Document:

Exhibit 10.1

    
      	
              EXHIBIT
                10.1

               

              
                

              

               

               

              CREDIT
                AGREEMENT

               

              dated
                as of

               

              April
                19, 2007,

               

               

              among

               

              SUN
                HEALTHCARE GROUP, INC.,

               

              THE
                LENDERS PARTY HERETO

               

              and

               

              CREDIT
                SUISSE,

              as
                Administrative Agent and Collateral Agent

               

                                                                       

               

              CREDIT
                SUISSE SECURITIES (USA) LLC,

              CIBC
                WORLD MARKETS CORP

              and

              UBS
                SECURITIES LLC,

              as
                Joint Bookrunners and Joint-Lead Arrangers

               

              CIBC
                WORLD MARKETS CORP.,

              as
                Syndication Agent

               

              UBS
                SECURITIES LLC,

              as
                Documentation Agent

               

               

               

                

              

               

            

    

    [CS&M
      Ref. No. 5865-465]

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    Table
      of Contents

    Page

    ARTICLE
      I

    

    Definitions

    

    
      	
              SECTION
                1.01.  Defined
                Terms

            	
              2

            
	
              SECTION
                1.02.  Terms Generally

            	
              31

            
	
              SECTION
                1.03.  Pro Forma Calculations

            	
              32

            
	
              SECTION
                1.04.  Classification of Loans and Borrowings

            	
              32

            
	
              SECTION
                1.05.  Senior Debt

            	
              33

            

    

    

    ARTICLE
      II

    

    The
      Credits

    

    
      	
              SECTION
                2.01.  Commitments

            	
              33

            
	
              SECTION
                2.02.  Loans

            	
              34

            
	
              SECTION
                2.03.  Borrowing Procedure

            	
              36

            
	
              SECTION
                2.04.  Evidence of Debt; Repayment of Loans

            	
              37

            
	
              SECTION
                2.05.  Fees

            	
              38

            
	
              SECTION
                2.06.  Interest on Loans

            	
              39

            
	
              SECTION
                2.07.  Default Interest

            	
              40

            
	
              SECTION
                2.08.  Alternate Rate of Interest

            	
              40

            
	
              SECTION
                2.09.  Termination and Reduction of Commitments

            	
              40

            
	
              SECTION
                2.10.  Conversion and Continuation of Borrowings

            	
              41

            
	
              SECTION
                2.11.  Repayment of Term Borrowings

            	
              43

            
	
              SECTION
                2.12.  Optional Prepayment

            	
              44

            
	
              SECTION
                2.13.  Mandatory Prepayments

            	
              45

            
	
              SECTION
                2.14.  Reserve Requirements; Change in
                Circumstances

            	
              47

            
	
              SECTION
                2.15.  Change in Legality

            	
              49

            
	
              SECTION
                2.16.  Indemnity

            	
              49

            
	
              SECTION
                2.17.  Pro Rata Treatment

            	
              50

            
	
              SECTION
                2.18.  Sharing of Setoffs

            	
              50

            
	
              SECTION
                2.19.  Payments

            	
              51

            
	
              SECTION
                2.20.  Taxes

            	
              52

            
	
              SECTION
                2.21.  Assignment of Commitments Under Certain Circumstances;
                Duty to

                                               Mitigate

            	
               

              53

            
	
              SECTION
                2.22.  Swingline Loans

            	
              55

            
	
              SECTION
                2.23.  Letters of Credit

            	
              56

            
	
              SECTION
                2.24.  Incremental Commitments

            	
              62

            

    

     

    i

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      of Contents

    (Continued)

    Page

    ARTICLE
      III

    

    Representations
      and Warranties

    

    
      	
              SECTION
                3.01.  Organization; Powers

            	
              65

            
	
              SECTION
                3.02.  Authorization

            	
              65

            
	
              SECTION
                3.03.  Enforceability

            	
              65

            
	
              SECTION
                3.04.  Governmental Approvals

            	
              66

            
	
              SECTION
                3.05.  Financial Statements

            	
              66

            
	
              SECTION
                3.06.  No Material Adverse Change

            	
              67

            
	
              SECTION
                3.07.  Title to Properties; Possession Under
                Leases

            	
              67

            
	
              SECTION
                3.08.  Subsidiaries

            	
              67

            
	
              SECTION
                3.09.  Litigation; Compliance with Laws

            	
              67

            
	
              SECTION
                3.10.  Agreements

            	
              68

            
	
              SECTION
                3.11.  Federal Reserve Regulations

            	
              68

            
	
              SECTION
                3.12.  Investment Company Act

            	
              68

            
	
              SECTION
                3.13.  Use of Proceeds

            	
              68

            
	
              SECTION
                3.14.  Tax Returns

            	
              68

            
	
              SECTION
                3.15.  No Material Misstatements

            	
              68

            
	
              SECTION
                3.16.  Employee Benefit Plans

            	
              69

            
	
              SECTION
                3.17.  Environmental Matters

            	
              69

            
	
              SECTION
                3.18.  Insurance

            	
              69

            
	
              SECTION
                3.19.  Security Documents

            	
              70

            
	
              SECTION
                3.20.  Location of Real Property and Leased
                Premises

            	
              71

            
	
              SECTION
                3.21.  Labor Matters

            	
              71

            
	
              SECTION
                3.22.  Solvency

            	
              71

            
	
              SECTION
                3.23.  Transaction Documents

            	
              71

            
	
              SECTION
                3.24.  Healthcare Representations

            	
              72

            
	
              SECTION
                3.25.  Senior Indebtedness

            	
              74

            
	
              SECTION
                3.26.  Sanctioned Persons

            	
              74

            

    

    

    ARTICLE
      IV

    

    Conditions
      of Lending

    

    
      	
              SECTION
                4.01.  All Credit Events

            	
              74

            
	
              SECTION
                4.02.  First Credit Event

            	
              75

            

    

    

    ARTICLE
      V

    

    Affirmative
      Covenants

    

    
      	
              SECTION
                5.01.  Existence; Compliance with Laws; Businesses and
                Properties

            	
              79

            
	
              SECTION
                5.02.  Insurance

            	
              79

            

    

    

    ii

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      of Contents

    (Continued)

    Page

    

    
      	
              SECTION
                5.03.  Obligations and Taxes

            	
              80

            
	
              SECTION
                5.04.  Financial Statements, Reports, etc

            	
              80

            
	
              SECTION
                5.05.  Litigation and Other Notices

            	
              82

            
	
              SECTION
                5.06.  Information Regarding Collateral

            	
              83

            
	
              SECTION
                5.07.  Maintaining Records; Access to Properties and
                Inspections;

                                                 Maintenance
                of Ratings

            	
               

              83

            
	
              SECTION
                5.08.  Use of Proceeds

            	
              83

            
	
              SECTION
                5.09.  Employee Benefits

            	
              83

            
	
              SECTION
                5.10.  Compliance with Environmental Laws

            	
              84

            
	
              SECTION
                5.11.  Preparation of Environmental Reports

            	
              84

            
	
              SECTION
                5.12.  Further Assurances

            	
              84

            
	
              SECTION
                5.13.  Interest Rate Protection

            	
              85

            
	
              SECTION
                5.14.  Proceeds of Certain Dispositions

            	
              85

            
	
              SECTION
                5.15.  Healthcare Requirements

            	
              86

            
	
              SECTION
                5.16.  Deposit Accounts; Concentration Accounts; Letters of
                Instruction

            	
              87

            

    

    

    ARTICLE
      VI

    

    Negative
      Covenants

    

    
      	
              SECTION
                6.01.  Indebtedness

            	
              88

            
	
              SECTION
                6.02.  Liens

            	
              90

            
	
              SECTION
                6.03.  Sale and Lease-Back Transactions

            	
              91

            
	
              SECTION
                6.04.  Investments, Loans and Advances

            	
              92

            
	
              SECTION
                6.05.  Mergers, Consolidations, Sales of Assets and
                Acquisitions

            	
              94

            
	
              SECTION
                6.06.  Restricted Payments; Restrictive
                Agreements

            	
              95

            
	
              SECTION
                6.07.  Transactions with Affiliates

            	
              95

            
	
              SECTION
                6.08.  Business of Borrower and Subsidiaries

            	
              96

            
	
              SECTION
                6.09.  Other Indebtedness and Agreements

            	
              96

            
	
              SECTION
                6.10.  Capital Expenditures

            	
              96

            
	
              SECTION
                6.11.  Interest Coverage Ratio

            	
              97

            
	
              SECTION
                6.12.  Maximum Total Leverage Ratio

            	
              97

            
	
              SECTION
                6.13.  Maximum Senior Leverage Ratio

            	
              98

            
	
              SECTION
                6.14.  Fiscal Year

            	
              98

            
	
              SECTION
                6.15.  Certain Equity Securities

            	
              98

            

    

    

    iii

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      of Contents

    (Continued)

    Page

     

    ARTICLE
      VII

    

    Events
      of
      Default

     

    

    ARTICLE
      VIII

    

    The
      Administrative Agent and the Collateral Agent

     

    

    ARTICLE
      IX

    

    Miscellaneous

    

    
      	
              SECTION
                9.01.  Notices

            	
              103

            
	
              SECTION
                9.02.  Survival of Agreement

            	
              104

            
	
              SECTION
                9.03.  Binding Effect

            	
              104

            
	
              SECTION
                9.04.  Successors and Assigns

            	
              104

            
	
              SECTION
                9.05.  Expenses; Indemnity

            	
              109

            
	
              SECTION
                9.06.  Right of Setoff

            	
              110

            
	
              SECTION
                9.07.  Applicable Law

            	
              110

            
	
              SECTION
                9.08.  Waivers; Amendment

            	
              111

            
	
              SECTION
                9.09.  Interest Rate Limitation

            	
              112

            
	
              SECTION
                9.10.  Entire Agreement

            	
              112

            
	
              SECTION
                9.11.  WAIVER OF JURY TRIAL

            	
              112

            
	
              SECTION
                9.12.  Severability

            	
              113

            
	
              SECTION
                9.13.  Counterparts

            	
              113

            
	
              SECTION
                9.14.  Headings

            	
              113

            
	
              SECTION
                9.15.  Jurisdiction; Consent to Service of
                Process

            	
              113

            
	
              SECTION
                9.16.  Confidentiality

            	
              114

            
	
              SECTION
                9.17.  USA PATRIOT Act Notice

            	
              114

            

    

    

    iv

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      of Contents

    (Continued)

    Page

    

    SCHEDULES

    

    
      	
              Schedule
                1.01(a)

            	
              -

            	
              Subsidiary
                Guarantors

            
	
              Schedule
                1.01(b)

            	
              -

            	
              Mortgaged
                Property

            
	
              Schedule
                1.01(c)

            	
              -

            	
              Facilities

            
	
              Schedule
                1.01(d)

            	
              -

            	
              Harborside
                Facility Level Indebtedness

            
	
              Schedule
                1.01(e)

            	
              -

            	
              Restricted
                Cash

            
	
              Schedule
                2.01

            	
              -

            	
              Lenders
                and Commitments

            
	
              Schedule
                3.08

            	
              -

            	
              Subsidiaries

            
	
              Schedule
                3.09

            	
              -

            	
              Litigation

            
	
              Schedule
                3.17

            	
              -

            	
              Environmental
                Matters

            
	
              Schedule
                3.18

            	
              -

            	
              Insurance

            
	
              Schedule
                3.19(a)

            	
              -

            	
              UCC
                Filing Offices

            
	
              Schedule
                3.19(c)

            	
              -

            	
              Mortgage
                Filing Offices

            
	
              Schedule
                3.20(a)

            	
              -

            	
              Owned
                Real Property

            
	
              Schedule
                3.20(b)

            	
              -

            	
              Leased
                Real Property

            
	
              Schedule
                3.21

            	
              -

            	
              Collective
                Bargaining Agreements

            
	
              Schedule
                4.02(a)

            	
              -

            	
              Local
                Counsel

            
	
              Schedule
                6.01

            	
              -

            	
              Existing
                Indebtedness

            
	
              Schedule
                6.02

            	
              -

            	
              Existing
                Liens

            
	
              Schedule
                6.04 

            	
              -

            	
              Existing
                Investments

            
	
              Schedule
                6.05

            	
              -

            	
              Scheduled
                Asset Sales

            

    

    

    

    EXHIBITS

    

    
      	
              Exhibit
                A

            	
              -

            	
              Form
                of Administrative Questionnaire

            
	
              Exhibit
                B

            	
              -

            	
              Form
                of Assignment and Acceptance

            
	
              Exhibit
                C

            	
              -

            	
              Form
                of Borrowing Request

            
	
              Exhibit
                D

            	
              -

            	
              Form
                of Guarantee and Collateral Agreement

            
	
              Exhibit
                E

            	
              -

            	
              Form
                of Mortgage

            
	
              Exhibit
                F-1

            	
              -

            	
              Form
                of Opinion of O’Melveny & Myers LLP

            
	
              Exhibit
                F-2

            	
              -

            	
              Form
                of Opinion of General Counsel

            
	
              Exhibit
                F-3

            	
              -

            	
              Form
                of Local Counsel Opinion

            
	
              Exhibit
                G

            	
              -

            	
              Form
                of Minority Holder Acknowledgement, Consent and
                Waiver

            

    

     

    (The
      schedules and exhibits listed above are not provided herein. However, Sun agrees
      to furnish such omitted documents to the Commission upon request.)

     

    v

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    CREDIT
      AGREEMENT dated as of April 19, 2007, among SUN HEALTHCARE GROUP, INC., a
      Delaware corporation (the “Borrower”),
      the
      Lenders (as defined in Article I), and CREDIT SUISSE, as administrative
      agent (in such capacity, the “Administrative
      Agent”)
      and as
      collateral agent (in such capacity, the “Collateral
      Agent”)
      for
      the Lenders.

