefit such payment is made;


 


(c)                                  The First Lien Obligations (as defined in the Intercreditor
Agreement);


 


(d)                                 Indebtedness incurred by Borrower or any of its Subsidiaries
arising from agreements providing for indemnification, adjustment of purchase
price, earnouts or similar obligations, or from guaranties or letters of
credit, surety bonds or performance bonds securing the performance of Borrower
or any such Subsidiary pursuant to such agreements, in connection with
Permitted Acquisitions or permitted dispositions of any business, assets or
Subsidiary of Borrower or any of its Subsidiaries;


 


(e)                                  Indebtedness which may be deemed to exist pursuant to any
guaranties, performance, surety, statutory, appeal or similar obligations
incurred in the ordinary course of business;


 


(f)                                    Indebtedness in respect of netting services, overdraft
protections and otherwise in connection with deposit accounts;


 


(g)                                 guaranties by Borrower of Indebtedness of a Guarantor or
guaranties by a Subsidiary of Borrower of Indebtedness of Borrower or a
Guarantor with respect, in each case, to Indebtedness otherwise permitted to be
incurred pursuant to this Section 6.01;


 


(h)                                 Indebtedness described in Schedule 6.01, but not any
extensions, refinancings, renewals or replacements of such Indebtedness except
for any Permitted Refinancing thereof;


 


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(i)                                     obligations to make the Initial Earnout Payments and
Milestone Payments and any Earnout Seller Notes related thereto;


 


(j)                                     Indebtedness in respect of the Initial Seller Notes;


 


(k)                                  Indebtedness with respect to Capital Leases and purchase
money Indebtedness (“Purchase Money Indebtedness”) incurred for the
purpose of financing all or any part of the purchase price of any property or
the cost of installation, construction, repair or improvement of any property
in an aggregate amount not to exceed at any time $6,000,000 and any Permitted
Refinancing thereof; provided, any such Purchase Money Indebtedness
(i) shall be secured only by the assets acquired, installed, constructed,
repaired or improved (and any accessions thereof or improvements thereto) in
connection with the incurrence of such Indebtedness, and (ii) shall
constitute not less than 70% of the aggregate consideration paid with respect
to such asset;


 


(l)                                     Indebtedness of Borrower and its Subsidiaries in an aggregate
amount not to exceed at any time $12,000,000; provided that no more than
$3,000,000 of such Indebtedness shall be secured Indebtedness;


 


(m)                               Indebtedness arising from judgments or orders in
circumstances not constituting an Event of Default under Section 8.01;


 


(n)                                 unsecured Indebtedness in respect of any Interest Rate
Agreement entered into to manage interest rate risk and not for speculative
purposes; and


 


(o)                                 Indebtedness of a Person or Indebtedness connected to assets
of a Person that, in either case, becomes a Subsidiary or Indebtedness connected
to assets that are acquired by Borrower or any of its Subsidiaries in each case
as a result of a Permitted Acquisition, in an aggregate amount not to exceed
$6,000,000 at any one time outstanding (provided that such indebtedness existed
at the time such Person became a Subsidiary or at the time such assets were
acquired and, in each case, was not created in anticipation thereof) and any
Permitted Refinancing thereof.


 


Section 6.02         Liens.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the UCC of any State or under any similar recording or notice
statute, except (each of the following, collectively, the “Permitted Liens”):


 


(a)                                  Liens in favor of Collateral Agent for the benefit of Secured
Parties granted pursuant to any Loan Document;


 


(b)                                 Liens for Taxes for amounts not yet overdue, or if
obligations with respect to such Taxes are being contested in good faith by
appropriate proceedings, so long as such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made for any
such contested amounts;


 


(c)                                  statutory Liens of landlords, carriers, warehousemen,
mechanics, repairmen, workmen and materialmen, and other Liens imposed by law,
in each case incurred in the


 


64

















 


ordinary course of business
(i) for amounts not yet overdue or (ii) for amounts that are overdue
and that (in the case of any such amounts overdue for a period in excess of ten
(10) days) are being contested in good faith by appropriate proceedings, so
long as such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made for any such contested amounts;


 


(d)                                 Liens incurred in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money or other
Indebtedness);


 


(e)                                  recorded or unrecorded easements, covenants, rights-of-way,
restrictions, encroachments, and other similar defects or irregularities in
title, in each case which do not and will not impair in any material respect
the ordinary conduct of the business of Borrower or any of its Subsidiaries;


 


(f)                                    any interest or title of a lessor or sublessor under any
lease of real estate permitted hereunder;


 


(g)                                 Liens in favor of any escrow agent solely on and in respect
of any cash earnest money deposits made by Borrower or any of its Subsidiaries
in connection with any letter of intent or purchase agreement permitted
hereunder;


 


(h)                                 purported Liens evidenced by the filing of precautionary UCC
financing statements relating solely to operating leases of personal property
entered into in the ordinary course of business;


 


(i)                                     Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods;


 


(j)                                     any zoning, building or similar law or right reserved to or
vested in any governmental office or agency to control or regulate the use of
any real property or similar restrictions;


 


(k)                                  licenses of patents, trademarks and other Intellectual
Property rights granted by Borrower or any of its Subsidiaries in the ordinary
course of business and not interfering in any respect with the ordinary conduct
of the business of Borrower or such Subsidiary;


 


(l)                                     Liens described in Schedule 6.02 or on a title report
delivered pursuant to Section 5.12;


 


(m)                               Liens securing Indebtedness permitted pursuant to Section
6.01(k); provided, any such Lien shall encumber only the assets
acquired, installed, constructed, repaired or improved (and any accessions
thereof or improvements thereto) with the proceeds of such Indebtedness;


 


(n)                                 other Liens securing obligations in an aggregate amount not
to exceed $3,000,000 at any time outstanding;


 


(o)                                 Liens consisting of judgment or judicial attachment liens
with respect to judgments that do not constitute an Event of Default under
Section 8.01;


 


(p)                                 Liens on the collateral securing obligations under the First
Lien Credit Agreement and any refinancings thereof permitted by Section
6.01(c);


 


65

















 


(q)                                 Liens in favor of a banking institution arising by operation
of law or otherwise encumbering deposits (including the right of set-off) held
by such banking institution and which are within the general parameters
customary in the banking industry; and


 


(r)                                    Liens securing Indebtedness permitted pursuant to Section
6.01(o) or otherwise assumed in connection with a Permitted Acquisition or
other asset acquisition, so long as such Liens cover only the assets acquired
pursuant to such Permitted Acquisition or other asset acquisition.


 


Section 6.03         No Further Negative Pledges.


 


Except with respect to (a) specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to a permitted Asset Sale and
(b) restrictions contained in the First Lien Credit Agreement and the
related documents  by reason of
customary provisions restricting assignments, subletting or other transfers contained
in leases, licenses and similar agreements entered into in the ordinary course
of business (provided that such restrictions are limited to the property or
assets secured by such Liens or the property or assets subject to such leases,
licenses or similar agreements, as the case may be), (d) restrictions set
forth in any Indebtedness incurred pursuant to Section 6.01(k), so long as they
are limited to the assets that are the subject of a Capital Lease or installed,
constructed, repaired or improved with the proceeds of such Indebtedness,
(e) pursuant to Indebtedness incurred pursuant to Section 6.01(o) and
(f) pursuant to any agreements acquired or entered into in connection with
a Permitted Acquisition, no Loan Party nor any of its Subsidiaries shall enter
into any agreement prohibiting the creation or assumption of any Lien upon any
of its properties or assets, whether now owned or hereafter acquired.


 


Section 6.04         Restricted Junior Payments.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries or Affiliates through any manner or means or through any other
Person to, directly or indirectly, declare, order, pay, make or set apart, or
agree to declare, order, pay, make or set apart, make any Restricted Junior
Payment except that:


 


(a)                                  [Reserved];


 


(b)                                 Borrower may make Initial Earnout Payments and Milestone
Payments in cash to the extent expressly required by the Stock Purchase
Agreement in respect of the Fiscal Year ended December 31, 2007; provided,
that (i) Borrower and its Subsidiaries shall be in compliance with the
financial covenants set forth in Section 6.07 on a pro forma basis after giving
effect to such payment  as of the last
day of the Fiscal Quarter most recently ended for which financial statements
have been provided pursuant to Section 5.01 (as determined in accordance with
Section 6.07(c) and evidenced by delivery of the relevant Compliance
Certificates in accordance with Section 5.01(d)) and (ii) no Default or
Event of Default shall have occurred and be continuing or would result
therefrom;


 


(c)                                  Borrower may make payments to Sellers pursuant to Section 1.7
of the Stock Purchase Agreement;


 


(d)                                 Borrower may make Initial Earnout Payments and Milestone
Payments in cash as required by the Stock Purchase Agreement in respect of the
Fiscal Year ended December 31, 2008 and thereafter in an amount not to exceed
the amount of cumulative Consolidated Excess Cash Flow of the Borrower not
required to prepay the Loans pursuant to Section 2.27(e) for the period from
November 1, 2007 to December 31, 2007 (that, for the avoidance of doubt, is not
subject to prepayment pursuant to Section 2.27(e)) and each Fiscal Year ending
after the Closing Date but prior to the date of determination; provided
that (i) Borrower and its Subsidiaries shall be in compliance with the
financial


 


66

















 


covenants set forth in Section 6.07
on a pro forma basis after giving effect to such payment as of the last day of
the Fiscal Quarter most recently ended for which financial statements have been
provided pursuant to Section 5.01 (as determined in accordance with Section
6.07(c) and evidenced by delivery of the relevant Compliance Certificates in
accordance with Section 5.01(d)), (ii) no Default or Event of Default
shall have occurred and be continuing or would result therefrom, (iii) at
the time of the making of such payment and after giving effect thereto, the
amount, if any, by which (1) the Revolving Commitments (as defined in the
First Lien Credit Agreement) exceeds (2) the sum of the Total Utilization
of Revolving Commitments (as defined in the First Lien Credit Agreement) shall
not be less than $5,000,000 and (iv) such payment shall not be made
earlier than five (5) Business Days after the delivery of the Compliance Certificate
required by Section 5.01(d) in respect of such Fiscal Year for which the
Initial Earnout Payments and Milestone Payments are due;


 


(e)                                  Borrower may make Initial Earnout Payments and Milestone
Payments in an amount equal to (i) the aggregate principal amount of any
Earnout Seller Notes plus (ii) the amount of net cash proceeds received by
Borrower from an offering of common Capital Stock of Borrower to the extent not
required to prepay the Loans pursuant to Section 2.27(c) of the First Lien Credit
Agreement and Section 2.27(c) of this Agreement or used in connection with a
Permitted Acquisition, a permitted Investment pursuant to Section 6.06 or
Consolidated Capital Expenditures;


 


(f)                                    (i) any Subsidiary may make Restricted Junior Payments
to its direct parent to the extent its parent is Borrower or any other
Subsidiary, (ii) any such Subsidiary that is not a Wholly Owned Subsidiary
may make distributions to Persons that are not Loan Parties, pro rata to such
Persons’ ownership of such Subsidiary and concurrently with the making of
distributions to the Loan Parties or otherwise for Taxes payable by such
Persons (whether or not pro rata, but if not pro rata the Loan Parties shall
receive at least their pro rata share); provided that that in the case
of clause (ii), (i) Borrower and its Subsidiaries shall be in compliance
with the financial covenants set forth in Section 6.07 on a pro forma basis
after giving effect to such payment as of the last day of the Fiscal Quarter
most recently ended for which financial statements have been provided pursuant
to Section 5.01 (as determined in accordance with Section 6.07(c) and evidenced
by delivery of the relevant Compliance Certificates in accordance with Section
5.01(d)) and (ii) no Default or Event of Default shall have occurred and
be continuing or would result therefrom;