     

    PRELIMINARY
      STATEMENT

     

    Pursuant
      to the Merger Agreement (such term and each other capitalized term used but
      not
      defined in this introductory statement having the meaning given it in
      Article I), the Borrower will acquire all the Equity Interests in
      Harborside Healthcare Corporation (“Harborside”)
      through the merger (the “Merger”)
      of
      Horizon Merger Inc., a Delaware corporation and a wholly owned Subsidiary
      (“Merger
      Sub”),
      with
      and into Harborside, with (a)(i) each share of common stock of Harborside
      issued and outstanding (with certain exceptions as set forth in the Merger
      Agreement) immediately prior to the Effective Time (as defined in the Merger
      Agreement) being converted at the Effective Time into the right to receive
      the
      Per Share Merger Consideration (as defined in the Merger Agreement), (ii) each
      option and warrant to purchase a share of common stock of Harborside that is
      outstanding (with certain exceptions as set forth in the Merger Agreement)
      immediately prior to the Effective Time being converted at the Effective Time
      into the right to receive the Per Share Merger Consideration (after deduction
      for any applicable exercise price and taxes), and (iii) each share of
      preferred stock of Harborside issued and outstanding (with certain exceptions
      as
      set forth in the Merger Agreement) immediately prior to the Effective Time
      being
      converted into the right to receive a pro rata portion of the Preferred Purchase
      Price (as defined in the Merger Agreement) (the amounts set forth in clauses
      (i), (ii) and (iii), collectively, the “Merger
      Consideration”),
      which
      Merger Consideration shall be in an aggregate amount of approximately
      $349,400,000 (less certain expenses of Harborside as set forth in the Merger
      Agreement), and (b) Harborside surviving as a wholly owned
      Subsidiary.

     

    In
      connection with the Merger, the Borrower has requested that the Lenders extend
      credit in the form of (a) Term Loans (i) on the Closing Date, in an
      aggregate principal amount not in excess of $310,000,000, and (ii) on no more
      than two occasions during the period commencing on the first Business Day after
      the Closing Date and ending on the Delayed Draw Commitment Termination Date,
      in
      an aggregate principal amount not in excess of $55,000,000, and
      (b) Revolving Loans at any time and from time to time after the date hereof
      and until the Revolving Credit Maturity Date, in an aggregate principal amount
      at any time outstanding not in excess of $50,000,000. The Borrower has requested
      the Swingline Lender to extend credit, at any time and from time to time after
      the date hereof and until the Revolving Credit Maturity Date, in the form of
      Swingline Loans, in an aggregate principal amount at any time outstanding not
      in
      excess of $10,000,000. The Borrower has requested the Issuing Bank to issue
      (a) RF Letters of Credit, in an aggregate face amount at any time
      outstanding not in excess of $15,000,000 and (b) PF Letters of Credit, in
      an aggregate face amount at any time outstanding not in excess of $70,000,000.
      The proceeds of the Term Loans to be made on the Closing Date are to be used
      solely to pay a portion of the Merger Consideration, to repay Existing

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Indebtedness
      of the Borrower and Harborside and to pay related fees and expenses. The
      proceeds of the Delayed Draw Term Loans are to be used solely to finance the
      acquisition of the Moffie Properties and the NHP Properties (including
      the repayment of associated Indebtedness and the payment of related fees and
      expenses). The proceeds of the Revolving Loans and the Swingline Loans are
      to be
      used, and Letters of Credit are to be requested, solely for working capital
      and
      general corporate purposes of the Borrower and the Subsidiaries.

     

    The
      Lenders are willing to extend such credit to the Borrower, and the Issuing
      Bank
      is willing to issue Letters of Credit for the account of the Borrower, in each
      case on the terms and subject to the conditions set forth herein. Accordingly,
      the parties hereto agree as follows:

     

    ARTICLE
      I

     

    Definitions

     

    SECTION
      1.01. Defined
      Terms.
      As used
      in this Agreement, the following terms shall have the meanings specified
      below:

     

    “ABR”,
      when
      used in reference to any Loan or Borrowing, refers to whether such Loan, or
      the
      Loans comprising such Borrowing, are bearing interest at a rate determined
      by
      reference to the Alternate Base Rate.

     

    “Adjusted
      LIBO Rate”
shall
      mean, with respect to any Eurodollar Borrowing for any Interest Period, an
      interest rate per annum equal to the product of (a) the LIBO Rate in effect
      for such Interest Period and (b) Statutory Reserves.

     

    “Administrative
      Agent Fees”
shall
      have the meaning assigned to such term in Section 2.05(b).

     

    “Administrative
      Questionnaire”
shall
      mean an Administrative Questionnaire in the form of Exhibit A, or such other
      form as may be supplied from time to time by the Administrative
      Agent.

     

    “Affiliate”
shall
      mean, when used 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; provided,
      however,
      that,
      for purposes of Section 6.07, the term “Affiliate”
shall
      also include any person that directly or indirectly owns 5% or more of any
      class
      of Equity Interests of the person specified.

     

    “Aggregate
      Revolving Credit Exposure”
shall
      mean the aggregate amount of the Lenders’ Revolving Credit
      Exposures.

     

    “Alternate
      Base Rate”
shall
      mean, for any day, a rate per annum equal to the greater of (a) the Prime
      Rate in effect on such day and (b) the Federal Funds Effective Rate in
      effect on such day plus 1/2 of 1%. If the Administrative Agent shall have

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

      
        determined (which determination shall be conclusive absent
          manifest error) that it is unable to ascertain the Federal Funds Effective
          Rate
          for any reason, including the inability or failure of the Administrative
          Agent
          to obtain sufficient quotations in accordance with the terms of the definition
          thereof, the Alternate Base Rate shall be determined without regard to
          clause (b) of the preceding sentence until the circumstances giving rise to
          such inability no longer exist. Any change in the Alternate Base Rate due
          to a
          change in the Prime Rate or the Federal Funds Effective Rate shall be effective
          on the effective date of such change in the Prime Rate or the Federal Funds
          Effective Rate, as the case may be.

      

    

     

    “Applicable
      Term Commitment Fee Rate” shall mean, for any day (a) from
      and including the Closing Date to but excluding the three-month anniversary
      of
      the Closing Date, 0.75% per annum, (b) from and including the three-month
      anniversary of the Closing Date to but excluding the six-month anniversary
      of
      the Closing Date, 1.00% per annum, and (c) thereafter, 1.50% per
      annum.

     

    “Applicable
      Percentage”
shall
      mean, for any day (a) with respect to any Eurodollar Term Loan, 2.00% per annum,
      (b) with respect to any ABR Term Loan, 1.00% per annum, and (c) (i) with
      respect to any Eurodollar Revolving Loan or ABR Revolving Loan, the applicable
      percentage set forth below under the caption “Eurodollar Spread—Revolving Loans”
or “ABR Spread—Revolving Loans”, as the case may be, and (ii) with respect
      to the Revolving Credit Commitment Fee, the applicable rate set forth below
      under the caption “Revolving Credit Commitment Fee Rate”, in each case based
      upon the Total Leverage Ratio as of the relevant date of
      determination:

    

    
      	
              Total
                Leverage
Ratio

            	
              Eurodollar
Spread--
                
Revolving 
Loans

            	
              ABR
                Spread--
Revolving
Loans

            	
              Revolving
Credit
                
Commitment
Fee Rate

               

            
	
              Category
                1

               

              Greater
                than 

              4.50
                to 1.00

            	
              2.00%

            	
              1.00%

            	
              0.50%

            
	
              Category
                2

               

              Less
                than or 

              equal
                to 4.50 to 

              1.00
                and 

              greater
                than 

              3.50
                to 1.00

            	
              1.75%

            	
              0.75%

            	
              0.50%

            
	
              Category
                3

               

              Less
                than or 

              equal
                to 3.50 to 

              1.00

               

            	
              1.50%

            	
              0.50%

            	
              0.375%

            

    

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    Each
      change in the Applicable Percentage resulting from a change in the Total
      Leverage Ratio shall be effective with respect to all Loans and Letters of
      Credit outstanding on and after the date of delivery to the Administrative
      Agent
      of the financial statements and certificates
      required by Section 5.04(a) or (b) and Section 5.04(c), respectively,
      indicating such change until the date immediately preceding the next date of
      delivery of such financial statements and certificates indicating another such
      change. Notwithstanding the foregoing, until the Borrower shall have delivered
      the financial statements and certificates required by Section 5.04(b) and
      Section 5.04(c), respectively, for the period ended September 30,
      2007, the Total Leverage Ratio shall be deemed to be in Category 1 for
      purposes of determining the Applicable Percentage. In addition, (i) at any
      time during which the Borrower has failed to deliver the financial statements
      and certificates required by Section 5.04(a) or (b) and Section 5.04(c),
      respectively, or (ii) at any time after the occurrence and during the
      continuance of an Event of Default, the Total Leverage Ratio shall be deemed
      to
      be in Category 1 for purposes of determining the Applicable
      Percentage.

     

    “Approvals”
shall
      mean the approvals from the applicable Governmental Authorities in respect
      of
      all appropriate Healthcare Licenses with respect to a particular
      Facility.

     

    “Arrangers”
shall
      mean Credit Suisse Securities (USA) LLC, CIBC World Markets Corp. and UBS
      Securities LLC.

     

    “Asset
      Sale”
shall
      mean the sale, transfer or other disposition (by way of merger, casualty,
      condemnation or otherwise) by the Borrower or any of the Subsidiaries to any
      person other than the Borrower or any Subsidiary Guarantor of (a) any
      Equity Interests of any of the Subsidiaries (other than directors’ qualifying
      shares) or (b) any other assets of the Borrower or any of the Subsidiaries
      (other than (i) inventory, damaged, obsolete or worn out assets, scrap and
      Permitted Investments, in each case disposed of in the ordinary course of
      business, (ii) dispositions between or among Foreign Subsidiaries and
      (iii) any sale, transfer or other disposition or series of related sales,
      transfers or other dispositions having a value not in excess of
      $750,000).

     

    “Assignment
      and Acceptance”
shall
      mean an assignment and acceptance entered into by a Lender and an assignee,
      and
      accepted by the Administrative Agent, in the form of Exhibit B or such
      other form as shall be approved by the Administrative Agent.

     

    “Board”
shall
      mean the Board of Governors of the Federal Reserve System of the United States
      of America.

     

    “Borrowing”
shall
      mean (a) Loans of the same Class and Type made, converted or continued on
      the same date and, in the case of Eurodollar Loans, as to which a single
      Interest Period is in effect, or (b) a Swingline Loan.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Borrowing
      Request”
shall
      mean a request by the Borrower in accordance with the terms of Section 2.03
      and substantially in the form of Exhibit C, or such other form as shall be
      approved by the Administrative Agent.

     

    “Business
      Day”
shall
      mean any day other than a Saturday, Sunday or day on which banks in New York
      City are authorized or required by law to close; provided,
      however,
      that
      when used in connection with a Eurodollar Loan, the term “Business
      Day”
shall
      also exclude any day on which banks are not open for dealings in dollar deposits
      in the London interbank market.

     

    “Capital
      Expenditures”
shall
      mean, for any period, (a) the additions to property, plant and equipment
      and other capital expenditures of the Borrower and its consolidated subsidiaries
      that are (or should be) set forth in a consolidated statement of cash flows
      of
      the Borrower for such period prepared in accordance with GAAP and
      (b) Capital Lease Obligations or Synthetic Lease Obligations incurred by
      the Borrower and its consolidated subsidiaries during such period, but excluding
      in each case any such expenditure (i) made to restore, replace or rebuild
      property to the condition of such property immediately prior to any damage,
      loss, destruction or condemnation of such property, to the extent such
      expenditure is made with insurance proceeds, condemnation awards or damage
      recovery proceeds relating to any such damage, loss, destruction or condemnation
      and (ii) to the extent that proceeds of Asset Sales are used to make such
      expenditure pursuant to the proviso in the definition of the term “Net Cash
      Proceeds”.

     

    “Capital
      Lease Obligations”
of
      any
      person shall mean the obligations of such person to pay rent or other amounts
      under any lease of (or other arrangement conveying the right to use) real or
      personal property, or a combination thereof, which obligations are required
      to
      be classified and accounted for as capital leases on a balance sheet of such
      person under GAAP, and the amount of such obligations shall be the capitalized
      amount thereof determined in accordance with GAAP.

     

    A
      “Change
      in Control”
shall
      be deemed to have occurred if (a) any “person” or “group” (within the
      meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect
      on the date hereof) shall own, directly or indirectly, beneficially or of
      record, shares representing more than 35% of the aggregate ordinary voting
      power
      represented by the issued and outstanding capital stock of the Borrower,
      (b) a majority of the seats (other than vacant seats) on the board of
      directors of the Borrower shall at any time be occupied by persons who were
      neither (i) nominated by the board of directors of the Borrower nor
      (ii) appointed by directors so nominated or (c) any change in control
      (or similar event, however denominated) with respect to the Borrower or any
      Subsidiary shall occur under and as defined in any indenture or agreement in
      respect of Material Indebtedness to which the Borrower or any Subsidiary is
      a
      party.

     

    “Change
      in Law”
shall
      mean (a) the adoption of any law, rule or regulation after the date of this
      Agreement, (b) any change in any law, rule or regulation or in the
      interpretation or application thereof by any Governmental Authority after the
      date of this Agreement or (c) compliance by any Lender or the Issuing Bank
      (or,
      for purposes of Section 2.14, by any lending office of such Lender or by such
      Lender’s or Issuing Bank’s 

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

      holding
        company, if any) with any request, guideline or directive (whether or not
        having
        the force of law) of any Governmental Authority made or issued after the
        date of
        this Agreement.