 


(g)                                 Borrower may make Restricted Junior Payments in order to
incentivize such holders to exercise the Warrants prior to the exercise date
specified therein;  provided  that (i) the making of such Restricted Junior Payment
shall be contingent upon, and shall only be made concurrently with, the minimum
receipt of cash proceeds by the Borrower prior to or simultaneous with the
exercise of such Warrants equal to or in excess of the amount of such Restricted
Junior Payment, (ii) upon the receipt of the cash proceeds of the exercise
of the Warrants, Borrower shall make a prepayment pursuant to Section 2.27 in
an amount equal to the amount of such Restricted Junior Payment;
(iii) Borrower and its Subsidiaries shall be in compliance with the
financial covenants set forth in Section 6.07 on a pro forma basis after giving
effect to such payment as of the last day of the Fiscal Quarter most recently
ended for which financial statements have been provided pursuant to Section
5.01 (as determined in accordance with Section 6.07(c) and evidenced by
delivery of the relevant Compliance Certificates in accordance with Section
5.01(d)) and (iv) no Default or Event of Default shall have occurred and
be continuing or would result therefrom; and


 


(h)                                 Borrower may make Restricted Junior Payments in an aggregate
amount not to exceed $350,000 to the extent constituting payment in full to the
holders of such Warrants the minimum amount required to terminate, retire or
obtain the surrender of the Warrants expressly pursuant to their terms (without
giving effect to any amendment after the date hereof); provided that
that in each case, (i) Borrower and its Subsidiaries shall be in
compliance with the financial covenants set forth in 


 


67

















 


Section 6.07 on a pro forma basis
after giving effect to such payment as of the last day of the Fiscal Quarter
most recently ended for which financial statements have been provided pursuant
to Section 5.01 (as determined in accordance with Section 6.07(c) and evidenced
by delivery of the relevant Compliance Certificates in accordance with Section
5.01(d)) and (ii) no Default or Event of Default shall have occurred and
be continuing or would result therefrom.


 


Section 6.05         Restrictions on Subsidiary Distributions.


 


Except (1) as provided herein, (2) in any
other Loan Document, (3) in the First Lien Credit Agreement or any
documents related thereto, (4) pursuant to any agreements acquired or
entered into in connection with a Permitted Acquisition, (5) pursuant to
the organizational documents of any Consent Subsidiary and (6) pursuant to
Indebtedness incurred pursuant to Section 6.01(o), no Loan Party shall, nor
shall it permit any of its Subsidiaries to, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of any
kind on the ability of any Subsidiary of Borrower to:


 


(a)                                  pay dividends or make any other distributions on any of such
Subsidiary’s Capital Stock owned by Borrower or any other Subsidiary of
Borrower;


 


(b)                                 repay or prepay any Indebtedness owed by such Subsidiary to
Borrower or any other Subsidiary of Borrower;


 


(c)                                  make loans or advances to Borrower or any other Subsidiary of
Borrower; or


 


(d)                                 transfer any of its property or assets to Borrower or any
other Subsidiary of Borrower other than restrictions (i) in agreements
evidencing purchase money Indebtedness permitted by Section 6.01(k) that impose
restrictions on the property so acquired, (ii) by reason of customary
provisions restricting assignments, subletting or other transfers contained in
leases, licenses, joint venture agreements and similar agreements entered into
in the ordinary course of business, or (iii) that are or were created by
virtue of any transfer of, agreement to transfer or option or right with
respect to any property, assets or Capital Stock not otherwise prohibited under
this Agreement.


 


Section 6.06         Investments.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture or general partnership, except (each of the
following, collectively, the “Permitted Investments”):


 


(a)                                  Cash Equivalents;


 


(b)                                 (i) equity Investments owned as of the Closing Date in
any Subsidiary, and (ii) Investments made after the Closing Date in Wholly
Owned Subsidiaries of Borrower;


 


(c)                                  Investments (i)  received in satisfaction or partial
satisfaction thereof from financially troubled account debtors, customers or
suppliers or in settlement of delinquent obligations of, and other disputes
with, account debtors, customers or suppliers and (ii) deposits,
prepayments and other credits to suppliers made in the ordinary course of
business consistent with the past practices of Borrower and its Subsidiaries;


 


(d)                                 intercompany loans to the extent permitted under Section
6.01(b);


 


68

















 


(e)                                  Consolidated Capital Expenditures;


 


(f)                                    loans and advances to employees of Borrower and its
Subsidiaries made in the ordinary course of business in an aggregate principal
amount not to exceed $600,000 in the aggregate (other than any loans or
advances to any director or executive officer (or equivalent thereof) that
would be in violation of Section 402 of the Sarbanes-Oxley Act to the extent
the Borrower and its Subsidiaries are subject thereto);


 


(g)                                 Investments made in connection with Permitted Acquisitions
permitted pursuant to Section 6.08;


 


(h)                                 Investments described in Schedule 6.06;


 


(i)                                     Investments by Borrower or any Subsidiary in any Subsidiary
that is not a Wholly Owned Subsidiary (or a Person who as a result of such
Investments becomes a Subsidiary that is not a Wholly Owned Subsidiary) in an
aggregate amount not to exceed at any time $3,000,000 plus the Available Equity
Credit;


 


(j)                                     other Investments in an aggregate amount not to exceed at any
time $3,000,000 plus the Available Equity Credit;


 


(k)                                  Investments consisting of cash on deposit with banks or other
depositary institutions;


 


(l)                                     non-cash consideration received by the Borrower or any
Subsidiary in any permitted Asset Sale; and


 


(m)                               Investments in Interest Rate Agreements permitted hereunder.


 


Notwithstanding the
foregoing, in no event shall any Loan Party make any Investment which results
in or facilitates in any manner any Restricted Junior Payment not otherwise
permitted under the terms of Section 6.04.


 


Section 6.07         Financial Covenants.


 


(a)                                  Total Leverage Ratio.
Borrower shall not permit the Total Leverage Ratio as of the last day of any
Fiscal Quarter, beginning with the Fiscal Quarter ending December 31, 2007 to
exceed the correlative ratio indicated:


 


	
  FISCAL

  QUARTER

  	
   

  	
  TOTAL LEVERAGE

  RATIO

  	
   

  
	
  December 31,
  2007

  	
   

  	
  5.95:1.00

  	
   

  
	
  March 31,
  2008

  	
   

  	
  5.95:1.00

  	
   

  
	
  June 30,
  2008

  	
   

  	
  5.95:1.00

  	
   

  
	
  September
  30, 2008

  	
   

  	
  5.70:1.00

  	
   

  
	
  December 31,
  2008

  	
   

  	
  5.65:1.00

  	
   

  
	
  March 31,
  2009

  	
   

  	
  5.40:1.00

  	
   

  
	
  June 30,
  2009

  	
   

  	
  5.40:1.00

  	
   

  



 


69

















 


	
  FISCAL

  QUARTER

  	
   

  	
  TOTAL LEVERAGE

  RATIO

  	
   

  
	
  September
  30, 2009

  	
   

  	
  5.20:1.00

  	
   

  
	
  December 31,
  2009

  	
   

  	
  4.95:1.00

  	
   

  
	
  March 31,
  2010

  	
   

  	
  4.95:1.00

  	
   

  
	
  June 30,
  2010

  	
   

  	
  4.70:1.00

  	
   

  
	
  September
  30, 2010

  	
   

  	
  4.50:1.00

  	
   

  
	
  December 31,
  2010

  	
   

  	
  4.40:1.00

  	
   

  
	
  March 31,
  2011

  	
   

  	
  4.20:1.00

  	
   

  
	
  June 30,
  2011

  	
   

  	
  4.00:1.00

  	
   

  
	
  September
  30, 2011

  	
   

  	
  4.00:1.00

  	
   

  
	
  December 31,
  2011

  	
   

  	
  3.70:1.00

  	
   

  
	
  March 31,
  2012 and thereafter

  	
   

  	
  3.50:1.00

  	
   

  



 


(b)                                 Maximum Consolidated Capital Expenditures. Borrower shall not, and shall not permit its Subsidiaries
to, make or incur Consolidated Capital Expenditures, in any Fiscal Year
indicated below, in an aggregate amount for Borrower and its Subsidiaries in
excess of the corresponding amount set forth below opposite such Fiscal Year: 


 


	
  PERIOD

  	
   

  	
  CONSOLIDATED

  CAPITAL

  EXPENDITURES

  	
   

  
	
  From the
  Closing Date through December 31, 2007

  	
   

  	
  $

  	
  1,380,000

  	
   

  
	
  Fiscal Year
  2008

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  Fiscal Year
  2009

  	
   

  	
  $

  	
  3,600,000

  	
   

  
	
  Fiscal Year
  2010

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
  Fiscal Year
  2011

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
  Fiscal Year
  2012

  	
   

  	
  $

  	
  5,400,000

  	
   

  
	
  Fiscal Year
  2013 and thereafter

  	
   

  	
  $

  	
  6,900,000

  	
   

  



 


provided, to the extent the permitted amount for any
Fiscal Year has been expended, such permitted amount shall be increased by an
amount equal to the excess, if any, of the permitted amount of Consolidated
Capital Expenditures for the previous Fiscal Year (without giving effect to any
adjustment in accordance with this proviso) over the actual amount of
Consolidated Capital Expenditures for the previous Fiscal Year; provided
further, Borrower shall have the right to elect in writing to the
Administrative Agent, delivered no later than concurrently with the delivery of
the Financial Plan for such


 


70

















 


Fiscal
Year, to increase the permitted amount of Consolidated Capital Expenditures for
such Fiscal Year by no less than $600,000 and no more than $2,400,000, so long
as such right is not exercised on more than four occasions from the Closing
Date until the date of determination and the aggregate amount, for all
increases taken together, does not exceed $2,400,000.


 


(c)                                  Certain Calculations.
With respect to any period during which a Permitted Acquisition or an Asset
Sale has occurred (each, a “Subject Transaction”), for purposes of
determining compliance with the financial covenants set forth in this Section
6.07, Consolidated Adjusted EBITDA shall be calculated with respect to such
period on a pro forma basis (including pro forma adjustments arising out of
events which are directly attributable to a specific transaction, are factually
supportable and are expected to have a continuing impact, in each case determined
on a basis consistent with Article 11 of Regulation S-X promulgated under the
Securities Act and as interpreted by the staff of the Securities and Exchange
Commission, which would include cost savings resulting from head count
reduction, closure of facilities and similar restructuring charges, which pro
forma adjustments shall be certified by the chief financial officer of
Borrower) using the historical financial statements of any business so acquired
or to be acquired or sold or to be sold and the consolidated financial
statements of Borrower and its Subsidiaries which shall be reformulated as if
such Subject Transaction, and any Indebtedness incurred or repaid in connection
therewith, had been consummated or incurred or repaid at the beginning of such
period (and assuming that such Indebtedness bears interest during any portion
of the applicable measurement period prior to the relevant acquisition at the
weighted average of the interest rates applicable to outstanding Loans incurred
during such period).