    

     

    “Class”,
      when
      used in reference to any Loan or Borrowing, refers to whether such Loan, or
      the
      Loans comprising such Borrowing, are Revolving Loans, PF L/C Loans, Other PF
      L/C
      Loans, Term Loans, Other Term Loans or Swingline Loans and, when used in
      reference to any Commitment, refers to whether such Commitment is a Revolving
      Credit Commitment, PF L/C Commitment, Incremental PF L/C Commitment, Term Loan
      Commitment, Incremental Term Loan Commitment or Swingline
      Commitment.

     

    “Clipper”
refers
      collectively to the three partnerships and six limited liability companies,
      each
      of which owns one Facility in New Hampshire that is operated by the Borrower
      and
      the Subsidiaries and which leases such Facilities to the Borrower and the
      Subsidiaries.

     

    “Clipper
      Option Agreement”
shall
      mean the Option and Indemnity Agreement dated as of April 30, 2004, among
      William E. Gilmore, Jr., Clipper Holdings, Inc., Langdon Place Affiliates,
      Inc.,
      Langdon Place of Keene, Inc., William E. Gilmore Family, LLC and SunBridge
      G.P.
      Corporation, as amended by the Memorandum of Understanding dated December 2006,
      as amended on March 31, 2007, pursuant to which SunBridge G.P. Corporation
      has
      the right to acquire all of the Equity Interests of Clipper and pursuant to
      which such Equity Interests may be put to the Borrower.

     

    “Closing
      Date”
shall
      mean April 19, 2007.

     

    “Closing
      Date Material Adverse Effect”
shall
      mean any event, change, circumstance, effect or state of facts that is
      materially adverse to (a) the business, financial condition or results of
      operations of Harborside and its Subsidiaries, taken as a whole or (b) the
      ability of Harborside to perform its obligations under the Merger Agreement
      or
      to consummate the transactions contemplated thereby, except in the case of
      clause (a) for any event, change, circumstance, effect or state of facts arising
      out of or attributable to any of the following, either alone or in combination:
      (i) general national, international or regional economic, political or
      financial conditions, including any such event, change, circumstance, effect
      or
      state of facts resulting from acts of war (whether or not declared) or terrorism
      or other force majeure events, but only if they do not materially
      disproportionately affect Harborside and its Subsidiaries taken as a whole
      relative to the industry in which Harborside and its Subsidiaries operate
      generally, (ii) generally affecting the industry in which Harborside and its
      Subsidiaries operate generally (including legislative, legal and regulatory
      changes), but only if they do not materially disproportionately affect
      Harborside and its Subsidiaries taken as a whole relative to the industry in
      which Harborside and its Subsidiaries operate generally, (iii) actions taken
      pursuant to or in accordance with the Merger Agreement or at the request of
      the
      Borrower, (iv) changes in Laws or GAAP and (v) the execution or delivery of
      the
      Merger Agreement or the announcement or pending status of the transactions
      contemplated by the Merger Agreement. As used in this definition, the terms
      “Subsidiaries”, “Laws” and “GAAP” have the meanings assigned thereto in the
      Merger Agreement.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Code”
shall
      mean the Internal Revenue Code of 1986, as amended from time to
      time.

     

    “Collateral”
shall
      mean all the “Collateral” as defined in any Security Document and shall also
      include the Mortgaged Properties.

     

    “Commitment”
shall
      mean, with respect to any Lender, such Lender’s Revolving Credit Commitment, PF
      L/C Commitment, Term Loan Commitment and Swingline Commitment.

     

    “Commitment
      Fees”
shall
      mean the Revolving Credit Commitment Fees and the Term Commitment
      Fees.

    “Concentration
      Accounts”
shall
      mean the Sun Concentration Account and the H.A.S. Concentration
      Account.

     

    “Confidential
      Information Memorandum”
shall
      mean the Confidential Information Memorandum of the Borrower dated March
      2007.

     

    “Consolidated
      EBITDA”
shall
      mean, for any period, Consolidated Net Income for such period plus
      (a) without duplication and to the extent deducted in determining such
      Consolidated Net Income, the sum of (i) consolidated interest expense for
      such period, (ii) consolidated income tax expense for such period,
      (iii) all amounts attributable to depreciation and amortization for such
      period, (iv) any non-cash charges (other than the write-down of current
      assets and other than charges referred to in clause (a)(v) below) for such
      period,
      (v)
      charges
      resulting from increases in professional liability, general liability and
      workers’ compensation reserves, solely relating to prior periods, (vi) fees
      and expenses for such period paid in connection with the Transactions, (vii)
      restructuring charges for such period incurred in connection with the Merger
      in
      an aggregate amount not to exceed $7,500,000 for any period of four consecutive
      fiscal quarters, and
      (viii)
      cash payments received during such period on account of non-cash gains deducted
      from Consolidated Net Income pursuant to clause (b)(ii) below in a prior period,
      and
      minus
      (b) without duplication (i) all cash payments made during such period
      on account of non-cash
      charges added to Consolidated Net Income pursuant to clause (a)(iv) above in
      a
      previous period, (ii) to
      the extent included in determining such Consolidated Net Income, any
      extraordinary gains and all non-cash gains for such period (other than gains
      referred to in clause (b)(iii) below), and (iii)
      gains
      resulting from decreases in professional liability, general liability and
      workers’ compensation reserves, solely relating to prior periods, all
      determined on a consolidated basis in accordance with GAAP. For purposes of
      determining the Interest Coverage Ratio, the Total Leverage Ratio and the Senior
      Leverage Ratio as of or for the periods ended on September 30, 2007, December
      31, 2007 and March 31, 2008, Consolidated
      EBITDA
      will be deemed to be equal to (i) for the fiscal quarter ended December 31,
      2006, $37,900,000, (ii) for the fiscal quarter ended March 31, 2007,
      $30,800,000, and (iii) for the fiscal quarter ended June 30, 2007, $36,800,000.
      In addition, in the case of any period that ends after the Closing Date on
      or
      prior to June 30, 2008, the Consolidated EBITDA of the Borrower shall be
      increased (an “Initial
      Pro Forma Adjustment”)
      by an
      amount determined by the Borrower in good 

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

      faith
        to
        represent the pro forma cost savings and synergies to be realized as a
        result of specific actions taken or to be taken in connection with the Merger
        (in each case, without duplication of the actual cost savings and synergies
        realized during such period as a result of such actions), provided
        that (a)
        such cost savings and synergies are identifiable and factually supportable,
        (b)
        such actions are taken within 12 months of the Closing Date, (c) no cost
        savings
        shall be added pursuant to this sentence to the extent duplicative of any
        expenses, charges or costs relating to such cost savings that are included
        in
        clause (a)(vii) above with respect to such period and (d) the aggregate amount
        of cost savings and synergies added pursuant to this definition shall not
        exceed
        $10,300,000 for any period of four consecutive fiscal
        quarters.

    

     

    “Consolidated
      Interest Expense”
shall
      mean, for any period, the sum of (a) the interest expense (including
      imputed interest expense in respect of Capital Lease Obligations and Synthetic
      Lease Obligations) of the Borrower and the Subsidiaries for such period,
      determined on a consolidated basis in accordance with GAAP, plus (b) any
interest
      accrued during such period in respect of Indebtedness of the Borrower or any
      Subsidiary that is required to be capitalized rather than included in
      consolidated interest expense for such period in accordance with GAAP. For
      purposes of the foregoing, interest expense shall be determined after giving
      effect to any net payments made or received by the Borrower or any Subsidiary
      with respect to interest rate Hedging Agreements. For purposes of determining
      the Interest Coverage Ratio for the period of four consecutive quarters ended
      September 30, 2007 and December 31, 2007, Consolidated Interest Expense shall
      be
      deemed to be equal to (a) the Consolidated Interest Expense for the two
      consecutive fiscal quarters ended September 30, 2007, multiplied by 2 and
      (b) the Consolidated Interest Expense for the three consecutive fiscal
      quarters ended December 31, 2007, multiplied by 4/3, respectively.

     

    “Consolidated
      Net Income”
shall
      mean, for any period, the net income or loss of the Borrower and the
      Subsidiaries for such period determined on a consolidated basis in accordance
      with GAAP; provided
      that
      there shall be excluded (a) the income of any Subsidiary (other than up to
      $1,000,000 of the aggregate income of the Special Purpose Vehicles) to the
      extent that the declaration or payment of dividends or similar distributions
      by
      such Subsidiary of that income is not at the time permitted by operation of
      the
      terms of its charter or any agreement, instrument, judgment, decree, statute,
      rule or governmental regulation applicable to such Subsidiary, (b) the
      income or loss of any person accrued prior to the date it becomes a Subsidiary
      or is merged into or consolidated with the Borrower or any Subsidiary or the
      date that such person’s assets are acquired by the Borrower or any Subsidiary,
      and (c) any gains attributable to sales of assets out of the ordinary
      course of business; provided
      further that
      the
      net income of any person in which any other person (other than the Borrower
      or a
      wholly owned Subsidiary or any director or foreign national holding qualifying
      shares in accordance with applicable law) has a joint interest shall be included
      in Consolidated Net Income only to the extent of the percentage interest of
      such
      person owned by the Borrower and the Subsidiaries.

     

    “Control”
shall
      mean 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

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       ownership
        of voting securities, by contract or otherwise, and the terms “Controlling”
and
        “Controlled”
shall
        have meanings correlative thereto.

    

     

    “Corporate
      Integrity Agreement”
shall
      mean that certain Corporate Integrity Agreement, dated as of July 12, 2001,
      between the Office of the Inspector General of the Department of Health and
      Human Services and the Borrower.

     

    “Credit
      Event”
shall
      have the meaning assigned to such term in Section 4.01.

     

    “Credit
      Facilities”
shall
      mean the revolving credit, swingline, letter of credit and term loan facilities
      provided for by this Agreement.

     

    “Credit-Linked
      Deposit”
shall
      mean, in respect of each PF Lender, the cash deposit made by such Lender
      pursuant to Section 2.23(l)(i), as such amount may be (a) reduced from
      time to time pursuant to Section 2.09, (b) increased from time to time
      pursuant to an Incremental PF L/C Assumption Agreement entered into by such
      Lender or (c) reduced or increased from time to time pursuant to
      Section 2.02(g) or pursuant to assignments by or to such Lender pursuant to
      Section 9.04. The initial amount of each PF
      Lender’s Credit-Linked Deposit shall be equal to the amount of its PF L/C
      Commitment on the Closing Date.

     

    “Credit-Linked
      Deposit Account”
shall
      mean one or more operating and/or investment accounts of, and established by,
      the Administrative Agent under its exclusive dominion and control that shall
      be
      used for the purposes set forth in Sections 2.02(g) and 2.23.

     

    “Current
      Assets”
shall
      mean, at any time, the consolidated current assets (other than cash and
      Permitted Investments) of the Borrower and the Subsidiaries.

     

    “Current
      Liabilities”
shall
      mean, at any time, the consolidated current liabilities of the Borrower and
      the
      Subsidiaries at such time, but excluding, without duplication, (a) the
      current portion of any long-term Indebtedness and (b) outstanding Revolving
      Loans and Swingline Loans.

     

    “Default”
shall
      mean any event or condition which upon notice, lapse of time or both would
      constitute an Event of Default.

     

    “Defaulting
      Lender”
shall
      mean any Revolving Credit Lender that has (a) defaulted in its obligation
      to make a Revolving Loan or to fund its participation in a Letter of Credit
      or
      Swingline Loan required to be made or funded by it hereunder, (b) notified
      the Administrative Agent or a Loan Party in writing that it does not intend
      to
      satisfy any such obligation or (c) become insolvent or the assets or
      management of which has been taken over by any Governmental
      Authority.

     

    “Delayed
      Draw Commitment Termination Date”
shall
      mean January 15, 2008.

     

    “Delayed
      Draw Term Loan Commitment”
shall
      mean, with respect to each Lender, the commitment of such Lender to make Delayed
      Draw Term Loans hereunder 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

      as
        set
        forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to
        which such Lender assumed its Delayed Draw Term Loan Commitment, as applicable,
        as the same may be (a) reduced from time to time pursuant to Section 2.09
        and
        (b) reduced or increased from time to time pursuant to assignments by or
        to such
        Lender pursuant to Section 9.04.

    

     

    “Delayed
      Draw Term Loans”
shall
      mean the terms loans made by the Lenders to the Borrower pursuant to Section
      2.01(b).

     

    “Disqualified
      Stock”
shall
      mean any Equity Interest that, by its terms (or by the terms of any security
      into which it is convertible or for which it is exchangeable), or upon the
      happening of any event, (a) matures (excluding any maturity as the result of
      an
      optional redemption by the issuer thereof) or is mandatorily redeemable,
      pursuant to a sinking fund obligation or otherwise, or is redeemable at the
      option of the holder thereof, in whole or in part, or requires the payment
      of
      any cash dividend or any other scheduled payment constituting a return of
      capital, in each case at any time on or prior to the first anniversary of the
      Term Loan Maturity Date, or (b) is convertible into or exchangeable (unless
      at
      the sole option of the issuer thereof) for (i) debt securities or (ii) any
      Equity Interest referred to in clause (a) above, in each case at any time prior
      to the first anniversary of the Term Loan Maturity Date.

    “dollars”
or
      “$”
shall
      mean lawful money of the United States of America.

     

    “Domestic
      Subsidiaries”
shall
      mean all Subsidiaries incorporated or organized under the laws of the United
      States of America, any State thereof or the District of Columbia.

     

    “Eligible
      Assignee”
shall
      mean any commercial bank, insurance company, investment or mutual fund or other
      entity that is an “accredited investor” (as defined in Regulation D under the
      Securities Act of 1933, as amended) that extends credit or invests in bank
      loans
      as one of its businesses; provided
      that
      neither the Borrower nor any of its Affiliates shall be an Eligible
      Assignee.

     

    “Environmental
      Laws”
shall
      mean all former, current and future Federal, state, local and foreign laws
      (including common law), treaties, regulations, rules, ordinances, codes,
      decrees, judgments, directives, orders (including consent orders), and
      agreements in each case, relating to protection of the environment, natural
      resources, human health and safety, but specifically excluding any local, state
      or Federal employee health and safety laws, or the presence, Release of, or
      exposure to, Hazardous Materials, or the generation, manufacture, processing,
      distribution, use, treatment, storage, transport, recycling or handling of,
      or
      the arrangement for such activities with respect to, Hazardous
      Materials.

     

    “Environmental
      Liability”
shall
      mean all liabilities, obligations, damages, losses, claims, actions, suits,
      judgments, orders, fines, penalties, fees, expenses and costs (including
      administrative oversight costs, natural resource damages and remediation costs),
      whether contingent or otherwise, arising out of or relating to
      (a) compliance or 

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

      non-compliance
        with any Environmental Law, (b) the generation, use, handling,
        transportation, storage, treatment or disposal of any Hazardous Materials,
        (c) exposure to any Hazardous Materials, (d) the Release of any
        Hazardous Materials or (e) any contract, agreement or other consensual
        arrangement pursuant to which liability is assumed or imposed with respect
        to
        any of the foregoing.

    

     

    “Equity
      Interests”
shall
      mean shares of capital stock, partnership interests, membership interests in
      a
      limited liability company, beneficial interests in a trust or other equity
      interests in any person, and any option, warrant or other right entitling the
      holder thereof to purchase or otherwise acquire any such equity
      interest.

     

    “Equity
      Issuance”
shall
      mean any issuance or sale by the Borrower or any of the Subsidiaries of any
      Equity Interests of the Borrower or any such Subsidiary, as applicable, except
      in each case for (a) any issuance or sale to the Borrower or any
      Subsidiary, (b) any issuance of directors’ qualifying shares and
      (c) sales or issuances of common stock of the Borrower to management,
      directors or employees of the Borrower or any Subsidiary under any employee
      stock option or stock purchase plan or employee benefit plan in existence from
      time to time or to the holders of warrants outstanding as of the date of this
      Agreement.

     

    “ERISA”
shall
      mean the Employee Retirement Income Security Act of 1974, as the same may be
      amended from time to time.

    “ERISA Affiliate”
shall
      mean any trade or business (whether or not incorporated) that, together with
      the
      Borrower, is treated as a single employer under Section 414(b) or (c) of
      the Code, or solely for purposes of Section 302 of ERISA and
      Section 412 of the Code, is treated as a single employer under
      Section 414 of the Code.

     

    “ERISA
      Event”
shall
      mean (a) any “reportable event”, as defined in Section 4043 of ERISA
      or the regulations issued thereunder, with respect to a Plan (other than an
      event for which the 30-day notice period is waived), (b) the existence with
      respect to any Plan of an “accumulated funding deficiency” (as defined in
      Section 412 of the Code or Section 302 of ERISA) and, on and after the
      effectiveness of Title I of the Pension Act, any failure by any Plan to satisfy
      the minimum funding standards (within the meaning of Section 412 of the Code
      or
      Section 302 of ERISA) applicable to such Plan, whether or not waived,
      (c) the filing pursuant to Section 412(d) of the Code (or, on and
      after the effectiveness of Title I of the Pension Act, Section 412(c) of
      the Code) or Section 303(d) of ERISA (or, on and after the effectiveness of
      Title I of the Pension Act, Section 302(c) of ERISA) of an application
      for a waiver of the minimum funding standard with respect to any Plan,
      (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
      liability under Title IV of ERISA with respect to the termination of any
      Plan or the withdrawal or partial withdrawal of the Borrower or any of its
      ERISA
      Affiliates from any Plan or Multiemployer Plan, (e) on and after the
      effectiveness of Title I of the Pension Act, a determination that any Plan
      is,
      or is expected to be, in “at-risk” status (within the meaning of Section
      303(i)(4) of ERISA or Section 430(i)(4) of the Code), (f) the receipt by the
      Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator
      of
      any notice relating to the intention to terminate any Plan or Plans or to
      appoint a trustee 

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

      to
        administer any Plan, (g) the adoption of any amendment to a Plan that would
        require the provision of security pursuant to Section 401(a)(29) of the Code
        or
        Section 307 of ERISA, (h) the receipt by the Borrower or any of its ERISA
        Affiliates of any notice, or the receipt by any Multiemployer Plan from the
        Borrower or any of its ERISA Affiliates of any notice, concerning the imposition
        of Withdrawal Liability or a determination that a Multiemployer Plan is,
        or is
        expected to be, insolvent or in reorganization, within the meaning of
        Title IV of ERISA (or, after the effectiveness of Title II of the Pension
        Act, that it is in endangered or critical status within the meaning of
        Section 305 of ERISA), (i) the occurrence of a “prohibited
        transaction” with respect to which the Borrower or any of the Subsidiaries is a
“disqualified person” (within the meaning of Section 4975 of the Code) or with
        respect to which the Borrower or any such Subsidiary could otherwise be liable
        or (j) any other event or condition with respect to a Plan or Multiemployer
        Plan that could result in liability of the Borrower or any Subsidiary other
        than
        liability for contributions, administrative expenses and PBGC premiums in
        the
        ordinary course.

    

     

    “Eurodollar”,
      when
      used in reference to any Loan or Borrowing, refers to whether such Loan, or
      the
      Loans comprising such Borrowing, are bearing interest at a rate determined
      by
      reference to the Adjusted LIBO Rate.

     

    “Event
      of Default”
shall
      have the meaning assigned to such term in Article VII.

     

    “Excess
      Cash Flow”
shall
      mean, for any fiscal year of the Borrower, the excess of (a) the sum,
      without duplication, of (i) Consolidated EBITDA for such fiscal year and
      (ii) reductions to noncash working capital of the Borrower and the
      Subsidiaries for such fiscal year (i.e.,
      the
      decrease, if any, in Current Assets minus Current Liabilities from the
beginning
      to the end of such fiscal year) over (b) the sum, without duplication, of
      (i) the amount of any Taxes payable in cash by the Borrower and the
      Subsidiaries with respect to such fiscal year, (ii) Consolidated Interest
      Expense for such fiscal year paid in cash, (iii) Capital Expenditures made
      in cash in accordance with Section 6.10 during such fiscal year, except to
      the extent financed with the proceeds of Indebtedness, equity issuances,
      casualty proceeds, condemnation proceeds or other proceeds that would not be
      included in Consolidated EBITDA, (iv) permanent repayments of Indebtedness
      (other than mandatory prepayments of Loans under Section 2.13) made in cash
      by
      the Borrower and the Subsidiaries during such fiscal year, but only to the
      extent that the Indebtedness so prepaid by its terms cannot be reborrowed or
      redrawn and such prepayments do not occur in connection with a refinancing
      of
      all or any portion of such Indebtedness, (v) additions to noncash working
      capital for such fiscal year (i.e.,
      the
      increase, if any, in Current Assets minus Current Liabilities from the beginning
      to the end of such fiscal year) and (vi) the amount of any Initial Pro Forma
      Adjustment added in the determination of Consolidated EBITDA for such fiscal
      year.

     

    “Excluded
      Taxes”
shall
      mean, with respect to the Administrative Agent, any Lender, the Issuing Bank
      or
      any other recipient of any payment to be made by or on account of any obligation
      of the Borrower hereunder, in each case inclusive of any interest, additions
      to
      Tax, penalties or other liabilities related thereto, (a) income or franchise
      Taxes imposed on (or measured by) its net income by the United States of
      America, or by the jurisdiction under the laws of which such recipient is
      organized or in 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

      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 or any similar Tax imposed by any other
        jurisdiction described in clause (a) above, (c) except in the case of an
        assignee pursuant to a request by the Borrower under Section 2.21(a), any
        withholding or backup withholding Tax that is imposed on amounts payable
        to such
        recipient at the time such recipient becomes a party to this Agreement (or
        designates a new lending office) or is attributable to such recipient’s failure
        (or unreasonable delay) to comply with Section 2.20(e), except to the extent
        that such recipient (or its assignor, if any) was entitled, at the time of
        designation of a new lending office (or assignment), to receive additional
        amounts from the Borrower with respect to such Tax pursuant to Section 2.20(a),
        and (d) any Tax resulting solely from such recipient’s gross negligence or
        willful misconduct.

    

     

    “Existing
      Indebtedness”
shall
      mean all Indebtedness outstanding prior to the Closing Date of the Borrower
      and
      its subsidiaries and Harborside and its subsidiaries, other than (i) the
      Existing Mortgage Indebtedness and (ii) such other Indebtedness set forth
      on Schedule 6.01.

     

    “Existing
      Mortgage Indebtedness”
shall
      mean (i) Harborside Facility Level Indebtedness in an aggregate outstanding
      principal amount on the Closing Date not in excess of $22,100,000 and
      (ii) certain existing Indebtedness of the Borrower and the Subsidiaries
      (including $50,000,000 in Indebtedness of Clipper), other than Harborside and
      the direct and indirect subsidiaries thereof, in an aggregate outstanding
      principal amount on the Closing Date not in excess of $136,200,000.

     

    “Extraordinary
      Receipt”
shall
      mean the receipt by a Loan Party or any of their respective subsidiaries of
      any
      purchase price adjustments, indemnity payments, tax refunds,
      judgments, litigation settlements and any pension plan reversions, in each
      case
      net of legal fees and other costs related thereto, and in the case of judgments
      and litigation settlements, net of amounts actually paid by any Loan Party
      during the previous 365 days from the date of the receipt of any such judgments
      and litigation settlements, to settle litigation in which such Loan Party was
      a
      defendant, and in any event (a) in excess of $2,000,000 and (b) to the
      extent not included in Consolidated EBITDA.

     

    “Facility”
shall
      mean any hospital, outpatient clinic, long-term care facility, nursing home
      or
      rehabilitation center and related medical office building or other facility
      owned or used by the Borrower or any Subsidiary in connection with their
      respective business. Set forth on Schedule 1.01(c) is a list of all Facilities
      in existence on the Closing Date owned or used by the Borrower and the
      Subsidiaries.

     

    “Federal
      Funds Effective Rate”
shall
      mean, for any day, the weighted average of the rates on overnight Federal funds
      transactions with members of the Federal Reserve System arranged by Federal
      funds brokers, as published on the next succeeding Business Day by the Federal
      Reserve Bank of New York, or, if such rate is not so published for any day
      that is a Business Day, the average of the quotations for the day for such
      transactions received by the Administrative Agent from three Federal funds
      brokers of recognized standing selected by it.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    “Fee
      Letter”
shall
      mean the Amended and Restated Fee Letter dated November 2, 2006, between
      the Borrower, the Administrative Agent, Credit Suisse Securities (USA) LLC,
      CIBC
      World Markets Corp., CIBC Inc., UBS Securities LLC, UBS Loan Finance LLC and
      Jefferies Finance LLC.

     

    “Fees”
shall
      mean the Commitment Fees, the Administrative Agent Fees, the L/C Participation
      Fees, the PF L/C Commitment Fees and the Issuing Bank Fees.

     

    “Financial
      Officer”
of
      any
      person shall mean the chief financial officer, principal accounting officer,
      treasurer or controller of such person.

     

    “Foreign
      Subsidiary”
shall
      mean any Subsidiary that is not a Domestic Subsidiary.

     

    “GAAP”
shall
      mean United States generally accepted accounting principles applied on a
      consistent basis.

     

    “Governmental
      Authority”
shall
      mean any Federal, state, local or foreign court or governmental agency,
      authority, instrumentality or regulatory body.

     

    “Granting
      Lender”
shall
      have the meaning assigned to such term in Section 9.04(i).

     

    “Guarantee”
of
      or
      by any person shall mean any obligation, contingent or otherwise, of such person
      guaranteeing or having the economic effect of guaranteeing any Indebtedness
      or
      other obligation of any other person (the “primary
      obligor”)
      in any
      manner, whether directly or indirectly, and including any obligation of such
      person, direct or indirect, (a) to purchase or pay (or advance or supply
      funds for the purchase or payment of) such Indebtedness or other obligation
      or
      to purchase (or to advance or supply funds
      for
      the purchase of) any security for the payment of such Indebtedness or other
      obligation, (b) to purchase or lease property, securities or services for
      the purpose of assuring the owner of such Indebtedness or other obligation
      of
      the payment of such Indebtedness or other obligation or (c) to maintain
      working capital, equity capital or any other financial statement condition
      or
      liquidity of the primary obligor so as to enable the primary obligor to pay
      such
      Indebtedness or other obligation; provided,
      however,
      that
      the term “Guarantee” shall not include endorsements for collection or deposit in
      the ordinary course of business.

     

    “Guarantee
      and Collateral Agreement”
shall
      mean the Guarantee and Collateral Agreement, substantially in the form of
      Exhibit D, among the Borrower, the Subsidiaries party thereto and the
      Collateral Agent for the benefit of the Secured Parties.

     

    “Harborside”
shall
      have the meaning assigned to such term in the preliminary
      statement.

     

    “Harborside
      Facility Level Indebtedness” shall
      mean certain HUD-guaranteed Indebtedness and other Indebtedness secured by
      mortgages on Facilities of Harborside or 

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

      its
        subsidiaries entered into prior to the Closing Date and set forth on Schedule
        1.01(d) hereto.

    

     

    “H.A.S.
      Concentration Account”
shall
      mean that certain deposit account established by the Borrower with LaSalle
      Bank
      National Association, identified as account number 5800949637, and any
      additional or replacement deposit account satisfactory to the Collateral Agent
      and otherwise satisfying the requirements set forth in Section
      5.16.