 


Section 6.08         Fundamental Changes; Disposition of Assets; Acquisitions.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease or sub-lease (as lessor or sublessor), transfer or
otherwise dispose of, in one transaction or a series of transactions, all or
any part of its business, assets or property of any kind whatsoever, whether
real, personal or mixed and whether tangible or intangible, whether now owned
or hereafter acquired, or acquire by purchase or otherwise (other than
purchases or other acquisitions of inventory, materials and equipment and
Consolidated Capital Expenditures in the ordinary course of business) the
business, substantially all of the property or fixed assets of, or stock or
other evidence of beneficial ownership of, any Person or any division or line
of business or other business unit of any Person, or become a general partner
in any partnership, except:


 


(a)                                  any Subsidiary of Borrower may be merged with or into
Borrower or any Guarantor, or be liquidated, wound up or dissolved, or all or
any part of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to Borrower , in all cases involving Borrower, or any Guarantor; provided,
in the case of such a merger, Borrower or such Guarantor, as applicable shall
be the continuing or surviving Person, except that any Subsidiary that is not a
Wholly Owned Subsidiary may distribute its assets in liquidation to Borrower
and any Subsidiary of the Borrower, on the one hand, and to Persons that are
not Loan Parties, on the other hand, pro rata to their respective ownership of
such Subsidiary;


 


(b)                                 sales or other dispositions of assets that do not constitute
Asset Sales;


 


(c)                                  Asset Sales 
(including, without limitation, sales of assets of a Target for fair
market value within one year following the acquisition of such Target (a “Target
Sale”)), the proceeds of which (valued at the principal amount thereof in
the case of non-cash proceeds consisting of notes or other debt Securities and
valued at fair market value in the case of other non-cash proceeds), other than


 


71

















 


those from a Target Sale,
(i) are less than $6,000,000 with respect to any single Asset Sale or
series of related Asset Sales and (ii) when aggregated with the proceeds
of all other Asset Sales made within the same Fiscal Year, are less than
$12,000,000; provided (1) the consideration received for such
assets shall be in an amount at least equal to the fair market value thereof
(determined in good faith by the Board of Directors of Borrower), (2) no
less than 75% of such consideration shall be paid in Cash or Cash Equivalents,
and (3) the Net Asset Sale Proceeds thereof shall be applied as required
in Section 2.30;


 


(d)                                 disposals of obsolete, worn out or surplus property;


 


(e)                                  Permitted Acquisitions; and


 


(f)                                    Investments made in accordance with Section 6.06.


 


Notwithstanding anything to the contrary above, no
Loan Party shall, nor shall it permit any of its Subsidiaries to, sell or
discount overdue accounts receivable whether or not such accounts receivable
arise in the ordinary course of business, as part of any bulk sale or financing
transaction or otherwise.


 


Section 6.09         Disposal of Subsidiary Interests.


 


Except for any sale of all of its interests in the
Capital Stock of any of its Subsidiaries in compliance with the provisions of
Section 6.08 and except as provided in the First Lien Credit Agreement, no Loan
Party shall, nor shall it permit any of its Subsidiaries to, (a) directly
or indirectly sell, assign, pledge or otherwise encumber or dispose of any
Capital Stock of any of its Subsidiaries, except as required by the Loan
Documents and to qualify directors if required by applicable law; or
(b) permit any of its Subsidiaries directly or indirectly to sell, assign,
pledge or otherwise encumber or dispose of any Capital Stock of any of its
Subsidiaries, except as required by the Loan Documents and to another Loan
Party (subject to the restrictions on such disposition otherwise imposed
hereunder), or to qualify directors if required by applicable law.


 


Section 6.10         Sales and Lease-Backs.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, become or remain liable as lessee or
as a guarantor or other surety with respect to any lease of any property
(whether real, personal or mixed), whether now owned or hereafter acquired,
which such Loan Party (a) has sold or transferred or is to sell or to
transfer to any other Person (other than Borrower or any of its Subsidiaries to
the extent such sale or transfer is otherwise permitted hereunder), or
(b) intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by such Loan Party to
any Person (other than Borrower or any of its Subsidiaries to the extent such
sale or transfer is otherwise permitted hereunder) in connection with such
lease.


 


Section 6.11         Transactions with Shareholders and Affiliates.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of Borrower or of any such
holder, unless such transaction (i) has been disclosed to Administrative
Agent, and (ii) is on terms that are no less favorable to Borrower or that
Subsidiary, as the case may be, than those that might be obtained at the time
from a Person who is not such a holder or Affiliate; provided the
foregoing restriction shall not apply to (a) the payment by Borrower and
its Subsidiaries of reasonable and customary fees, stock options and stock
grants to members of its and its Subsidiaries’ Boards of Directors and the
payment and provisions


 


72

















 


of reasonable compensation
and benefits (including permitted incentive stock plans) to officers and
employees; (b) compensation arrangements for officers and other employees
of Borrower and its Subsidiaries entered into in the ordinary course of
business; (c) transactions described in Schedule 6.11;
(d) transactions pursuant to Section 6.06(f); (e) transactions
between Borrower and any of its Subsidiaries, or between any such Subsidiaries;
and (f) the lease between Chem Rx and 750 Park Place in accordance with
the terms thereof.


 


Section 6.12         Conduct of Business.


 


From and after the Closing Date, no Loan Party
shall, nor shall it permit any of its Subsidiaries to, engage in any business
other than (i) the businesses engaged in by such Loan Party on the Closing
Date and similar or related businesses and (ii) such other lines of
business as may be consented to by Requisite Lenders.


 


Section 6.13         Amendments or Waivers of Certain Related Agreements.


 


Except as set forth in Section 6.14, no Loan Party
shall nor shall it permit any of its Subsidiaries to, agree to any material
amendment, restatement, supplement or other modification to, or waiver of, any
of its material rights under any Related Agreement (other than the First Lien
Credit Agreement), Organizational Document or any agreement evidencing
Indebtedness after the Closing Date in a manner materially adverse to the
Lenders without in each case obtaining the prior written consent of Requisite
Lenders to such amendment, restatement, supplement or other modification or
waiver.


 


Section 6.14         Amendments or Waivers of the First Lien Credit Agreement.


 


Each of the Borrower and its
Subsidiaries shall not, nor shall it permit any of its
Subsidiaries to, amend or otherwise change the terms of the First Lien Credit
Agreement or make any payment consistent with an amendment thereof or change
thereto, if the effect of such amendment or change is to increase the interest
rate applicable thereto, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto or otherwise make such event of default or condition less restrictive
or burdensome on the Borrower),
change the prepayment provisions thereof, or change any collateral therefor
(other than to release such collateral), or if the effect of such amendment or
change, together with all other amendments or changes made, is to increase
materially the obligations of the obligor thereunder or to confer any
additional rights on the lenders under the First Lien Credit Agreement (or a
representative on their behalf) which would be adverse to any Loan Party or Lenders,
except as otherwise expressly permitted by the Intercreditor Agreement.


 


Section 6.15         Fiscal Year.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to change its Fiscal Year-end from December 31.


 


Section 6.16         No Foreign Subsidiaries.


 


No Loan Party shall, nor shall it permit any of its
Subsidiaries to, create, acquire or otherwise own directly or indirectly any
Subsidiary other than a Domestic Subsidiary.


 


73

















 


ARTICLE SEVEN

GUARANTY


 


Section 7.01         Guaranty of the Obligations.


 


Subject to the provisions of Section 7.02,
Guarantors jointly and severally hereby irrevocably and unconditionally
guaranty to Administrative Agent for the ratable benefit of the Beneficiaries
the due and punctual payment in full of all Obligations when the same shall
become due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed
Obligations”).


 


Section 7.02         Contribution by Guarantors.


 


All Guarantors desire to allocate among themselves
(collectively, the “Contributing Guarantors”), in a fair and equitable
manner, their obligations arising under this Guaranty. Accordingly, in the
event any payment or distribution is made on any date by a Guarantor (a “Funding
Guarantor”) under this Guaranty that exceeds its Fair Share as of such
date, such Funding Guarantor shall be entitled to a contribution from each of
the other Contributing Guarantors in the amount of such other Contributing
Guarantor’s Fair Share Shortfall as of such date, with the result that all such
contributions will cause each Contributing Guarantor’s Aggregate Payments to
equal its Fair Share as of such date. “Fair Share” means, with respect
to a Contributing Guarantor as of any date of determination, an amount equal to
(a) the ratio of (i) the Fair Share Contribution Amount with respect
to such Contributing Guarantor to (ii) the aggregate of the Fair Share
Contribution Amounts with respect to all Contributing Guarantors multiplied by
(b) the aggregate amount paid or distributed on or before such date by all
Funding Guarantors under this Guaranty in respect of the obligations Guaranteed.
“Fair Share Shortfall” means, with respect to a Contributing Guarantor
as of any date of determination, the excess, if any, of the Fair Share of such
Contributing Guarantor over the Aggregate Payments of such Contributing
Guarantor. “Fair Share Contribution Amount” means, with respect to a
Contributing Guarantor as of any date of determination, the maximum aggregate
amount of the obligations of such Contributing Guarantor under this Guaranty
that would not render its obligations hereunder or thereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any comparable applicable provisions of state law;
provided, solely for purposes of calculating the “Fair Share
Contribution Amount” with respect to any Contributing Guarantor for
purposes of this Section 7.02, any assets or liabilities of such Contributing
Guarantor arising by virtue of any rights to subrogation, reimbursement or
indemnification or any rights to or obligations of contribution hereunder shall
not be considered as assets or liabilities of such Contributing Guarantor. “Aggregate
Payments” means, with respect to a Contributing Guarantor as of any date of
determination, an amount equal to (1) the aggregate amount of all payments
and distributions made on or before such date by such Contributing Guarantor in
respect of this Guaranty (including in respect of this Section 7.02), minus
(2) the aggregate amount of all payments received on or before such date
by such Contributing Guarantor from the other Contributing Guarantors as
contributions under this Section 7.02. The amounts payable as contributions
hereunder shall be determined as of the date on which the related payment or
distribution is made by the applicable Funding Guarantor. The allocation among
Contributing Guarantors of their obligations as set forth in this Section 7.02
shall not be construed in any way to limit the liability of any Contributing
Guarantor hereunder. Each Guarantor is a third party beneficiary to the
contribution agreement set forth in this Section 7.02.


 


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Section 7.03         Payment by Guarantors.


 


Subject to Section 7.02, Guarantors hereby jointly
and severally agree, in furtherance of the foregoing and not in limitation of
any other right which any Beneficiary may have at law or in equity against any
Guarantor by virtue hereof, that upon the failure of Borrower to pay any of the
Guaranteed Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
§ 362(a)), Guarantors will upon demand pay, or cause to be paid, in cash,
to Administrative Agent for the ratable benefit of Beneficiaries, an amount
equal to the sum of the unpaid principal amount of all Guaranteed Obligations
then due as aforesaid, accrued and unpaid interest on such Guaranteed
Obligations (including interest which, but for Borrower’s becoming the subject
of a case under the Bankruptcy Code, would have accrued on such Guaranteed
Obligations, whether or not a claim is allowed against Borrower for such
interest in the related bankruptcy case) and all other Guaranteed Obligations
then owed to Beneficiaries as aforesaid.


 


Section 7.04         Liability of Guarantors Absolute.