     

    “Hazardous
      Materials”
shall
      mean (a) any petroleum products or byproducts and all other hydrocarbons,
      coal ash, radon gas, asbestos, urea formaldehyde foam insulation,
      polychlorinated biphenyls, chlorofluorocarbons and all other ozone-depleting
      substances and (b) any chemical, material, substance or waste that is
      prohibited, limited or regulated by or pursuant to any Environmental
      Law.

     

    “Healthcare
      Licenses”
shall
      have the meaning assigned to such term in Section 3.24(a).

     

    “Healthcare
      Requirements”
shall
      mean all Federal, state, county, municipal and other governmental statutes,
      laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions
      or agreements, in each case, pertaining to or concerned with the establishment,
      construction, ownership, operation, use or occupancy of a Facility or any part
      thereof as a skilled-nursing facility, assisted-living facility or other
      healthcare facility and all material permits, licenses and authorizations and
      regulations relating thereto, including all material rules, orders, regulations
      and decrees of and agreements with healthcare Governmental Authorities as
      pertaining to such Facility.

     

    “Hedging
      Agreement”
shall
      mean any interest rate protection agreement, foreign currency exchange
      agreement, commodity price protection agreement or other interest or currency
      exchange rate or commodity price hedging arrangement.

    “HIPAA”
shall
      mean the Health Insurance Portability and Accountability Act of 1996 and the
      Federal standard for privacy of individually identifiable health information
      promulgated thereunder, and any and all rules or regulations promulgated from
      time to time thereunder, including the regulations set forth at 45 CFR parts
      160
      and 164 as such provisions are currently drafted and, if applicable, updated,
      amended or revised.

     

    “HIPAA
      Compliant”
shall
      mean that the Borrower and each Subsidiary is or will be in compliance with
      each
      of the applicable requirements of the so-called “Administrative Simplification”
provisions of HIPAA on and as of each date that any part thereof, or any final
      rule or regulation thereunder, becomes effective in accordance with its or
      their
      terms, as the case may be, except where failure to be in compliance could not
      reasonably be expected to result in a Material Adverse Effect.

     

    “Inactive
      Subsidiary”
shall
      mean any Subsidiary that, on any date of determination, (a) does not
      conduct any business operations, (b) has assets with a book value not in
      excess of $10,000 and (c) does not have any Indebtedness
      outstanding.

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    “Incremental
      Assumption Agreement”
shall
      mean an Incremental Term Loan Assumption Agreement or an Incremental PF L/C
      Assumption Agreement.

     

    “Incremental
      Commitment”
shall
      mean an Incremental Term Loan Commitment or an Incremental PF L/C
      Commitment.

     

    “Incremental
      Lender”
shall
      mean a Lender with an Incremental Commitment.

     

    “Incremental
      PF L/C Amount”
shall
      mean, at any time, the excess, if any, of (a) $30,000,000 over (b) the
      aggregate amount of all Incremental PF L/C Commitments established prior to
      such
      time pursuant to Section 2.24.

     

    “Incremental
      PF L/C Assumption Agreement”
shall
      mean an Incremental PF L/C Assumption Agreement among, and in form and substance
      reasonably satisfactory to, the Borrower, the Administrative Agent and one
      or
      more Incremental PF Lenders.

     

    “Incremental
      PF L/C Commitment”
shall
      mean the commitment of any Lender, established pursuant to Section 2.24, to
      fund
      Credit-Linked Deposits or Other Credit-Linked Deposits as set forth in the
      Incremental PF L/C Assumption Agreement pursuant to which such Lender acquired
      its Incremental PF L/C Commitment.

     

    “Incremental
      PF Lender”
shall
      mean a Lender with an Incremental PF L/C Commitment, a participation in an
      outstanding Other PF Letter of Credit or L/C Disbursement in respect thereof
      or
      an Other PF L/C Loan.

     

    “Incremental
      PF Maturity Date”
shall
      mean the final maturity date of any Other PF L/C Loans, as set forth in the
      applicable Incremental PF L/C Assumption Agreement.

     

    “Incremental
      Term Borrowing” shall
      mean a Borrowing comprised of Incremental Term Loans.

     

    “Incremental
      Term Lender”
shall
      mean a Lender with an Incremental Term Loan Commitment or an outstanding
      Incremental Term Loan.

    “Incremental
      Term Loan Amount”
shall
      mean, at any time, the excess, if any, of (a) $100,000,000 over
      (b) the aggregate amount of all Incremental Term Loan Commitments
      established prior to such time pursuant to Section 2.24.

     

    “Incremental
      Term Loan Assumption Agreement”
shall
      mean an Incremental Term Loan Assumption Agreement among, and in form and
      substance reasonably satisfactory to, the Borrower, the Administrative Agent
      and
      one or more Incremental Term Lenders.

     

    “Incremental
      Term Loan Commitment”
shall
      mean the commitment of any Lender, established pursuant to Section 2.24, to
      make Incremental Term Loans to the Borrower.

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    “Incremental
      Term Loan Maturity Date”
shall
      mean the final maturity date of any Incremental Term Loan, as set forth in
      the
      applicable Incremental Term Loan Assumption Agreement.

     

    “Incremental
      Term Loan Repayment Dates”
shall
      mean the dates scheduled for the repayment of principal of any Incremental
      Term
      Loan, as set forth in the applicable Incremental Term Loan Assumption
      Agreement.

     

    “Incremental
      Term Loans”
shall
      mean Term Loans made by one or more Lenders to the Borrower pursuant to
      Section 2.01(c). Incremental Term Loans may be made in the form of
      additional Term Loans or, to the extent permitted by Section 2.24 and
      provided for in the relevant Incremental Term Loan Assumption Agreement, Other
      Term Loans.

     

    “Indebtedness”
of
      any
      person shall mean, without duplication, (a) all obligations of such person
      for borrowed money or with respect to deposits or advances of any kind,
      (b) all obligations of such person evidenced by bonds, debentures, notes or
      similar instruments, (c) all obligations of such person upon which interest
      charges are customarily paid, (d) all obligations of such person under
      conditional sale or other title retention agreements relating to property or
      assets purchased by such person, (e) all obligations of such person issued
      or assumed as the deferred purchase price of property or services (excluding
      trade accounts payable and accrued obligations incurred in the ordinary course
      of business), (f) all Indebtedness of others secured by (or for which the
      holder of such Indebtedness has an existing right, contingent or otherwise,
      to
      be secured by) any Lien on property owned or acquired by such person, whether
      or
      not the obligations secured thereby have been assumed, (g) all Guarantees
      by such person of Indebtedness of others, (h) all Capital Lease Obligations
      and Synthetic Lease Obligations of such person, (i) all obligations of such
      person as an account party in respect of letters of credit and (j) all
      obligations of such person in respect of bankers’ acceptances. The Indebtedness
      of any person shall include the Indebtedness of any partnership in which such
      person is a general partner.

     

    “Indemnified
      Taxes”
shall
      mean Taxes other than Excluded Taxes.

     

    “Initial
      Pro Forma Adjustment”
shall
      have the meaning assigned to such term in the definition of “Consolidated
      EBITDA”.

     

    “Interest
      Coverage Ratio”
shall
      mean, for any period, the ratio of (a) Consolidated EBITDA for such period
      to (b) Consolidated Interest Expense for such period.

     

    “Interest
      Payment Date”
shall
      mean (a) with respect to any ABR Loan (including any Swingline Loan), the
      last Business Day of each March, June, September and December, (b) with
      respect to any Credit-Linked Deposit, the last day of the Interest Period
      therefor or the date of any prepayment thereof and (c) with respect to any
      Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
      of which such Loan is a part and, in the case of a Eurodollar Borrowing with
      an
      Interest Period of 

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

      more
        than
        three months’ duration, each day that would have been an Interest Payment Date
        had successive Interest Periods of three months’ duration been applicable to
        such Borrowing.

    

     

    “Interest
      Period”
shall
      mean, (a) with respect to any Eurodollar Borrowing, the period commencing
      on the date of such Borrowing and ending on the numerically corresponding day
      (or, if there is no numerically corresponding day, on the last day) in the
      calendar month that is 1, 2, 3 or 6 months thereafter or, with
      the consent of the Administrative Agent and to the extent available to each
      applicable Lender, 9 or 12 months thereafter, as the Borrower may elect,
      and (b) with respect to the Credit-Linked Deposits, the period commencing
      on the Closing Date or on the last day of the preceding Interest Period and
      ending on the last Business Day of each March, June, September and December
      thereafter, commencing with the last Business Day of June 2007; provided,
      however,
      that
      (a) prior to the Delayed Draw Commitment Termination Date (or earlier
      termination of all the Delayed Draw Term Loan Commitments), the Borrower may
      not
      elect an Interest Period for any Term Borrowing longer than 3 months and (b)
      if
      any Interest Period for any Eurodollar Borrowing would end on a day other than
      a
      Business Day, such Interest Period shall be extended to the next succeeding
      Business Day unless such next succeeding Business Day would fall in the next
      calendar month, in which case such Interest Period shall end on the next
      preceding Business Day. Interest shall accrue from and including the first
      day
      of an Interest Period to but excluding the last day of such Interest Period.
      For
      purposes hereof, the date of a Borrowing initially shall be the date on which
      such Borrowing is made and thereafter shall be the effective date of the most
      recent conversion or continuation of such Borrowing. With respect to the
      Borrowings of Eurodollar Delayed Draw Term Loans, the initial Interest Periods
      shall be the periods commencing on (and including) the date of borrowing of
      such
      Delayed Draw Term Loans and ending on (and including) the last day of the
      Interest Periods applicable to the Term Loans outstanding immediately prior
      to
      the date of borrowing, with the aggregate principal amount of Delayed Draw
      Term
      Loans to which each such Interest Period applies being in the same proportions
      as the respective aggregate principal amounts of the outstanding Term Loans
      to
      which the corresponding Interest Periods apply. Notwithstanding the foregoing,
      unless the Administrative Agent shall otherwise agree, the Interest Period
      of
      any Eurodollar Borrowing made within 30 days of the Closing Date shall be of
      one
      month’s duration.

     

    “Issuing
      Bank”
shall
      mean, as the context may require, (a) Credit Suisse, acting through any of
      its Affiliates or branches, in its capacity as the issuer of Letters of Credit
      hereunder and (b) any other Lender that may become an Issuing Bank pursuant
      to
      Section 2.23(i) or 2.23(k), with respect to Letters of Credit issued by
      such Lender. The Issuing
      Bank may, in its discretion, arrange for one or more Letters of Credit to be
      issued by Affiliates or branches of the Issuing Bank, in which case the term
      “Issuing
      Bank”
shall
      include any such Affiliate or branch with respect to Letters of Credit issued
      by
      such Affiliate or branch.

     

    “Issuing
      Bank Fees”
shall
      have the meaning assigned to such term in Section 2.05(c).

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    “L/C
      Commitment”
shall
      mean the commitment of the Issuing Bank to issue Letters of Credit pursuant
      to
      Section 2.23.

     

    “L/C
      Disbursement”
shall
      mean a payment or disbursement made by the Issuing Bank pursuant to a Letter
      of
      Credit.

     

    “L/C
      Participation Fee”
shall
      have the meaning assigned to such term in Section 2.05(c).

     

    “Lenders”
shall
      mean (a) the persons listed on Schedule 2.01 (other than any such
      person that has ceased to be a party hereto pursuant to an Assignment and
      Acceptance) and (b) any person that has become a party hereto pursuant to
      an Assignment and Acceptance or an Incremental Assumption Agreement. Unless
      the
      context clearly indicates otherwise, the term “Lenders” shall include the
      Swingline Lender.

     

    “Letter
      of Credit”
shall
      mean any RF Letter of Credit and any PF Letter of Credit.

     

    “LIBO
      Rate”
shall
      mean, with respect to the Credit-Linked Deposits or any Eurodollar Borrowing
      for
      any Interest Period, the rate per annum determined by the Administrative Agent
      at approximately 11:00 a.m. (London time) on the date that is two Business
      Days
      prior to the commencement of such Interest Period by reference to the British
      Bankers’ Association Interest Settlement Rates for deposits in dollars (as set
      forth by any service selected by the Administrative Agent that has been
      nominated by the British Bankers’ Association as an authorized information
      vendor for the purpose of displaying such rates) for a period equal to such
      Interest Period; provided
      that, to
      the extent that an interest rate is not ascertainable pursuant to the foregoing
      provisions of this definition, the “LIBO
      Rate”
shall
      be the interest rate per annum determined by the Administrative Agent to be
      the
      average of the rates per annum at which deposits in dollars are offered for
      such
      relevant Interest Period to major banks in the London interbank market in
      London, England by the Administrative Agent at approximately 11:00 a.m. (London
      time) on the date that is two Business Days prior to the beginning of such
      Interest Period.

     

    “Lien”
shall
      mean, with respect to any asset, (a) any mortgage, deed of trust, lien,
      pledge, encumbrance, charge or security interest in or on such asset,
      (b) the interest of a vendor or a lessor under any conditional sale
      agreement, capital lease or title retention agreement (or any financing lease
      having substantially the same economic effect as any of the foregoing) relating
      to such asset and (c) in the case of securities, any purchase option, call
      or similar right of a third party with respect to such securities.

     

    “Loan
      Documents”
shall
      mean this Agreement, the Letters of Credit, the Security Documents, each
      Incremental Assumption Agreement and the promissory notes, if any, executed
      and
      delivered pursuant to Section 2.04(e).

     

    “Loan
      Parties”
shall
      mean the Borrower and the Subsidiary Guarantors.

     

    “Loans”
shall
      mean the Revolving Loans, the PF L/C Loans, the Term Loans and the Swingline
      Loans.

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    “Margin
      Stock”
shall
      have the meaning assigned to such term in Regulation U.

     

    “Material
      Adverse Effect”
shall
      mean (a) a materially adverse effect on the business, assets, operations,
      condition (financial or otherwise) or operating results of the Borrower and
      the
      Subsidiaries, taken as a whole, (b) a material impairment of the ability of
      the Borrower or any other Loan Party to perform any of its obligations under
      any
      Loan Document to which it is or will be a party or (c) a material
      impairment of the rights and remedies of or benefits available to the Lenders
      under any Loan Document.

     

    “Material
      Indebtedness”
shall
      mean Indebtedness (other than the Loans and Letters of Credit), or obligations
      in respect of one or more Hedging Agreements, of any one or more of the Borrower
      or any Subsidiary in an aggregate principal amount exceeding, for purposes
      of
      (a) Article VII, $5,000,000, and (b) all other Articles,
      $20,000,000. For purposes of determining Material Indebtedness for all Articles,
      the “principal amount” of the obligations of the Borrower or any Subsidiary in
      respect of any Hedging Agreement at any time shall be the maximum aggregate
      amount (giving effect to any netting agreements) that the Borrower or such
      Subsidiary would be required to pay if such Hedging Agreement were terminated
      at
      such time.

     

    “Medicaid”
shall
      mean Title XIX of the Social Security Act, which was enacted in 1965 to provide
      a cooperative Federal-state program for low income and medically indigent
      persons, which is partially funded by the Federal government and administered
      by
      the states.

     

    “Medicare”
shall
      mean Title XVIII of the Social Security Act, which was enacted in 1965 to
      provide a Federally funded and administered health program for the aged and
      certain disabled persons.

     

    “Medicare/Medicaid
      Deposit Account”
shall
      have the meaning assigned to such term in Section 5.16.

     

    “Merger”
shall
      have the meaning assigned to such term in the preliminary
      statement.

     

    “Merger
      Agreement”
shall
      mean the Agreement and Plan of Merger dated October 19, 2006, among the
      Borrower, Merger Sub and Harborside.

     

    “Merger
      Consideration”
shall
      have the meaning assigned to such term in the preliminary
      statement.

    “Merger
      Sub”
shall
      have the meaning assigned to such term in the preliminary
      statement.

     

    “Minority
      Holder Acknowledgement, Consent and Waiver”
shall
      mean an agreement substantially in the form of Exhibit G, with such
      modifications to such form as may be reasonably approved by the Administrative
      Agent.

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    “Moffie
      Properties”
refers
      to the properties leased by Harborside Connecticut Limited Partnership, a
      Massachusetts limited partnership, and located in Simsbury, Connecticut,
      Madison, Connecticut and Woodbridge, Connecticut, and identified on Schedule
      3.20(b), for which properties Harborside Connecticut Limited Partnership has
      exercised an option to acquire such properties pursuant to the terms of such
      leases.

     

    “Moody’s”
shall
      mean Moody’s Investors Service, Inc., or any successor thereto.

     

    “Mortgaged
      Properties”
shall
      mean, initially, the owned real properties of the Loan Parties specified on
      Schedule 1.01(b), and shall include each other parcel of real property and
      improvements thereto with respect to which a Mortgage is granted pursuant to
      Section 5.12.

     

    “Mortgages”
shall
      mean the mortgages, deeds of trust, assignments of leases and rents and other
      security documents delivered pursuant to clause (i) of Section 4.02(h)
      or pursuant to Section 5.12, each substantially in the form of
      Exhibit E.

     

    “Multiemployer
      Plan”
shall
      mean a multiemployer plan as defined in Section 4001(a)(3) of
      ERISA.

     

    “Net
      Cash Proceeds”
shall
      mean (a) with respect to any Asset Sale, the cash proceeds (including cash
      proceeds subsequently received (as and when received) in respect of noncash
      consideration initially received), net of (i) selling expenses (including
      reasonable broker’s fees or commissions, legal fees, transfer and similar taxes
      and the Borrower’s good faith estimate of income taxes paid or payable in
      connection with such sale) and reasonable costs and expenses incurred in
      connection with the settlement or adjustment of any claims with respect to
      casualty, condemnation, eminent domain or similar events, (ii) amounts
      provided as a reserve, in accordance with GAAP, against any liabilities under
      any indemnification obligations or purchase price adjustment associated with
      such Asset Sale (provided
      that, to
      the extent and at the time any such amounts are released from such reserve,
      such
      amounts shall constitute Net Cash Proceeds) and (iii) the principal amount,
      premium or penalty, if any, interest and other amounts on any Indebtedness
      for
      borrowed money which is secured by the asset sold in such Asset Sale and which
      is required to be repaid with such proceeds (other than any such Indebtedness
      assumed by the purchaser of such asset); provided,
      however,
      that,
      if (x) the Borrower shall deliver a certificate of a Financial Officer to
      the Administrative Agent at the time of receipt thereof setting forth the
      Borrower’s intent to reinvest such proceeds in productive assets of a kind then
      used or usable in the business of the Borrower and the Subsidiaries within
      360
      days of receipt of such proceeds and (y) no Default or Event of Default
      shall have occurred and shall be continuing at the time of such certificate
      or
      at the proposed time of the application of such proceeds, such proceeds shall
      not constitute Net Cash Proceeds except to the extent not so used at the end
      of
      such 360-day period, at which time such
      proceeds shall be deemed to be Net Cash Proceeds; provided
      further that
      if
      during such 360-day period the Borrower or a Subsidiary enters into a written
      agreement committing it to so apply all or a portion of such proceeds after
      such
      360th
      day,
      such 360-day period will be extended with respect to the amount of proceeds
      so
      committed to be used, but such extension will in no event be for a period longer
      than 180 days, at which

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       time
        such proceeds shall be deemed to be Net Cash Proceeds; and (b) with respect
        to any issuance or incurrence of Indebtedness or any Equity Issuance, the
        cash
        proceeds thereof, net of all taxes and customary fees, commissions, costs
        and
        other expenses incurred in connection therewith.

    

     

    “NHP
      Properties”
refers
      to the properties leased by Nationwide Health Properties, Inc. to Harborside
      Massachusetts Limited Partnership pursuant to that certain Restated Master
      Lease
      dated as of August 1, 2002, as extended on May 30, 2006, and pursuant
      to which Harborside Massachusetts Limited Partnership has exercised an option
      to
      acquire such properties.

     

    “Obligations”
shall
      mean all obligations defined as “Obligations” in the Guarantee and Collateral
      Agreement and the other Security Documents.

     

    “Other
      Credit-Linked Deposits”
shall
      have the meaning assigned to such term in Section 2.24(b).

     

    “Other
      PF L/C Exposure”
shall
      mean, at any time, the sum of (a) the aggregate undrawn amount of all
      outstanding Other PF Letters of Credit at such time and (b) the aggregate
      principal amount of all L/C Disbursements in respect of Other PF Letters of
      Credit that have not yet been reimbursed at such time. The Other PF L/C Exposure
      of any Incremental PF Lender at any time shall be its Other PF Pro Rata
      Percentage of the aggregate Other PF L/C Exposure at such time.

     

    “Other
      PF L/C Loans”
shall
      mean the loans deemed made by the Lenders to the Borrower pursuant to Section
      2.02(g) in respect of their participations in L/C Disbursements under an Other
      PF Letter of Credit.

     

    “Other
      PF Letter of Credit”
shall
      mean a Letter of Credit designated (or deemed designated) as such and issued
      pursuant to Section 2.23.

     

    “Other
      PF Pro Rata Percentage”
of
      any
      Incremental PF Lender at any time shall mean the percentage of the aggregate
      Incremental PF L/C Commitments in respect of Other Credit-Linked Deposits
      represented by such Incremental PF Lender’s Incremental PF L/C Commitment in
      respect of Other Credit-Linked Deposits. In the event the Incremental PF L/C
      Commitments shall have expired or been terminated, the Other PF Pro Rata
      Percentages shall be determined on the basis of the Incremental PF L/C
      Commitments most recently in effect.

     

    “Other
      Term Loans”
shall
      have the meaning assigned to such term in Section 2.24(a).

     

    “Other
      Taxes”
shall
      mean any and all present or future stamp or documentary taxes or any other
      excise or property taxes, charges or similar levies arising from any
payment
      made under any Loan Document or from the execution, delivery or enforcement
      of,
      or otherwise with respect to, any Loan Document.

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    “PBGC”
shall
      mean the Pension Benefit Guaranty Corporation referred to and defined in
      ERISA.

     

    “Pension
      Act”
means
      the Pension Protection Act of 2006, as amended.

     

    “Perfection
      Certificate”
shall
      mean the Perfection Certificate substantially in the form of Exhibit B to
      the Guarantee and Collateral Agreement.

     

    “Permanent
      Injunction”
shall
      mean that certain Superseding Permanent Injunction and Final Judgment entered
      on
      September 14, 2005, in Case No. GIC853861 in the Superior Court of the State
      of
      California for the County of San Diego, Central Division, filed by the State
      of
      California against the Borrower and certain other entities named
      therein.

     

    “Permitted
      Acquisition”
shall
      have the meaning assigned to such term in Section 6.04(g).

     

    “Permitted
      Investments”
shall
      mean:

     

    (a) direct
      obligations of, or obligations the principal of and interest on which are
      unconditionally guaranteed by, the United States of America (or by any agency
      thereof to the extent such obligations are backed by the full faith and credit
      of the United States of America), in each case maturing within one year from
      the
      date of acquisition thereof;

     

    (b) investments
      in commercial paper maturing within 270 days from the date of acquisition
      thereof and having, at such date of acquisition, the highest credit rating
      obtainable from S&P or from Moody’s;

     

    (c) investments
      in certificates of deposit, banker’s acceptances and time deposits maturing
      within one year from the date of acquisition thereof issued or guaranteed by
      or
      placed with, and money market deposit accounts issued or offered by, the
      Administrative Agent or any domestic office of any commercial bank organized
      under the laws of the United States of America or any State thereof that has
      a
      combined capital and surplus and undivided profits of not less than
      $500,000,000;

     

    (d) fully
      collateralized repurchase agreements with a term of not more than 30 days for
      securities described in clause (a) above and entered into with a financial
      institution satisfying the criteria of clause (c) above;

     

    (e) investments
      in “money market funds” within the meaning of Rule 2a-7 of the Investment
      Company Act of 1940, as amended, substantially all of whose assets are invested
      in investments of the type described in clauses (a) through (d)
      above;

     

    (f) investments
      in so-called “auction rate” securities rated AAA or higher by S&P or Aaa or
      higher by Moody’s and which have a reset date not more than 90 days from the
      date of acquisition thereof; and

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (g) other
      short-term investments utilized by Foreign Subsidiaries in accordance with
      normal investment practices for cash management in investments of a type
      analogous to the foregoing.

     

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

     

    “PF
      L/C Commitment”
shall
      mean, with respect to each Lender, the amount set forth opposite such Lender’s
      name on Schedule 2.01, or in the Assignment and Acceptance pursuant to
      which such Lender assumed its PF L/C Commitment, as applicable, as the same
      may
      be (a) reduced from time to time pursuant to Section 2.09, (b)
      increased from time to time pursuant to an Incremental PF L/C Assumption
      Agreement entered into by such Lender and (c) reduced or increased from
      time to time pursuant to assignments by or to such Lender pursuant to
      Section 9.04. The aggregate amount of the PF L/C Commitments on the Closing
      Date is $70,000,000.

     

    “PF
      L/C Commitment Fee”
shall
      have the meaning assigned to such term in Section 2.05(c).

     

    “PF
      L/C Exposure”
shall
      mean, at any time, the sum of (a) the aggregate undrawn amount of all
      outstanding PF Letters of Credit at such time and (b) the aggregate
      principal amount of all L/C Disbursements in respect of PF Letters of Credit
      that have not yet been reimbursed at such time. The PF L/C Exposure of any
      PF
      Lender at any time shall be its PF Pro Rata Percentage of the aggregate PF
      L/C
      Exposure at such time.

     

    “PF
      L/C Loans”
shall
      mean the loans deemed made by the Lenders to the Borrower pursuant to
      Section 2.02(g) in respect of their participations in L/C Disbursements
      under a PF Letter of Credit. 

     

    “PF
      Lender”
shall
      mean a Lender with a PF L/C Commitment, a participation in an outstanding PF
      Letter of Credit or L/C Disbursement in respect thereof or a PF L/C
      Loan.

     

    “PF
      Letter of Credit”
shall
      mean a Letter of Credit designated (or deemed designated) as such and issued
      pursuant to Section 2.23.

     

    “PF
      Maturity Date”
shall
      mean April 19, 2014.

     

    “PF
      Pro Rata Percentage”
of
      any
      PF Lender at any time shall mean the percentage of the aggregate PF L/C
      Commitments represented by such PF Lender’s PF L/C Commitment. In the event the
      PF L/C Commitments shall have expired or been terminated, the PF Pro Rata
      Percentages shall be determined on the basis of the PF L/C Commitments most
      recently in effect.

     

    “Plan”
shall
      mean any employee pension benefit plan (other than a Multiemployer Plan) subject
      to the provisions of Title IV of ERISA or Section 412 of the

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    Code
      or
      Section 302 of ERISA, and in respect of which the Borrower or any
      ERISA  Affiliate is (or, if such plan were terminated, would
      under Section 4069 of ERISA be deemed to be) an “employer” as defined in
      Section 3(5) of ERISA.

     

    “Prime
      Rate”
shall
      mean the rate of interest per annum determined from time to time by Credit
      Suisse as its prime rate in effect at its principal office in New York City
      and notified to the Borrower.

     

    “Purchase
      Money Indebtedness”
shall
      have the meaning assigned to such term in Section 6.01(d).

     

    “Qualified
      Capital Stock”
of
      any
      person shall mean any Equity Interest of such person that is not Disqualified
      Stock.