 


Subject to applicable bankruptcy and insolvency
laws, each Guarantor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than payment in full of the Guaranteed Obligations. In furtherance
of the foregoing and without limiting the generality thereof, each Guarantor
agrees as follows:


 


(a)                                  this Guaranty is a guaranty of payment when due and not of
collectability. This Guaranty is a primary obligation of each Guarantor and not
merely a contract of surety;


 


(b)                                 Administrative Agent may enforce this Guaranty upon the
occurrence and during the continuance of an Event of Default notwithstanding
the existence of any dispute between Borrower and any Beneficiary with respect
to the existence of such Event of Default;


 


(c)                                  the obligations of each Guarantor hereunder are independent
of the obligations of Borrower and the obligations of any other guarantor
(including any other Guarantor) of the obligations of Borrower, and a separate
action or actions may be brought and prosecuted against such Guarantor whether
or not any action is brought against Borrower or any of such other guarantors
and whether or not Borrower is joined in any such action or actions;


 


(d)                                 payment by any Guarantor of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge any
Guarantor’s liability for any portion of the Guaranteed Obligations which has
not been paid. Without limiting the generality of the foregoing, if
Administrative Agent is awarded a judgment in any suit brought to enforce any
Guarantor’s covenant to pay a portion of the Guaranteed Obligations, such
judgment shall not be deemed to release such Guarantor from its covenant to pay
the portion of the Guaranteed Obligations that is not the subject of such suit,
and such judgment shall not, except to the extent satisfied by such Guarantor,
limit, affect, modify or abridge any other Guarantor’s liability hereunder in
respect of the Guaranteed Obligations;


 


(e)                                  any Beneficiary, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or enforceability
hereof or giving rise to any reduction, limitation, impairment, discharge or
termination of any Guarantor’s liability hereunder, from time to time may, with
the written consent of the applicable Loan Party or pursuant to the terms of
the applicable Loan


 


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Document, (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Guaranteed Obligations;
(ii) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, the Guaranteed
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations; (iii) request and accept
other guaranties of the Guaranteed Obligations and take and hold security for
the payment hereof or the Guaranteed Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or
modify, with or without consideration, any security for payment of the
Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or
any other obligation of any Person (including any other Guarantor) with respect
to the Guaranteed Obligations; (v) enforce and apply any security now or
hereafter held by or for the benefit of such Beneficiary in respect hereof or
the Guaranteed Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that such Beneficiary may have against any
such security, in each case as such Beneficiary in its discretion may determine
consistent herewith or the applicable Hedge Agreement and any applicable
security agreement, including foreclosure on any such security pursuant to one
or more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, and even though such action operates to impair
or extinguish any right of reimbursement or subrogation or other right or
remedy of any Guarantor against Borrower or any security for the Guaranteed
Obligations; and (vi) exercise any other rights available to it under the
Loan Documents or the Hedge Agreements; and


 


(f)                                    this Guaranty and the obligations of Guarantors hereunder
shall be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Guaranteed Obligations), including the occurrence of any
of the following, whether or not any Guarantor shall have had notice or
knowledge of any of them:  (i) any
failure or omission to assert or enforce or agreement or election not to assert
or enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right,
power or remedy (whether arising under the Loan Documents or the Hedge Agreements,
at law, in equity or otherwise) with respect to the Guaranteed Obligations or
any agreement relating thereto, or with respect to any other guaranty of or
security for the payment of the Guaranteed Obligations; (ii) any
rescission, waiver, amendment or modification of, or any consent to departure
from, any of the terms or provisions (including provisions relating to events
of default) hereof, any of the other Loan Documents, any of the Hedge
Agreements or any agreement or instrument executed pursuant thereto, or of any
other guaranty or security for the Guaranteed Obligations, in each case whether
or not in accordance with the terms hereof or such Loan Document, such Hedge
Agreement or any agreement relating to such other guaranty or security; (iii) the
Guaranteed Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments received
pursuant to the other Loan Documents or any of the Hedge Agreements or from the
proceeds of any security for the Guaranteed Obligations, except to the extent
such security also serves as collateral for indebtedness other than the
Guaranteed Obligations) to the payment of indebtedness other than the
Guaranteed Obligations, even though any Beneficiary might have elected to apply
such payment to any part or all of the Guaranteed Obligations; (v) any
Beneficiary’s consent to the change, reorganization or termination of the
corporate structure or existence of Borrower or any of its Subsidiaries and to
any corresponding restructuring of the Guaranteed Obligations; (vi) any
failure to perfect or continue perfection of a security interest in any
collateral which secures any of the Guaranteed Obligations; (vii) any
defenses, set-offs or counterclaims which Borrower may allege or assert against
any Beneficiary in respect of the Guaranteed Obligations, including failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (viii) any other act
or thing or omission, or delay to do any other act or thing, which may or might
in any manner or to any extent vary the risk of any Guarantor as an obligor in
respect of the Guaranteed Obligations.


 


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Section 7.05                            Waivers by
Guarantors.


 


Each Guarantor hereby waives, for the benefit of
Beneficiaries:  (a) any right to
require any Beneficiary, as a condition of payment or performance by such
Guarantor, to (i) proceed against Borrower, any other guarantor (including
any other Guarantor) of the Guaranteed Obligations or any other Person,
(ii) proceed against or exhaust any security held from Borrower, any such
other guarantor or any other Person, (iii) proceed against or have resort
to any balance of any Deposit Account or credit on the books of any Beneficiary
in favor of Borrower or any other Person, or (iv) pursue any other remedy
in the power of any Beneficiary whatsoever; (b) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of Borrower or any other Guarantor including any defense based on or arising
out of the lack of validity or the unenforceability of the Guaranteed
Obligations or any agreement or instrument relating thereto or by reason of the
cessation of the liability of Borrower or any other Guarantor from any cause
other than payment in full of the Guaranteed Obligations; (c) any defense
based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in other respects more burdensome
than that of the principal; (d) any defense based upon any Beneficiary’s
errors or omissions in the administration of the Guaranteed Obligations, except
behavior which amounts to bad faith; (e) (i) any principles or
provisions of law, statutory or otherwise, which are or might be in conflict
with the terms hereof and any legal or equitable discharge of such Guarantor’s
obligations hereunder, (ii) the benefit of any statute of limitations
affecting such Guarantor’s liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and
(iv) promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property subject
thereto; (f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
hereof, notices of default hereunder, the Hedge Agreements or any agreement or
instrument related thereto, notices of any renewal, extension or modification
of the Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to Borrower and notices of any of the matters referred to
in Section 7.04 and any right to consent to any thereof; and (g) any
defenses or benefits that may be derived from or afforded by law which limit
the liability of or exonerate guarantors or sureties, or which may conflict
with the terms hereof.


 


Section 7.06                            Guarantors’ Rights of
Subrogation, Contribution, etc.


 


Until the Termination Date, each Guarantor hereby
waives any claim, right or remedy, direct or indirect, that such Guarantor now
has or may hereafter have against Borrower or any other Guarantor or any of its
assets in connection with this Guaranty or the performance by such Guarantor of
its obligations hereunder, in each case whether such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise and
including (a) any right of subrogation, reimbursement or indemnification
that such Guarantor now has or may hereafter have against Borrower with respect
to the Guaranteed Obligations, (b) any right to enforce, or to participate
in, any claim, right or remedy that any Beneficiary now has or may hereafter
have against Borrower, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by any
Beneficiary. In addition, until Termination Date, each Guarantor shall withhold
exercise of any right of contribution such Guarantor may have against any other
guarantor (including any other Guarantor) of the Guaranteed Obligations,
including any such right of contribution as contemplated by Section 7.02. Each
Guarantor further agrees that, to the extent the waiver or agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification such Guarantor may have against
Borrower or against any collateral or security, and any rights of contribution
such Guarantor may have against any such other guarantor, shall be junior and
subordinate to any rights any Beneficiary may have against Borrower, to all
right, title and interest any Beneficiary may have in any such collateral or
security, and to any right any Beneficiary may have


 


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against such other guarantor.
If any amount shall be paid to any Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
prior to the Termination Date, such amount shall be held in trust for
Administrative Agent on behalf of Beneficiaries and shall forthwith be paid
over to Administrative Agent for the benefit of Beneficiaries to be credited
and applied against the Guaranteed Obligations, whether matured or unmatured,
in accordance with the terms hereof.


 


Section 7.07         Subordination of Other Obligations.


 


Any Indebtedness of Borrower or any Guarantor now or
hereafter held by any Guarantor (the “Obligee Guarantor”) is hereby
subordinated in right of payment to the Guaranteed Obligations, and any such
indebtedness collected or received by the Obligee Guarantor after an Event of
Default has occurred and is continuing shall be held in trust for
Administrative Agent on behalf of Beneficiaries and shall, upon the occurrence
of an Event of Default pursuant to Section 8.01(a), (f) or (g) and otherwise
upon the demand of the Administrative Agent, forthwith be paid over to
Administrative Agent for the benefit of Beneficiaries to be credited and
applied against the Guaranteed Obligations but without affecting, impairing or
limiting in any manner the liability of the Obligee Guarantor under any other
provision hereof.


 


Section 7.08         Continuing Guaranty.


 


This Guaranty is a continuing guaranty and shall
remain in effect until the Termination Date. Each Guarantor hereby irrevocably
waives any right to revoke this Guaranty as to future transactions giving rise
to any Guaranteed Obligations.


 


Section 7.09         Authority of Guarantors or Borrower.


 


It is not necessary for any Beneficiary to inquire
into the capacity or powers of any Guarantor or Borrower or the officers,
directors or any agents acting or purporting to act on behalf of any of them.


 


Section 7.10         Financial Condition of Borrower.


 


Any Credit Extension may be made to Borrower or continued
from time to time, and any Hedge Agreements may be entered into from time to
time, in each case without notice to or authorization from any Guarantor
regardless of the financial or other condition of Borrower at the time of any
such grant or continuation or at the time such Hedge Agreement is entered into,
as the case may be. No Beneficiary shall have any obligation to disclose or
discuss with any Guarantor its assessment, or any Guarantor’s assessment, of
the financial condition of Borrower. Each Guarantor has adequate means to
obtain information from Borrower on a continuing basis concerning the financial
condition of Borrower and its ability to perform its obligations under the Loan
Documents and the Hedge Agreements, and each Guarantor assumes the
responsibility for being and keeping informed of the financial condition of
Borrower and of all circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty
on the part of any Beneficiary to disclose any matter, fact or thing relating
to the business, operations or conditions of Borrower now known or hereafter
known by any Beneficiary.


 


Section 7.11         Bankruptcy,
etc.


 


(a)                                  So long as any Guaranteed Obligations remain outstanding, no Guarantor
shall, without the prior written consent of Administrative Agent acting
pursuant to the instructions of Requisite Lenders, commence or join with any
other Person in commencing any bankruptcy,


 


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reorganization or insolvency case
or proceeding of or against Borrower or any other Guarantor. The obligations of
Guarantors hereunder shall not be reduced, limited, impaired, discharged,
deferred, suspended or terminated by any case or proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Borrower or any other Guarantor
or by any defense which Borrower or any other Guarantor may have by reason of
the order, decree or decision of any court or administrative body resulting
from any such proceeding.


 


(b)                                 Each Guarantor acknowledges and agrees that any interest on
any portion of the Guaranteed Obligations which accrues after the commencement
of any case or proceeding referred to in clause (a) above (or, if interest
on any portion of the Guaranteed Obligations ceases to accrue by operation of
law by reason of the commencement of such case or proceeding, such interest as
would have accrued on such portion of the Guaranteed Obligations if such case
or proceeding had not been commenced) shall be included in the Guaranteed
Obligations because it is the intention of Guarantors and Beneficiaries that
the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto
should be determined without regard to any rule of law or order which may
relieve Borrower of any portion of such Guaranteed Obligations. Guarantors will
permit any trustee in bankruptcy, receiver, debtor in possession, assignee for
the benefit of creditors or similar person to pay Administrative Agent, or
allow the claim of Administrative Agent in respect of, any such interest
accruing after the date on which such case or proceeding is commenced.