     

    “Register”
shall
      have the meaning assigned to such term in Section 9.04(d).

     

    “Regulation
      T”
shall
      mean Regulation T of the Board as from time to time in effect and all
      official rulings and interpretations thereunder or thereof.

     

    “Regulation
      U”
shall
      mean Regulation U of the Board as from time to time in effect and all
      official rulings and interpretations thereunder or thereof.

     

    “Regulation X”
shall
      mean Regulation X of the Board as from time to time in effect and all
      official rulings and interpretations thereunder or thereof.

     

    “Related
      Fund”
shall
      mean, with respect to any Lender that is a fund or commingled investment vehicle
      that invests in bank loans, any other fund that invests in bank loans and is
      managed or advised by the same investment advisor as such Lender or by an
      Affiliate of such investment advisor.

     

    “Related
      Parties”
shall
      mean, with respect to any specified person, such person’s Affiliates and the
      respective directors, trustees, officers, employees, agents and advisors of
      such
      person and such person’s Affiliates.

     

    “Release”
shall
      mean any release, spill, emission, leaking, dumping, injection, pouring,
      deposit, disposal, discharge, dispersal, leaching or migration into or through
      the environment or within or upon any building, structure, facility or
      fixture.

     

    “Repayment
      Date”
shall
      have the meaning given such term in Section 2.11.

     

    “Required
      Lenders”
shall
      mean, at any time, Lenders having Loans (excluding Swingline Loans), RF L/C
      Exposure, PF L/C Exposure, Other PF L/C Exposure, Swingline Exposure and unused
      Revolving Credit Commitments, PF L/C Commitments, Incremental PF L/C Commitments
      and Term Loan Commitments representing more than 50% of the sum of all Loans
      outstanding (excluding Swingline Loans), RF L/C Exposure, PF L/C Exposure,
      Other
      PF L/C Exposure, Swingline Exposure and unused Revolving Credit Commitments,
      PF
      L/C Commitments, Incremental PF L/C Commitments and Term Loan Commitments at
      such time; provided
      that the
      Revolving Loans, RF L/C 

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    
      Exposure,
        Swingline Exposure and unused Revolving Credit Commitments of any Defaulting
        Lender shall be disregarded in the determination of the Required Lenders
        at any
        time.

       

           “Responsible
        Officer”
of
        any
        person shall mean any executive officer or Financial Officer of such person
        and
        any other officer or similar official thereof responsible for the administration
        of the obligations of such person in respect of this
        Agreement.

    

     

    “Restricted
      Cash”
shall
      mean the $50,000,000 of cash of the Borrower held by the insurance companies
      or
      Governmental Authorities listed on Schedule 1.01(e) for the purpose of securing
      the Borrower’s or the Subsidiaries’ obligations with respect to workers’
compensation claims.

     

    “Restricted
      Indebtedness”
shall
      mean Indebtedness of the Borrower or any Subsidiary, the payment, prepayment,
      repurchase or defeasance of which is restricted under
      Section 6.09(b).

     

    “Restricted
      Payment”
shall
      mean any dividend or other distribution (whether in cash, securities or other
      property (other than Qualified Capital Stock)) with respect to any Equity
      Interests in the Borrower or any Subsidiary, or any payment (whether in cash,
      securities or other property (other than Qualified Capital Stock)), including
      any sinking fund or similar deposit, on account of the purchase, redemption,
      retirement, acquisition, cancellation or termination of any Equity Interests
      in
      the Borrower or any Subsidiary.

     

    “Revolving
      Credit Borrowing”
shall
      mean a Borrowing comprised of Revolving Loans.

     

    “Revolving
      Credit Commitment”
shall
      mean, with respect to each Lender, the commitment of such Lender to make
      Revolving Loans hereunder (and to acquire participations in Swingline Loans
      and
      RF Letters of Credit as provided for herein) as set forth on Schedule 2.01,
      or in the Assignment and Acceptance pursuant to which such Lender assumed its
      Revolving Credit Commitment, as applicable, as the same may be (a) reduced
      from time to time pursuant to Section 2.09 and (b) reduced or
      increased from time to time pursuant to assignments by or to such Lender
      pursuant to Section 9.04.

     

    “Revolving
      Credit Commitment Fee”
shall
      have the meaning assigned to such term in Section 2.05(a).

     

    “Revolving
      Credit Commitment Fee Rate”
shall
      have the meaning assigned to such term in the definition of the term “Applicable
      Percentage”.

     

    “Revolving
      Credit Exposure”
shall
      mean, with respect to any Lender at any time, the aggregate principal amount
      at
      such time of all outstanding Revolving Loans of such Lender, plus
      the
      aggregate amount at such time of such Lender’s RF L/C Exposure, plus
      the
      aggregate amount at such time of such Lender’s Swingline Exposure.

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    “Revolving
      Credit Lender”
shall
      mean a Lender with a Revolving Credit Commitment or an outstanding Revolving
      Loan.

     

    “Revolving
      Credit Maturity Date”
shall
      mean April 19, 2013.

     

    “Revolving
      Facility Pro Rata Percentage”
of
      any
      Revolving Credit Lender at any time shall mean the percentage of the Total
      Revolving Credit Commitment represented by
      such
      Lender’s Revolving Credit Commitment. In the event the Revolving Credit
      Commitments shall have expired or been terminated, the Revolving Facility Pro
      Rata Percentages shall be determined on the basis of the Revolving Credit
      Commitments most recently in effect.

     

    “Revolving
      Loans”
shall
      mean the revolving loans made by the Lenders to the Borrower pursuant to
      clause (a)(iii) of Section 2.01 and clause (f) of
      Section 2.02.

     

    “RF
      L/C Exposure”
shall
      mean at any time the sum of (a) the aggregate undrawn amount of all
      outstanding RF Letters of Credit at such time and (b) the aggregate
      principal amount of all L/C Disbursements in respect of RF Letters of Credit
      that have not yet been reimbursed at such time. The RF L/C Exposure of any
      Revolving Credit Lender at any time shall equal its Revolving Facility Pro
      Rata
      Percentage of the aggregate RF L/C Exposure at such time.

     

    “RF
      Letter of Credit”
shall
      mean a Letter of Credit designated (or deemed designated) as such and issued
      pursuant to Section 2.23.

     

    “SEC”
shall
      mean the U.S. Securities and Exchange Commission or any Governmental Authority
      succeeding to any or all of its functions.

     

    “Secured
      Parties”
shall
      have the meaning assigned to such term in the Guarantee and Collateral
      Agreement.

     

    “Security
      Documents”
shall
      mean the Mortgages, the Guarantee and Collateral Agreement and each of the
      security agreements, mortgages and other instruments and documents executed
      and
      delivered pursuant to any of the foregoing or pursuant to
      Section 5.12.

     

    “Senior Leverage
      Ratio”
shall
      mean, on any date, the ratio of Total Senior Debt on such date to Consolidated
      EBITDA for the period of four consecutive fiscal quarters most recently ended
      on
      or prior to such date. In any period of four consecutive fiscal quarters in
      which a Permitted Acquisition or Significant Asset Sale occurs, the Senior
      Leverage Ratio shall be determined on a pro forma basis in accordance with
      Section 1.03.

     

    “Significant
      Asset Sale”
shall
      mean an Asset Sale of all or substantially all of the assets of, or a majority
      of the Equity Interests in, a person, or a division or line of business or
      other
      business unit of a person, which Asset Sale generates gross proceeds in excess
      of $5,000,000.

     

    “SPC”
shall
      have the meaning assigned to such term in Section 9.04(i).

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    “Special
      Purpose Vehicle”
      shall
      mean a direct or indirect Subsidiary that is formed for the sole purpose of
      becoming an obligor under HUD-guaranteed or mortgage financings and that engages
      in no activities other than in connection with such financing and any business
      or other activities incidental thereto; provided
      that the
      Borrower shall identify such Subsidiary as a Special Purpose Vehicle on the
      Closing Date or, if later, in writing to the Administrative Agent and the
      Collateral Agent either prior to such Subsidiary engaging in any such financing
      or at the time of the acquisition of such Subsidiary.

     

    “S&P”
shall
      mean Standard & Poor’s Ratings Service, or any successor
      thereto.

     

    “Statutory
      Reserves”
shall
      mean a fraction (expressed as a decimal), the numerator of which is the number
      one and the denominator of which is the number one minus the aggregate of the
      maximum reserve percentages (including any marginal, special, emergency or
      supplemental reserves) expressed as a decimal established by the Board and
      any
      other banking authority, domestic or foreign, to which the Administrative Agent
      or any Lender (including any branch, Affiliate or other fronting office making
      or holding a Loan) is subject for Eurocurrency Liabilities (as defined in
      Regulation D of the Board). Eurodollar Loans shall be deemed to constitute
      Eurocurrency Liabilities (as defined in Regulation D of the Board) and to
      be subject to such reserve requirements without benefit of or credit for
      proration, exemptions or offsets that may be available from time to time to
      any
      Lender under such Regulation D. Statutory Reserves shall be adjusted
      automatically on and as of the effective date of any change in any reserve
      percentage.

     

    “Subordinated
      Note Documents”
shall
      mean the indenture under which the Subordinated Notes are issued and all other
      instruments, agreements and other documents evidencing or governing the
      Subordinated Notes or providing for any Guarantee or other right in respect
      thereof.

     

    “Subordinated
      Notes”
shall
      mean the Borrower’s 9 1⁄8% Senior Subordinated Notes due 2015, in an initial
      aggregate principal amount of $200,000,000.

     

    “subsidiary”
shall
      mean, with respect to any person (herein referred to as the “parent”),
      any
      corporation, partnership, limited liability company, association or other
      business entity (a) of which securities or other ownership interests
      representing more than 50% of the equity or more than 50% of the ordinary voting
      power or more than 50% of the general partnership interests are, at the time
      any
      determination is being made, owned, Controlled or held, or (b) that is, at
      the time any determination is made, otherwise Controlled, by the parent or
      one
      or more subsidiaries of the parent or by the parent and one or more subsidiaries
      of the parent.

     

    “Subsidiary”
shall
      mean any subsidiary of the Borrower.

     

    “Subsidiary
      Guarantor”
shall
      mean each Subsidiary listed on Schedule 1.01(a), and each other Subsidiary
      that is or becomes a party to the Guarantee and Collateral
      Agreement.

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    “Sun
      Concentration Account”
shall
      mean that certain deposit account established by the Borrower with LaSalle
      Bank
      National Association, identified as account number 5801008813, and any
      additional or replacement deposit account satisfactory to the Collateral Agent
      and otherwise satisfying the requirements set forth in Section
      5.16.

     

    “Swingline
      Commitment”
shall
      mean the commitment of the Swingline Lender to make loans pursuant to
      Section 2.22, as the same may be reduced from time to time pursuant to
      Section 2.09.

     

    “Swingline
      Exposure”
shall
      mean at any time the aggregate principal amount at such time of all outstanding
      Swingline Loans. The Swingline Exposure of any Revolving Credit
      Lender at any time shall equal its Revolving Facility Pro Rata Percentage of
      the
      aggregate Swingline Exposure at such time.

     

    “Swingline
      Lender”
shall
      mean Credit Suisse, acting through any of its Affiliates or branches, in its
      capacity as lender of Swingline Loans hereunder.

     

    “Swingline
      Loan”
shall
      mean any loan made by the Swingline Lender pursuant to
      Section 2.22.

     

    “Synthetic
      Lease”
shall
      mean, as to any person, any lease (including leases that may be terminated
      by
      the lessee at any time) of any property (whether real, personal or mixed) (a)
      that is accounted for as an operating lease under GAAP and (b) in respect of
      which the lessee retains or obtains ownership of the property so leased for
      U.S.
      Federal income tax purposes, other than any such lease under which such person
      is the lessor.

     

    “Synthetic
      Lease Obligations”
shall
      mean, as to any person, an amount equal to the capitalized amount of the
      remaining lease payments under any Synthetic Lease that would appear on a
      balance sheet of such person in accordance with GAAP if such obligations were
      accounted for as Capital Lease Obligations.

     

    “Synthetic
      Purchase Agreement”
shall
      mean any swap, derivative or other agreement or combination of agreements
      pursuant to which the Borrower or any Subsidiary is or may become obligated
      to
      make (a) any payment in connection with a purchase by any third party from
      a
      person other than the Borrower or any Subsidiary of any Equity Interest or
      Restricted Indebtedness or (b) any payment (other than on account of a permitted
      purchase by it of any Equity Interest or Restricted Indebtedness) the amount
      of
      which is determined by reference to the price or value at any time of any Equity
      Interest or Restricted Indebtedness; provided
      that no
      phantom stock or similar plan providing for payments only to current or former
      directors, officers or employees of the Borrower or the Subsidiaries (or to
      their heirs or estates) shall be deemed to be a Synthetic Purchase
      Agreement.

     

    “Taxes”
shall
      mean any and all present or future taxes, levies, imposts, duties, deductions,
      charges or withholdings imposed by any Governmental Authority.

     

    “Term
      Borrowing”
shall
      mean a Borrowing comprised of Term Loans.

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    “Term
      Commitment Fees”
shall
      have the meaning assigned to such term in Section 2.05(a).

     

    “Term
      Lender”
shall
      mean a Lender with a Term Loan Commitment or an outstanding Term
      Loan.

     

    “Term
      Loan Commitment”
shall
      mean, with respect to each Lender, the commitment of such Lender to make Term
      Loans hereunder as set forth on Schedule 2.01, or in the Assignment and
      Acceptance pursuant to which such Lender assumed its Term Loan Commitment,
      as
      applicable, as the same may be (a) reduced from time to time pursuant to
      Section 2.09 and (b) reduced or increased from time to time pursuant
      to assignments by or to such Lender pursuant to Section 9.04. Unless the
context
      shall otherwise require, the term “Term
      Loan Commitments”
shall
      include the Delayed Draw Term Loan Commitments and the Incremental Term Loan
      Commitments.