 


(c)                                  In the event that all or any portion of the Guaranteed
Obligations are paid by Borrower, the obligations of Guarantors hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guaranteed Obligations for all purposes
hereunder.


 


Section 7.12         Discharge of Guaranty upon Sale of Guarantor.


 


If all of the Capital Stock of any Guarantor or any
of its successors in interest hereunder shall be sold or otherwise disposed of
(including by merger or consolidation) in accordance with the terms and
conditions hereof, the Guaranty of such Guarantor or such successor in
interest, as the case may be, hereunder shall automatically be discharged and
released without any further action by any Beneficiary or any other Person
effective as of the time of such sale or disposition.


 


ARTICLE EIGHT

EVENTS OF DEFAULT


 


Section 8.01         Events of Default.


 


If any one or more of the following conditions or
events shall occur:


 


(a)                                  Failure to Make Payments When Due. Failure by Borrower to pay (i) when due any
installment of principal of any Loan, whether at stated maturity, by
acceleration, by notice of voluntary prepayment, by mandatory prepayment or
otherwise; (ii) any interest on any Loan or any fee due hereunder within
three (3) Business Days after the date due; or (iii) any other amount due
hereunder within three (3) Business Days after delivery of notice from the
Administrative Agent; or


 


(b)                                 Default in Other Agreements.
(i) Failure of any Loan Party or any of their respective Subsidiaries to
pay when due any principal of one or more items of Indebtedness (other than Indebtedness
referred to in Section 8.01(a)) in a principal amount of $6,000,000 or more,


 


79

















 


individually or in the aggregate,
in each case beyond the grace period, if any, provided therefor; or
(ii) breach or default by any Loan Party with respect to any other
material term of (1) one or more items of Indebtedness in the individual
or aggregate principal amounts referred to in clause (i) above or (2) any
loan agreement, mortgage, indenture or other agreement relating to such item(s)
of Indebtedness, in each case beyond the grace period, if any, provided
therefor, if the effect of such breach or default is to cause, or to permit the
holder or holders of that Indebtedness (or a trustee on behalf of such holder or
holders), to cause, that Indebtedness to become or be declared due and payable
(or redeemable) prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be; provided, however, with respect to
any failure to pay or breach or default or Event of Default (as defined in the
First Lien Credit Agreement) under the First Lien Credit Agreement (other than
a payment default under or an acceleration of the First Lien Credit Agreement),
such event shall only constitute an Event of Default hereunder if such event
occurs and is not cured or waived within forty-five (45) days after such event
becomes an Event of Default (as defined in the First Lien Credit Agreement); or


 


(c)                                  Breach of Certain Covenants.
(i) Failure of any Loan Party to perform or comply with any term or
condition contained in Section 2.16, Section 5.02 or Article Six; or
(ii) failure of any Loan Party to perform or comply with any term or
condition contained in Section 5.01(a) through (d) and such failure shall not
have been remedied or waived within ten (10) Business Days after such failure;
or


 


(d)                                 Breach of Representations, etc. Any representation, warranty, certification or other
statement made or deemed made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by any Loan Party or any of its
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect as of the date made or deemed
made; or


 


(e)                                  Other Defaults Under Loan Documents. Any Loan Party shall default in the performance of or
compliance with any term contained herein or any of the other Loan Documents,
other than any such term referred to in any other Section of this
Section 8.01, and such default shall not have been remedied or waived
within thirty (30) days after the earlier of (i) a Responsible Officer of
such Loan Party becoming aware of such default or (ii) receipt by Borrower
of notice from Administrative Agent or any Lender of such default; or


 


(f)                                    Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court of competent jurisdiction shall enter a
decree or order for relief in respect of Borrower or any of its Subsidiaries in
an involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be
commenced against Borrower or any of its Subsidiaries under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Borrower or any of its
Subsidiaries, or over all or a substantial part of its property, shall have
been entered; or there shall have occurred the involuntary appointment of an
interim receiver, trustee or other custodian of Borrower or any of its
Subsidiaries for all or a substantial part of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of Borrower or any of its Subsidiaries, and
any such event described in this clause (ii) shall continue for sixty (60) days
without having been dismissed, bonded or discharged; or


 


(g)                                 Voluntary Bankruptcy; Appointment of Receiver, etc. (i) Borrower or any of its Subsidiaries shall have an
order for relief entered with respect to it or shall commence a


 


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voluntary case under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Borrower or any of its Subsidiaries shall make any
assignment for the benefit of creditors; or (ii) Borrower or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in
writing its inability, to pay its debts as such debts become due; or the Board
of Directors of Borrower or any of its Subsidiaries (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to herein or in Section 8.01(f); or


 


(h)                                 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process involving
in an amount in excess of $6,000,000 in any case individually or in the
aggregate at any time (to the extent not adequately covered by insurance) or
any non-monetary judgment that could reasonably be expected to have a Material
Adverse Effect shall be entered or filed against Borrower or any of its
Subsidiaries or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of sixty (60) days (or in any
event later than five (5) days prior to the date of any proposed sale
thereunder); or


 


(i)                                     Dissolution. Any
order, judgment or decree shall be entered against any Loan Party decreeing the
dissolution or split up of such Loan Party and such order shall remain
undischarged or unstayed for a period in excess of thirty (30) days; or


 


(j)                                     Employee Benefit Plans.
(i) There shall occur one or more ERISA Events which individually or in
the aggregate results in or might reasonably be expected to result in liability
of Borrower, any of its Subsidiaries or any of their respective ERISA
Affiliates in excess of $6,000,000 during the term hereof; or (ii) there
exists any fact or circumstance that reasonably could be expected to result in
the imposition of a Lien or security interest under Section 412(n) of the
Internal Revenue Code or under ERISA affecting a material portion of the assets
of the Borrower and its Subsidiaries, taken as a whole; or


 


(k)                                  Change of Control. A Change
of Control shall occur; or


 


(l)                                     Guaranties, Collateral Documents and other Loan Documents. At any time after the execution and delivery thereof,
(i) the Guaranty for any reason, other than the satisfaction in full of
all Obligations, shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared to be null and void or any
Guarantor shall repudiate its obligations thereunder, (ii) this Agreement
or any Collateral Document covering a material portion of the Collateral ceases
to be in full force and effect (other than by reason of a release of Collateral
in accordance with the terms hereof or thereof or the satisfaction in full of
the Obligations in accordance with the terms hereof) or shall be declared null
and void, or Collateral Agent shall not have or shall cease to have a valid and
perfected Lien in a material portion of the Collateral purported to be covered
by the Collateral Documents with the priority required by the relevant
Collateral Document, in each case for any reason other than the failure of
Collateral Agent or any Secured Party to take any action within its control, or
(iii) any Loan Party shall contest the validity or enforceability of any
Loan Document in writing or deny in writing that it has any further liability,
including with respect to future advances by Lenders, under any Loan Document
to which it is a party; or


 


(m)                               Health Care Matters.
Borrower or any of its Subsidiaries fails to (i) comply with any Health
Care Law or (ii) maintain any Governmental Authorization, material
accreditation or Government Third Party Payor Program provider agreement, and,
in the case of clause (i) or (ii) above, such failure, individually or in the
aggregate, could reasonably be expected to have a


 


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Material Adverse Effect and is not
cured within 30 days after the earlier of (i) a Responsible Officer of a
Loan Party becoming aware of such default or (ii) the receipt by Borrower
of written notice from Administrative Agent or any Lender of such default;


 


THEN, (1) upon the
occurrence of any Event of Default described in Section 8.01(f) or 8.01(g),
automatically, and (2) upon the occurrence and during the continuance of
any other Event of Default or an acceleration of all loans under the First Lien
Credit Agreement, at the request of (or with the consent of) Requisite Lenders,
upon notice to Borrower by Administrative Agent, (A) each of the following
shall immediately become due and payable, in each case without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by each Loan Party: 
(I) the unpaid principal amount of and accrued interest and premium
on the Loans and (II) all other Obligations; and (B) the
Administrative Agent may cause the Collateral Agent to enforce any and all
Liens and security interests created pursuant to Collateral Documents.


 


ARTICLE NINE

AGENTS


 


Section 9.01         Appointment and Authority.


 


CIBC WM is hereby appointed Lead Arranger hereunder
and under the other Loan Documents and each Lender hereby authorizes the Lead
Arranger to act as its agent in accordance with the terms hereof and the other
Loan Documents. CIBC is hereby appointed Administrative Agent and Collateral
Agent hereunder and under the other Loan Documents by the Lenders and by the
Secured Parties’ acceptance of the benefits hereof, and each Secured Party
hereby authorizes Administrative Agent and Collateral Agent to act as its agent
in accordance with terms hereof and the other Loan Documents. The Lead Arranger
may, in its sole discretion, appoint other agents (including, without
limitation, Syndication Agent and Documentation Agent) following the date
hereof, and each Lender hereby authorizes each such agent to act as its agent
in accordance with terms hereof and the other Loan Documents. Each of the
Lenders hereby irrevocably appoints CIBC as its agent hereunder and under the
other Loan Documents and authorizes Administrative Agent and Collateral Agent
to take such actions on its behalf and to exercise such powers as are delegated
to Administrative Agent and Collateral Agent by the terms hereof or thereof,
together with such actions and powers as are reasonably incidental thereto. The
provisions of this Article Nine (other than Section 9.06) are solely for the
benefit of the Agents and the Lenders, and Borrower shall not have rights as a
third party beneficiary of any of such provisions. As of the Closing Date, CIBC
WM, in its capacity as Lead Arranger, shall have no obligation, but shall be
entitled to all benefits of this Article Nine.


 


Section 9.02         Rights as a Lender.


 


Each of Administrative Agent and Collateral Agent
shall have the same rights and powers in its capacity as a Lender as any other
Lender and may exercise the same as though it were not an Agent and the term “Lender”
or “Lenders” shall, unless otherwise expressly indicated or unless the context
otherwise requires, include the Administrative Agent and the Collateral Agent
hereunder in their individual capacities. Administrative Agent and Collateral
Agent and their Affiliates may accept deposits from, lend money to, act as the
financial advisor or in any other advisory capacity for and generally engage in
any kind of business with Borrower or any Subsidiary or other Affiliate thereof
as if such Person were not an Agent hereunder and without any duty to account
therefor to the Lenders.


 


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Section 9.03         Exculpatory
Provisions.


 


Administrative Agent and Collateral Agent shall not
have any duties or obligations except those expressly set forth herein and in
the other Loan Documents. Without limiting the generality of the foregoing,
Administrative Agent and Collateral Agent:


 


(a)           shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default or Event of Default has occurred and is
continuing,


 


(b)           shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that
Administrative Agent or Collateral Agent is required to exercise as directed in
writing by the Requisite Lenders (or such other number or percentage of the
relevant Lenders as shall be expressly provided for herein or in the other Loan
Documents); provided that neither Administrative Agent nor Collateral
Agent shall be required to take any action that, in its opinion or the opinion
of its counsel, may expose Administrative Agent or Collateral Agent to
liability or that is contrary to any Loan Document or applicable law, and


 


(c)           shall not, except as expressly set forth herein and in the
other Loan Documents, have any duty to disclose, and shall not be liable for
the failure to disclose, any information relating to Borrower or any of its
Affiliates that is communicated to or obtained by Administrative Agent or
Collateral Agent or any of their respective Affiliates in any capacity.


 


Neither Administrative Agent
nor Collateral Agent shall be liable for any action taken or not taken by it
with the consent or at the request of the Requisite Lenders (or such other
number or percentage of the Lenders as shall be necessary, or as Administrative
Agent or Collateral Agent shall believe in good faith shall be necessary, under
the circumstances as provided in Section 10.04) or in the absence of its own
gross negligence or willful misconduct. Neither Administrative Agent nor
Collateral Agent shall be deemed to have knowledge of any Default or Event of
Default unless and until notice thereof is given to Administrative Agent or
Collateral Agent by Borrower or a Lender.


 


Neither Administrative Agent nor Collateral Agent
shall be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection
with this Agreement or any other Loan Document, (ii) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth herein
or therein or the occurrence of any Default or Event of Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document or
(v) the satisfaction of any condition set forth in Article Three or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to Administrative Agent or Collateral Agent.


 


Section 9.04         Reliance by
Administrative Agent and the Collateral Agent.


 


Each of Administrative Agent and Collateral Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument,
document or other writing (including any electronic message,  Internet or intranet website posting or other
distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated by the proper Person. Each of Administrative Agent and
Collateral Agent also may rely upon any statement made to it orally or by
telephone and believed by it to have been made by the proper Person, and shall
not incur any liability for relying thereon. In determining compliance with any


 


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condition hereunder to the
making of a Loan, each of Administrative Agent and Collateral Agent may presume
that such condition is satisfactory to such Lender unless Administrative Agent
or Collateral Agent shall have received notice to the contrary from such Lender
prior to the making of such Loan. Each of Administrative Agent and Collateral
Agent may consult with legal counsel (who may be counsel for Borrower),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts.


 


Section 9.05         Delegation
of Duties.


 


Each of Administrative Agent and Collateral Agent
may perform any and all of its duties and exercise its rights and powers
hereunder or under any other Loan Document by or through any one or more
sub-agents appointed by Administrative Agent or Collateral Agent. Each of
Administrative Agent and Collateral Agent and any sub-agent may perform any and
all of its duties and exercise its rights and powers under this Agreement or
under any other Loan Document by or through any one or more sub-agents
appointed by such sub-agent with the approval of Administrative Agent or
Collateral Agent, as applicable (such appointing sub-agent is referred to in
this Section 9.05 as an “Appointing Sub-Agent”). Each of Administrative
Agent, Collateral Agent and each such sub-agent may perform any and all of its
duties and exercise its rights and powers by or through their respective
Related Parties. The exculpatory, indemnification and other provisions of this
Article Nine and of Section 10.02 shall apply to any of the Related Parties of
Administrative Agent and Collateral Agent and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent or Collateral Agent,
as applicable. All of the rights, benefits, and privileges (including the
exculpatory and indemnification provisions) of this Article Nine and of Section
10.02 shall apply to each such sub-agent and to the Related Parties of each
sub-agent, and shall apply to their respective activities as sub-agent as if
such sub-agent and Article Nine were named herein. Notwithstanding anything
herein to the contrary, with respect to each sub-agent appointed by
Administrative Agent, Collateral Agent and/or an Appointing Sub-Agent,
(i) such sub-agent shall be a third party beneficiary under this Agreement
with respect to all such rights, benefits and privileges (including exculpatory
rights and rights to indemnification) and shall have all of the rights and
benefits of a third party beneficiary, including an independent right of action
to enforce such rights, benefits and privileges (including exculpatory rights
and rights to indemnification) directly, without the consent or joinder of any
other Person, against any or all of the Loan Parties and the Lenders,
(ii) such rights, benefits and privileges (including exculpatory rights
and rights to indemnification) shall not be modified or amended without the
consent of such sub-agent, and (iii) such sub-agent shall only have obligations
to Administrative Agent or Collateral Agent and, if applicable, an Appointing
Sub-Agent and not to any Loan Party Lender or any other Person and no Loan
Party Lender or any other Person shall have any rights, directly or indirectly,
as a third party beneficiary or otherwise, against such sub-agent.


 


Section 9.06         Resignation
of Administrative Agent.


 


Each of Administrative Agent and Collateral Agent
may at any time give notice of its resignation to the Lenders and Borrower. Upon
receipt of any such notice of resignation, the Requisite Lenders shall have the
right, to appoint a successor, which successor shall (so long as no Event of
Default has occurred and is continuing) be subject to approval by Borrower
(such approval not to be unreasonably withheld or delayed), and which shall be
a bank with an office in the United States, or an Affiliate of any such bank
with an office in the United States. If no such successor shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent or Collateral Agent
gives notice of its resignation, then the retiring Administrative Agent or
Collateral Agent may appoint a successor Administrative Agent or Collateral
Agent, as applicable, meeting the qualifications set forth above; provided
that if Administrative Agent or Collateral Agent shall notify Borrower and the
Lenders that no qualifying person has accepted such appointment,


 


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then such resignation shall
nonetheless become effective in accordance with such notice and (1) the
retiring Administrative Agent or Collateral Agent shall be discharged from its
duties and obligations hereunder and under the other Loan Documents (except
that in the case of any collateral security held by Administrative Agent or
Collateral Agent on behalf of the Secured Parties under any of the Loan
Documents, the retiring Administrative Agent or Collateral Agent shall continue
to hold such collateral security until such time as a successor Administrative
Agent or Collateral Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through
Administrative Agent or Collateral Agent shall instead be made by or to each
Lender directly, until such time as the Requisite Lenders appoint a successor
Administrative Agent or Collateral Agent as provided for above in this
paragraph. Upon the acceptance of a successor’s appointment as Administrative
Agent or Collateral Agent hereunder, such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
(or retired) Administrative Agent or Collateral Agent, and the retiring
Administrative Agent or Collateral Agent shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents (if not
already discharged therefrom as provided above in this paragraph). The fees
payable by Borrower to a successor Administrative Agent or Collateral Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between Borrower and such successor. After the retiring Administrative Agent’s
or Collateral Agent’s resignation hereunder and under the other Loan Documents,
the provisions of this Article Nine and Section 10.02 shall continue in effect
for the benefit of such retiring Administrative Agent or Collateral Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while the retiring Administrative Agent
or Collateral Agent was acting as Administrative Agent or Collateral Agent, as
applicable.


 


Section 9.07         Non-Reliance
on Agents and Other Lenders.


 


Each Lender acknowledges that it has, independently
and without reliance upon the Agents or any other Lender or any of their
Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agents or any other Lender or any of their Related
Parties and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or
any related agreement or any document furnished hereunder or thereunder.


 


Section 9.08         No Other
Duties, etc.


 


Anything herein to the contrary notwithstanding,
none of the Lead Arranger, Syndication Agent or Documentation Agent shall have
any powers, duties or responsibilities under this Agreement or any of the other
Loan Documents, except in its capacity, as applicable, as Administrative Agent,
Collateral Agent or a Lender hereunder.


 


Section 9.09         Collateral
Documents and Guaranty.


 


(a)           Agents under Collateral Documents and Guaranty. Each Lender hereby further authorizes Administrative Agent
or Collateral Agent, as applicable, on behalf of and for the benefit of
Lenders, to be the agent for and representative of Lenders with respect to the
Guaranty, the Collateral, the Intercreditor Agreement, each Lien Subordination
Agreement and each other Collateral Document. Subject to Section 10.04, without
further written consent or authorization from Lenders, Administrative Agent or
Collateral Agent, as applicable may execute any documents or instruments
necessary to (i) release any Lien encumbering any item of Collateral that
is the subject of a sale or other disposition of assets permitted hereby or to
which Requisite Lenders (or such other Lenders as may be


 


85

















 


required to give such consent under
Section 10.04) have otherwise consented or (ii) release any Guarantor from
the Guaranty pursuant to Section 7.12 or with respect to which Requisite
Lenders (or such other Lenders as may be required to give such consent under
Section 10.04) have otherwise consented.


 


(b)           Right to Realize on Collateral and Enforce Guaranty. Anything contained in any of the Loan Documents to the
contrary notwithstanding, (other than Section 10.03), Borrower, Administrative
Agent, Collateral Agent and each Lender hereby agree that (i) no Lender
shall have any right individually to realize upon any of the Collateral or to
enforce the Guaranty, it being understood and agreed that all powers, rights
and remedies hereunder may be exercised solely by Administrative Agent, on
behalf of Lenders in accordance with the terms hereof and all powers, rights
and remedies under the Collateral Documents may be exercised solely by
Collateral Agent, and (ii) in the event of a foreclosure by Collateral
Agent on any of the Collateral pursuant to a public or private sale, Collateral
Agent or any Lender may be the purchaser of any or all of such Collateral at
any such sale and Collateral Agent, as agent for and representative of Secured
Parties (but not any Lender or Lenders in its or their respective individual
capacities unless Requisite Lenders shall otherwise agree in writing) shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Obligations as a credit on account of the
purchase price for any collateral payable by Collateral Agent at such sale.


 


Section 9.10         Withholding
Taxes.


 


To the extent required by any applicable law, the
Administrative Agent may withhold from any payment to any Lender an amount
equivalent to any applicable withholding tax. If the Internal Revenue Service
or any other Governmental Authority asserts a claim that the Administrative
Agent did not properly withhold tax from amounts paid to or for the account of
any Lender because the appropriate form was not delivered or was not properly
executed or because such Lender failed to notify the Administrative 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 Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax or otherwise, including any
penalties or interest and together with any and all expenses incurred.


 


ARTICLE TEN

MISCELLANEOUS


 


Section 10.01       Notices;
Effectiveness; Electronic Communication.


 


(a)           Notices Generally. Except in
the case of notices and other communications expressly permitted to be given by
telephone (and except as provided in paragraph (b) below), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopier as follows:


 


(i)            if
to Borrower, to it at Chem Rx Corporation, 750 Park Place, Long Beach, New York
11561; Attention Chuck Kelly, Chief Financial Officer; Telecopier No. (516)
889-8225; Telephone No. (516) 889-8770, ext. 144;


 


(ii)           if
to Administrative Agent, to


 


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Canadian Imperial Bank of Commerce,

New York Agency

300 Madison Avenue

New York, New York 10017

Attention:  Agency Services

Facsimile No.:  (212) 856-3763


 


and (other than notices pursuant to Article II)


 


Attention: 
Caroline Adams

Facsimile No.:  (212) 856-3991


 


with a copy of notices (other than notices pursuant to
Article II) to:


 


Latham & Watkins LLP

885 Third Avenue, New York, NY  10022

Attention:  Marcus J. Dougherty

Facsimile No.:  (212) 751-4864; and


 


(iii)          if
to a Lender, to it at its address (or telecopier number) set forth in its
Administrative Questionnaire.


 


Notices sent by hand or
overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received; notices sent by telecopier shall be
deemed to have been given when sent if a confirmation has been received and, if
not given during normal business hours for the recipient, shall be deemed to
have been given at the opening of business on the next business day for the
recipient. Notices delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).


 


(b)           Electronic Communications.
Notices and other communications to the Lenders hereunder may be delivered or
furnished by electronic communication (including e mail and Internet or intranet
websites) pursuant to procedures approved by Administrative Agent; provided
that the foregoing shall not apply to notices to any Lender pursuant to Article
Two if such Lender has notified Administrative Agent that it is incapable of
receiving notices under such Section by electronic communication. Administrative
Agent or Borrower may, in its reasonable discretion, agree to accept notices
and other communications to it hereunder by electronic communications pursuant
to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.


 


Unless Administrative Agent otherwise prescribes,
(i) notices and other communications sent to an e mail address shall be
deemed received upon the sender’s receipt of an acknowledgement from the
intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement); provided
that if such notice or other communication is not sent during the normal
business hours of the recipient, such notice or communication shall be deemed
to have been sent at the opening of business on the next business day for the
recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause
(i) of notification that such notice or communication is available and
identifying the website address therefor.


 


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(c)           Change of Address, Etc.
Any party hereto may change its address or telecopier number for notices and
other communications hereunder by written notice to the other parties hereto.


 


Section 10.02       Expenses;
Indemnity; Damage Waiver.


 


(a)           Costs and Expenses. Borrower
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent, the Lead Arranger and their Affiliates, including the
reasonable fees, charges and disbursements of one outside counsel for the Administrative
Agent, the Lead Arranger and their Affiliates (subject to the proviso below),
in connection with the syndication of the credit facilities provided for
herein, the preparation, negotiation, execution, delivery and administration of
this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), and (ii) all
out-of-pocket expenses incurred by the Agents or any Lender, including the
fees, charges and disbursements of one counsel for the Agents or any Lender
(subject to the proviso below), in connection with the enforcement or
protection of its rights in connection with this Agreement and the other Loan Documents,
including its rights under this Section, or in connection with the Loans made
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans; provided,
in the case of each of clause (i) and (ii), if any party has been advised by
counsel that there is an actual or reasonable likelihood of conflict of
interest, then such party affected thereby may retain its own counsel.


 


(b)           Indemnification by Borrower.
Borrower shall indemnify the Agents (and any sub-agent thereof) and each
Lender, and each Related Party of any of the foregoing Persons (each such
Person being called an “Indemnitee”) against, and hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including the reasonable fees, charges and disbursements of any
outside counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or the consummation of
the transactions contemplated hereby or thereby, (ii) any Loan or the use
or proposed use of the proceeds therefrom, (iii) any actual or alleged
presence or Release of Hazardous Materials on or from any property owned or
operated by Borrower or any of its Subsidiaries, or any Environmental Liability
related in any way to Borrower or any of its Subsidiaries, or (iv) any
actual or prospective claim, litigation, investigation or proceeding relating
to any of the foregoing, whether based on contract, tort or any other theory,
whether brought by a third party or by Borrower or any other Loan Party,  and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of, or breach of the Loan Documents by,
such Indemnitee; and provided further that
no Loan Party shall have any obligation to any Indemnitee hereunder with
respect to such indemnified liabilities arising out of legal proceedings
commenced against a Lender by the assignee of such Lender to the extent such
proceedings relates (A) solely to breaches of representations or
warranties of such assigning Lender regarding ownership or authority to assign
all or a portion of its Commitment or Loans owing to it or other Obligation, or
(B) principally to statements or representations made by an assigning Lender
to such assignee that were not based upon information supplied by the Borrower.


 


(c)           Reimbursement by Lenders.
To the extent that Borrower fails to pay any amount required under paragraph
(a) or (b) of this Section to be paid by it to the Agents (or any sub-agent
thereof) or any Related Party of any of the foregoing, each Lender severally
agrees to pay to the Agents (or any such sub-agent) or such Related Party, as
the case may be, such Lender’s Applicable Percentage


 


88

















 


(determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Agents (or any such sub-agent) or against any
Related Party of any of the foregoing acting for the Agents (or any such
sub-agent). The obligations of the Lenders under this paragraph (c) are subject
to the provisions of Section 10.11.


 


(d)           Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby, the transactions contemplated hereby or thereby,
any Loan or the use of the proceeds thereof. No Indemnitee referred to in
paragraph (b) above shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.


 


(e)           Payments. All
amounts due under this Section 10.02 shall be payable not later than five (5)
Business Days after written demand therefor.


 


Section 10.03       Right of
Set-Off.


 


If an Event of Default shall have occurred and be
continuing and the Obligations shall have been accelerated pursuant to Section
8.01, each Lender and each of its respective Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by applicable
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender or any such
Affiliate to or for the credit or the account of Borrower or any other Loan
Party against and on account of any and all of the obligations of Borrower or
such Loan Party now or hereafter existing under this Agreement or any other
Loan Document to such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or any other Loan Document and
although such obligations of Borrower or such Loan Party may be contingent or
unmatured or are owed to a branch or office of such Lender different from the
branch or office holding such deposit or obligated on such indebtedness. The
rights of each Lender and its respective Affiliates under this Section are in
addition to other rights and remedies (including other rights of setoff) which
such Lender or its respective Affiliates may have. Each Lender agrees promptly
to notify Borrower and Administrative Agent after any such setoff and application;
provided that the failure to give such notice shall not affect the
validity of such setoff and application.


 


Section 10.04       Amendments
and Waivers.


 


(a)           Requisite Lenders’ Consent.
Subject to Section 10.04(b) and 10.04(c), no amendment, modification,
termination or waiver of any provision of the Loan Documents, or consent to any
departure by any Loan Party therefrom, shall in any event be effective without
the written concurrence of the Requisite Lenders and Borrower.


 


(b)           Affected Lenders’ Consent.
Without the written consent of each Lender that would be affected thereby, no
amendment, modification, termination, or consent shall be effective if the
effect thereof would:


 


(i)            extend
the scheduled final maturity of any Loan or Note;


 


89

















 


(ii)           waive,
reduce or postpone any scheduled repayment (but not prepayment);


 


(iii)          reduce
the rate of interest or premium on any Loan (other than any waiver of any
increase in the interest rate applicable to any Loan pursuant to
Section 2.22) or any fee payable hereunder or change the cash pay nature
of any such interest;


 


(iv)          extend
the time for payment of any such interest, premium or fees;


 


(v)           reduce
the principal amount of any Loan;


 


(vi)          amend,
modify, terminate or waive any provision of this Section 10.04(b) or Section
10.04(c);


 


(vii)         amend,
directly or indirectly, the definition of “Requisite Lenders” or “Pro
Rata Share” (or any other defined terms used to define terms); provided,
with the consent of Requisite Lenders, additional extensions of credit pursuant
hereto may be included in the determination of “Requisite Lenders” or “Pro
Rata Share” on substantially the same basis as the Commitments and the
Loans are included on the Closing Date;


 


(viii)        release all
or substantially all of the Collateral or all or substantially all of the
Guarantors or all or substantially all of the value of the Guaranty from the
Guaranty except as expressly provided in the Loan Documents; or


 


(ix)           waive
an Event of Default under Section 8.01(a).


 


(c)           Other Consents. No
amendment, modification, termination or waiver of any provision of the Loan
Documents, or consent to any departure by any Loan Party therefrom, shall
amend, modify, terminate or waive any provision of Article 9 as the same
applies to any Agent, or any other provision hereof as the same applies to the
rights or obligations of any Agent, in each case without the consent of such
Agent.


 


Section 10.05       Execution
of Amendments, etc.


 


Administrative Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of such Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on any Loan Party in any
case shall entitle any Loan Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 10.05 shall be
binding upon each Lender at the time outstanding, each future Lender and, if
signed by a Loan Party, on such Loan Party.


 


Section 10.06       Successors
and Assigns; Participations.


 


(a)           Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender and no Lender may assign or otherwise transfer any of
its rights or obligations hereunder except (i) to an Eligible Assignee in
accordance with the provisions of paragraph (b) of this Section, (ii) by
way of participation in accordance


 


90

















 


with the provisions of paragraph
(d) of this Section or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of paragraph (f) of this Section (and any
other attempted assignment or transfer by any party hereto shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in
paragraph (d) of this Section and, to the extent expressly contemplated hereby,
the Related Parties of each of the Agents and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.


 


(b)           Assignments by Lenders.
Any Lender may at any time assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided
that:


 


(i)            Minimum
Amounts. (A) in the case of an
assignment of the entire remaining amount of the assigning Lender’s Commitment
and the Loans at the time owing to it or in the case of an assignment to a
Lender or an Affiliate of a Lender or an Approved Fund with respect to a
Lender, no minimum amount need be assigned; and (B) in any case not
described in paragraph (b)(i)(A) of this Section, the aggregate amount of the
Commitment (which for this purpose includes Loans outstanding thereunder) or,
if the applicable Commitment is not then in effect, the principal outstanding
balance of the Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption Agreement with respect
to such assignment is delivered to Administrative Agent or, if “Trade Date” is
specified in the Assignment and Assumption Agreement, as of the Trade Date)
shall not be less than $1,000,000, unless each of Administrative Agent and, so
long as no Event of Default has occurred and is continuing, Borrower otherwise
consents (each such consent not to be unreasonably withheld or delayed);


 


(ii)           Proportionate
Amounts. Each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations under this Agreement with respect to the Loan or the
Commitment assigned;


 


(iii)          Assignment
and Assumption Agreement. The
parties to an assignment shall (A) electronically execute and deliver to
the Administrative Agent and Borrower an Assignment and Assumption Agreement
via an electronic settlement acceptable to the Administrative Agent or
(B) manually execute and deliver to the Administrative Agent and Borrower
an Assignment and Assumption Agreement; and


 


(iv)          Assignment
Fee and Administrative Questionnaire. The
parties to each assignment shall deliver to Administrative Agent a processing
and recordation fee of $3,500 (except in the case of an assignment to an
Affiliate or Approved Fund of the assigning Lender, in which case the processing
and recordation fee shall be $500, or as otherwise agreed by Administrative
Agent) and the Eligible Assignee, if it shall not be a Lender, shall deliver to
Administrative Agent an Administrative Questionnaire and any forms or other
documents required pursuant to Section 2.36.


 


Subject to acceptance and
recording thereof by Administrative Agent pursuant to paragraph (c) of this
Section, from and after the effective date specified in each Assignment and
Assumption Agreement, the Eligible Assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption Agreement, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption Agreement, be released from
its obligations under this Agreement (and, in the case of an Assignment and
Assumption Agreement covering all of the assigning Lender’s rights and


 


91

















 


obligations under this
Agreement, such Lender shall cease to be a party hereto) , but shall continue
to be entitled to the benefits of Sections 2.34, 2.35, 2.36 and 10.02 with
respect to facts and circumstances occurring prior to the effective date of
such assignment. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a participation
in such rights and obligations in accordance with paragraph (d) of this
Section.


 


(c)           Register. Administrative
Agent, acting solely for this purpose as an agent of Borrower, shall maintain
at its office a copy of each Assignment and Assumption Agreement delivered to
it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Loans owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”).
The entries in the Register shall be conclusive, and Borrower, Administrative
Agent and the Lenders shall treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by Borrower, at any reasonable time and from time to
time upon reasonable prior notice.


 


(d)           Participations. Any
Lender may at any time, without the consent of, or notice to, Borrower or
Administrative Agent, sell participations to any Person (other than a natural
person or Borrower or any of Borrower’s Affiliates or Subsidiaries) (each, a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans owing
to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) Borrower, Administrative 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.


 


Any agreement or instrument pursuant to which a
Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
to:  (i) extend the final scheduled
maturity of any Loan or Note in which such participant is participating, or reduce
the rate or extend the time of payment of interest or fees thereon (except in
connection with a waiver of applicability of any post default increase in
interest rates) or reduce the principal amount thereof, or increase the amount
of the participant’s participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Commitment shall not constitute a change in the
terms of such participation, and that an increase in any Commitment or Loan
shall be permitted without the consent of any participant if the participant’s
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by any Loan Party of any of its rights and obligations under
this Agreement or (iii) release all or substantially all of the Collateral
under the Collateral Documents (except as expressly provided in the Loan
Documents) supporting the Loans hereunder in which such participant is
participating. Subject to paragraph (e) of this Section, Borrower agrees that
each Participant shall be entitled to the benefits of Sections 2.33(c), 2.34,
2.35 and 2.36 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 10.03 as though it were a Lender, provided such Participant agrees to
be subject to Section 2.32 as though it were a Lender.


 


(e)           Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater
payment under Sections 2.33(c), 2.34, 2.35 and 2.36 than the applicable Lender
would have been entitled to receive with respect to the participation sold to
such Participant, unless the


 


92

















 


sale of the participation to such
Participant is made with Borrower’s prior written consent. A Participant that
would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.36 unless Borrower is notified of the participation sold
to such Participant and such Participant agrees, for the benefit of Borrower,
to comply with Section 2.36(e) as though it were a Lender.


 


(f)            Certain Pledges. Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank; provided that no such pledge or assignment shall release
such Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto.


 


Section 10.07       Independence
of Covenants.


 


All covenants hereunder shall be given independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or
would otherwise be within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.


 


Section 10.08       Survival of
Representations, Warranties and Agreements.


 


All representations, warranties and agreements made
herein shall survive the execution and delivery hereof and the making of any
Credit Extension. Notwithstanding anything herein or implied by law to the
contrary, the agreements of each Loan Party set forth in Sections 2.33(c),
2.34, 2.35, 2.36, 10.02 and 10.03 and the agreements of Lenders set forth in
Sections 2.33, 9.03 and 10.02 shall survive the payment of the Loans, and
the termination hereof. All other agreements and covenants under the Loan
Documents shall terminate on the Termination Date.


 


Section 10.09       No Waiver;
Remedies Cumulative.


 


No failure or delay on the part of any Agent or any
Lender in the exercise of any power, right or privilege hereunder or under any
other Loan Document shall impair such power, right or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. The rights, powers
and remedies given to each Agent and each Lender hereby are cumulative and
shall be in addition to and independent of all rights, powers and remedies
existing by virtue of any statute or rule of law or in any of the other Loan
Documents or any of the Hedge Agreements. Any forbearance or failure to
exercise, and any delay in exercising, any right, power or remedy hereunder
shall not impair any such right, power or remedy or be construed to be a waiver
thereof, nor shall it preclude the further exercise of any such right, power or
remedy.


 


Section 10.10       Marshalling;
Payments Set Aside.


 


Neither any Agent nor any Lender shall be under any
obligation to marshal any assets in favor of any Loan Party or any other Person
or against or in payment of any or all of the Obligations. To the extent that
any Loan Party makes a payment or payments to Administrative Agent or Lenders
(or to Administrative Agent, on behalf of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law,
common law or any equitable cause, then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all Liens,
rights and


 


93

















 


remedies therefor or related
thereto, shall be revived and continued in full force and effect as if such
payment or payments had not been made or such enforcement or setoff had not
occurred.


 


Section 10.11       Severability.


 


In case any provision in or obligation hereunder or
any Note shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.


 


Section 10.12       Obligations
Several; Independent Nature of Lenders’ Rights.


 


The obligations of Lenders hereunder are several and
no Lender shall be responsible for the obligations or Commitment of any other
Lender hereunder. Nothing contained herein or in any other Loan Documents, and
no action taken by Lenders pursuant hereto or thereto, shall be deemed to
constitute Lenders as a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out hereof and it shall not be necessary
for any other Lender to be joined as an additional party in any proceeding for
such purpose.


 


Section 10.13       Headings.


 


Section headings herein are included herein for
convenience of reference only and shall not constitute a part hereof for any
other purpose or be given any substantive effect.


 


Section 10.14       Governing
Law; Jurisdiction; Etc.


 


(a)           Governing Law. THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND RULE 327(b) OF THE NEW YORK CIVIL PRACTICE LAW AND
RULES.


 


(b)           Submission to Jurisdiction.
Borrower and each other Loan Party irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the courts of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State court or, to the fullest extent permitted by
applicable law, in such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or in any other Loan Document shall
affect any right that any Agent or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against Borrower or any other Loan Party or its properties in the courts of any
jurisdiction.


 


(c)           Waiver of Venue. Borrower
and each other Loan Party irrevocably and unconditionally waives, to the
fullest extent permitted by applicable law, any objection which it may now or
hereafter have to the laying of venue of any action or proceeding arising out
of or relating to this


 


94

















 


Agreement or any other Loan
Document in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.


 


(d)           Service of Process. Each
party hereto irrevocably consents to service of process in the manner provided
for notices in Section 10.01. Nothing in this Agreement will affect the right
of any party hereto to serve process in any other manner permitted by
applicable law.


 


Section 10.15       WAIVER OF
JURY TRIAL.


 


EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.


 


Section 10.16       Treatment
of Certain Information; Confidentiality.


 


Each of the Agents and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to it, its Affiliates and their
respective partners, directors, officers, employees, agents, advisors, auditors
and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Information
and instructed to keep such Information confidential pursuant to the terms
hereof), (b) to the extent requested by any regulatory authority
purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners),
(c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party hereto,
(e) in connection with the exercise of any remedies hereunder or under any
other Loan Document or any action or proceeding relating to this Agreement or
any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same
as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or
its advisors) to any swap or derivative transaction relating to Borrower and
its obligations, (g) with the consent of Borrower or (h) to the
extent such Information (x) becomes publicly available other than as a
result of a breach of this Section or (y) becomes available to Agents or
any Lender on a nonconfidential basis from a source other than Borrower not
known to them to be bound by an obligation of confidentiality.


 


For purposes of this Section, “Information” means
all information received from Borrower or any of its Subsidiaries relating to
Borrower or any of their Subsidiaries or any of their respective businesses. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.


 


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Section 10.17       Usury
Savings Clause.


 


Notwithstanding any other provision herein, the
aggregate interest rate charged with respect to any of the Obligations,
including all charges or fees in connection therewith deemed in the nature of
interest under applicable law shall not exceed the Highest Lawful Rate. If the
rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate, the outstanding
amount of the Loans made hereunder shall bear interest at the Highest Lawful
Rate until the total amount of interest due hereunder equals the amount of
interest which would have been due hereunder if the stated rates of interest
set forth in this Agreement had at all times been in effect. In addition, if
when the Loans made hereunder are repaid in full the total interest due
hereunder (taking into account the increase provided for above) is less than
the total amount of interest which would have been due hereunder if the stated
rates of interest set forth in this Agreement had at all times been in effect,
then to the extent permitted by law, Borrower shall pay to Administrative Agent
an amount equal to the difference between the amount of interest paid and the
amount of interest which would have been paid if the Highest Lawful Rate had at
all times been in effect. Notwithstanding the foregoing, it is the intention of
Lenders and Borrower to conform strictly to any applicable usury laws. Accordingly,
if any Lender contracts for, charges, or receives any consideration which
constitutes interest in excess of the Highest Lawful Rate, then any such excess
shall be cancelled automatically and, if previously paid, shall at such Lender’s
option be applied to the outstanding amount of the Loans made hereunder or be
refunded to Borrower.


 


Section 10.18       Counterparts;
Integration; Effectiveness.


 


This Agreement may be executed in counterparts (and
by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Agreement shall become effective when it shall have been
executed by Administrative Agent and when Administrative Agent shall have
received counterparts hereof which, when taken together, bear the signatures of
each of the other parties hereto, and thereafter shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement


 


Section 10.19       Entire
Agreement.


 


This Agreement and the other Loan Documents
represent the entire agreement of the parties with regard to the subject matter
hereof and thereof and the terms of any letters and other documentation entered
into between any of the parties hereto prior to the execution of this Agreement
which relate to Loans to be made hereunder shall be replaced by the terms of
this Agreement and the other Loan Documents.


 


Section 10.20       Electronic
Execution of Assignments.


 


The words “execution,” “signed,” “signature,” and
words of like import in any Assignment and Assumption Agreement shall be deemed
to include electronic signatures or the keeping of records in electronic form,
each of which shall be of the same legal effect, validity or enforceability as
a manually executed signature or the use of a paper-based recordkeeping system,
as the case may be, to the extent and as provided for in any applicable law,
including the Federal Electronic Signatures in Global and National Commerce
Act, the New York State Electronic Signatures and Records Act, or any other
similar state laws based on the Uniform Electronic Transactions Act.


 


96

















 


Section 10.21       Patriot Act
Notification.


 


Each Lender and Administrative Agent (for itself and
not on behalf of any Lender) hereby notifies Borrower that pursuant to the
requirements of the Act, it is required to obtain, verify and record
information that identifies Borrower, which information includes the name and
address of Borrower and other information that will allow such Lender or
Administrative Agent, as applicable, to identify Borrower in accordance with
the Act.


 


Section 10.22       Release on
Payment in Full.


 


Administrative Agent shall, on behalf of the Lenders,
upon the written request and at the expense of Borrower upon the Termination
Date, execute any documents reasonably requested by Borrower to evidence the
release of the Liens of the Credit Documents if not theretofore released (and
upon the Termination Date, such Liens shall be automatically released). Lenders
shall, at Borrower’s request and at no cost to Lenders, reasonably cooperate
with Borrower in assigning the Notes and Mortgages (without recourse) at payoff
and will execute all documents reasonably necessary to evidence the discharge
or such assignment of the Obligations.


 


Section 10.23       Lender
Addendum.


 


Each Lender to become a party to this Agreement on
the date hereof shall do so by delivering to the Administrative Agent a Lender
Addendum duly executed by such Lender, Borrower and the Administrative Agent.


 


[Remainder of page
intentionally left blank]


 


97

















 


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


 


	
   

  	
  CHEM RX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Jerry Silva

  	
   

  
	
   

  	
   

  	
    Name: Jerry Silva

  	
   

  
	
   

  	
   

  	
    Title: Chairman and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  B.J.K. INC.

  
	
   

  	
  CHEMRX NEW JERSEY, LLC

  
	
   

  	
  CHEMRX / SALERNO’S, LLC

  
	
   

  	
  CHEMRX-BOCA RATON, LLC

  
	
   

  	
  CHEMRX CARE, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Jerry Silva

  	
   

  
	
   

  	
   

  	
    Name: Jerry Silva

  	
   

  
	
   

  	
   

  	
    Title: President

  	
   

  



 


S-1

















 


	
   

  	
  CIBC WORLD MARKETS CORP.,

  as Sole Lead Arranger and Sole Book Runner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Doug Cornett

  
	
   

  	
   

  	
  Name:  Doug Cornett

  
	
   

  	
   

  	
  Title:  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CANADIAN IMPERIAL BANK OF
  COMMERCE,

  NEW YORK AGENCY,

  as Administrative Agent and Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Doug Cornett

  
	
   

  	
   

  	
  Name:  Doug Cornett

  
	
   

  	
   

  	
  Title:  Authorized Signatory

  



 


S-2

















 


Schedule 1.01 to


Second Lien Credit and Guaranty Agreement


 


Consolidated Adjusted EBITDA


 


With respect to any calculation period ending prior to the first
anniversary of the Closing Date for which the following Fiscal Quarters are
relevant, Consolidated Adjusted EBITDA for each of the following Fiscal
Quarters shall be deemed to be the following amounts and, thereafter, actual
Consolidated Adjusted EBITDA shall be used:


 


	
  Fiscal Quarter

  	
   

  	
  Consolidated Adjusted EBITDA

  	
   

  
	
  First Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  $

  	
  5,872,359

  	
   

  
	
  Second Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  $

  	
  6,874,642