     

    “Term
      Loan Maturity Date”
shall
      mean April 19, 2014.

     

    “Term
      Loan Repayment Dates”
shall
      mean the Repayment Dates and the Incremental Term Loan Repayment
      Dates.

     

    “Term
      Loans”
shall
      mean the term loans made by the Lenders to the Borrower pursuant to
      Section 2.01(a). Unless the context shall otherwise require, the term
“Term
      Loans”
shall
      include all Delayed Draw Term Loans and all Incremental Term Loans.

     

    “Total
      Debt”
shall
      mean, at any time, (a) the total Indebtedness of the Borrower and the
      Subsidiaries (which, for purposes of this definition, shall include Clipper
      for
      so long as a third party shall have the right to require the Borrower or any
      of
      the Subsidiaries to acquire at least a majority interest in Clipper) at such
      time (excluding Indebtedness of the type described in clause (i) of the
      definition of such term, except to the extent of any unreimbursed drawings
      thereunder) minus (b) the aggregate amount of cash and cash equivalents (in
      each
      case, free and clear of all Liens and excluding Restricted Cash) in excess
      of
      $10,000,000 included on the consolidated balance sheet of the Borrower and
      the
      Subsidiaries at such time.

     

    “Total
      Leverage Ratio”
shall
      mean, on any date, the ratio of Total Debt on such date to Consolidated EBITDA
      for the period of four consecutive fiscal quarters most recently ended on or
      prior to such date. In any period of four consecutive fiscal quarters in which
      a
      Permitted Acquisition or Significant Asset Sale occurs, the Total Leverage
      Ratio
      shall be determined on a pro forma basis in accordance with
      Section 1.03.

     

    “Total
      Senior Debt”
shall
      mean, at any time, the Total Debt of the Borrower and the Subsidiaries at such
      time less
      the
      aggregate amount outstanding of Subordinated Notes or any other Indebtedness
      subordinated to the Obligations on terms no less favorable to the Lenders than
      the subordination terms set forth in the Subordinated Notes
      Documents.

    
      
        
        

      

      
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    “Total
      Revolving Credit Commitment”
shall
      mean, at any time, the aggregate amount of the Revolving Credit Commitments,
      as
      in effect at such time. The initial Total Revolving Credit Commitment is
      $50,000,000.

     

    “Transactions”
shall
      mean, collectively, (a) the execution, delivery and performance by the
      Borrower and Merger Sub of the Merger Agreement and the consummation of the
      transactions contemplated thereby, (b) the execution, delivery and
      performance by the Borrower and the Subsidiaries party thereto of the
      Subordinated Note Documents and the issuance of the Subordinated Notes,
      (c) the execution, delivery and performance by the Loan Parties of the Loan
      Documents to which they are a party and the making of the Borrowings hereunder,
      (d) the repayment of all amounts due or outstanding under or in respect of,
      and the termination of, the Existing Indebtedness and (e) the payment of related
      fees and expenses.

    “TRICARE”
shall
      mean, collectively, a program of medical benefits covering former and active
      members of the uniformed services and certain of their dependents, financed
      and
      administered by the United States Departments of Defense, Health and Human
      Services and Transportation, which program was formerly known as the “Civilian
      Health and Medical Program of the Uniformed Services (CHAMPUS)”.

     

    “Type”,
      when
      used in respect of any Loan or Borrowing, shall refer to the Rate by reference
      to which interest on such Loan or on the Loans comprising such Borrowing is
      determined. For purposes hereof, the term “Rate”
shall
      mean the Adjusted LIBO Rate and the Alternate Base Rate.

     

    “USA
      PATRIOT Act”
shall
      mean The Uniting and Strengthening America by Providing Appropriate Tools
      Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub.
      L.
      No. 107-56 (signed into law October 26, 2001)).

     

    “Veterans
      Administration”
shall
      mean the Department of Veterans Affairs.

     

    “wholly
      owned subsidiary”
of
      any
      person shall mean a subsidiary of such person of which securities (except for
      directors’ qualifying shares) or other ownership interests representing 100% of
      the Equity Interests are, at the time any determination is being made, owned,
      Controlled or held by such person or one or more wholly owned subsidiaries
      of
      such person or by such person and one or more wholly owned subsidiaries of
      such
      person.

     

    “Withdrawal
      Liability”
shall
      mean liability to a Multiemployer Plan as a result of a complete or partial
      withdrawal from such Multiemployer Plan, as such terms are defined in
      Part I of Subtitle E of Title IV of ERISA.

     

    SECTION
      1.02. Terms
      Generally.
      The
      definitions in Section 1.01 shall apply equally to both 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”; and the words “asset” and “property”
shall be 

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    construed
      as having 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. All references herein to Articles, Sections, Exhibits and
      Schedules shall be deemed references to Articles and Sections of, and Exhibits
      and Schedules to, this Agreement unless the context shall otherwise require.
      Except as otherwise expressly provided herein, (a) any reference in this
      Agreement to any Loan Document shall mean such document as amended, restated,
      supplemented or otherwise modified from time to time and (b) all terms of an
      accounting or financial nature shall be construed in accordance with GAAP,
      as in
      effect from time to time; provided,
      however,
      that if
      the Borrower notifies the Administrative Agent that the Borrower wishes to
      amend
      any covenant in Article VI or any related definition to eliminate the effect
      of
      any change in GAAP occurring after the date of this Agreement on the operation
      of such covenant (or if the Administrative Agent notifies the Borrower that
      the
      Required Lenders wish to amend Article VI or any related definition for such
      purpose), then the Borrower’s compliance with such covenant shall be determined
      on the basis of GAAP in effect immediately before the relevant change in
AAP became effective, until either such notice is withdrawn or such
      covenant is amended in a manner satisfactory to the Borrower and the Required
      Lenders.

     

    SECTION
      1.03. Pro
      Forma Calculations.
      With
      respect to any period of four consecutive fiscal quarters during which any
      Permitted Acquisition or Significant Asset Sale occurs (and for purposes of
      determining whether an acquisition is a Permitted Acquisition under
      Section 6.04(g) or would result in a Default or an Event of Default), the
      Total Leverage Ratio and the Senior Leverage Ratio shall be calculated with
      respect to such period on a pro forma basis after giving effect to such
      Permitted Acquisition or Significant Asset Sale (including, without duplication,
      (a) all pro forma adjustments permitted or required by Article 11 of
      Regulation S-X under the Securities Act of 1933, as amended, and (b) pro
      forma adjustments for cost savings (net of continuing associated expenses)
      to
      the extent such cost savings are factually supportable, are expected to have
      a
      continuing impact and have been realized or are reasonably expected to be
      realized within 12 months following such Permitted Acquisition or Significant
      Asset Sale; provided
      that all
      such adjustments should be reasonably satisfactory to the Administrative Agent
      and shall be set forth in a reasonably detailed certificate of a Financial
      Officer of the Borrower), using, for purposes of making such calculations,
      the
      historical financial statements of the Borrower and the Subsidiaries which
      shall
      be reformulated as if such Permitted Acquisition or Significant Asset Sale,
      and
      any other Permitted Acquisitions and Significant Asset Sales that have been
      consummated during the period, had been consummated on the first day of such
      period.

     

    SECTION
      1.04. Classification
      of Loans and Borrowings.
      For
      purposes of this Agreement, Loans may be classified and referred to by Class
      (e.g.,
      a
“Revolving Loan”) or by Type (e.g.,
      a
“Eurocurrency Loan”) or by Class and Type (e.g.,
      a
“Eurocurrency Revolving Loan”). Borrowings also may be classified and referred
      to by Class (e.g.,
      a
“Revolving Borrowing”) or by Type (e.g.,
      a
“Eurocurrency Borrowing”) or by Class and Type (e.g.,
      a
“Eurocurrency Revolving Borrowing”).

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    SECTION
      1.05. Senior
      Debt.
      The
      Loans and other Obligations are hereby designated as “Senior Indebtedness” and
“Designated Senior Debt” for all purposes of the Subordinated Note
      Documents.

     

    ARTICLE
      II

     

    The
      Credits

     

    SECTION
      2.01. Commitments.
      (a)
      Subject
      to the terms and conditions and relying upon the representations and warranties
      herein set forth, each Lender agrees, severally and not jointly, (i) to
      make a Term Loan to the Borrower on the Closing Date in a principal amount
      not to exceed its Term Loan Commitment, (ii) to fund its Credit-Linked
      Deposit on the Closing Date in an amount not to exceed its PF L/C Commitment
      and
      (iii) to make Revolving Loans to the Borrower, at any time and from time to
      time after the date hereof, and until the earlier of the Revolving Credit
      Maturity Date and the termination of the Revolving Credit Commitment of such
      Lender in accordance with the terms hereof, in an aggregate principal amount
      at
      any time outstanding that will not result in such Lender’s Revolving Credit
      Exposure exceeding such Lender’s Revolving Credit Commitment. Within the limits
      set forth in clause (ii) of the preceding sentence and subject
      to the terms, conditions and limitations set forth herein, the Borrower may
      borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or prepaid
      in
      respect of Term Loans may not be reborrowed. PF L/C Loans and Other PF L/C
      Loans
      may be prepaid without reducing the Commitments; provided,
      however,
      that
      neither PF L/C Loans nor Other PF L/C Loans may be reborrowed as
      such.

     

    (b)
      Subject to the terms and conditions and relying upon the representations and
      warranties set forth herein, each Lender having a Delayed Draw Term Loan
      Commitment agrees, severally and not jointly, to make Delayed Draw Term Loans
      to
      the Borrower on not more than two occasions during the period commencing on
      the
      first Business Day after the Closing Date and ending on the Delayed Draw
      Commitment Termination Date, in an aggregate principal amount not to exceed
      its
      Delayed Draw Term Loan Commitment. Amounts paid or prepaid in respect of Delayed
      Draw Term Loans may not be reborrowed.

     

    (c)
      Subject
      to the terms and conditions and relying upon the representations and warranties
      set forth herein and in the applicable Incremental Term Loan Assumption
      Agreement, each Lender having an Incremental Term Loan Commitment agrees,
      severally and not jointly, to make Incremental Term Loans to the Borrower,
      in an
      aggregate principal amount not to exceed its Incremental Term Loan Commitment.
      Amounts paid or prepaid in respect of Incremental Term Loans may not be
      reborrowed.

     

    (d)
      Subject
      to the terms and conditions and relying upon the representations and warranties
      set forth herein and in the applicable Incremental PF L/C Assumption Agreement,
      each Lender having an Incremental PF L/C Commitment agrees, severally and not
      jointly, on the date of effectiveness of the Incremental PF L/C Assumption
      Agreement pursuant to which such Lender acquired its Incremental PF L/C
      Commitment, 

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

      to
        fund
        its Credit-Linked Deposit or Other Credit-Linked Deposit, as the case may
        be, in
        an amount not to exceed its Incremental PF L/C Commitment.

    

     

    SECTION
      2.02. Loans.
      (a)
      Each
      Loan
      (other than Swingline Loans) shall be made as part of a Borrowing consisting
      of
      Loans made by the Lenders ratably in accordance with their applicable
      Commitments; provided,
      however,
      that
      the failure of any Lender to make any Loan shall not in itself relieve any
      other
      Lender of its obligation to lend hereunder (it being understood, however, that
      no Lender shall be responsible for the failure of any other Lender to make
      any
      Loan required to be made by such other Lender). Except for Loans deemed made
      pursuant to Section 2.02(f) or 2.02(g), the Loans comprising any Borrowing
      shall be in an aggregate principal amount that is (i) an integral multiple
      of $1,000,000 and not less than $5,000,000 (except, with respect to any
      Incremental Term Borrowing, to the extent otherwise provided in the related
      Incremental Term Loan Assumption Agreement) or (ii) equal to the remaining
      available balance of the applicable Commitments.

     

    (b)
      Subject to Sections 2.02(f), 2.08 and 2.15, each Borrowing shall be
      comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
      pursuant to Section 2.03. Each Lender may at its option make any Eurodollar
      Loan by causing any domestic or foreign branch or Affiliate of such Lender
      to
      make such Loan; provided that any exercise of such option shall not
      affect the obligation of the Borrower to repay such Loan in accordance with
      the
      terms of this Agreement. Borrowings of more than
      one
      Type may be outstanding at the same time; provided,
      however,
      that
      the Borrower shall not be entitled to request any Borrowing that, if made,
      would
      result in more than five Eurodollar Borrowings of any Class outstanding
      hereunder at any time. For purposes of the foregoing, Eurodollar Borrowings
      having different Interest Periods, regardless of whether they commence on the
      same date, shall be considered separate Borrowings.

     

    (c)
      Except
      with respect to Loans made pursuant to Section 2.02(f) or 2.02(g), each
      Lender shall make each Loan to be made by it hereunder on the proposed date
      thereof by wire transfer of immediately available funds to such account in
      New
      York City as the Administrative Agent may designate not later than
      1:00 p.m., New York City time, and the Administrative Agent shall promptly
      credit the amounts so received to an account designated by the Borrower in
      the
      applicable Borrowing Request or, if a Borrowing shall not occur on such date
      because any condition precedent herein specified shall not have been met, return
      the amounts so received to the respective Lenders.

     

    (d)
      Unless
      the Administrative Agent shall have received notice from a Lender prior to
      the
      date of any Borrowing that such Lender will not make available to the
      Administrative Agent such Lender’s portion of such Borrowing, the Administrative
      Agent may assume that such Lender has made such portion available to the
      Administrative Agent on the date of such Borrowing in accordance with
      paragraph (c) above and the Administrative Agent may, in reliance upon such
      assumption, make available to the Borrower on such date a corresponding amount.
      If the Administrative Agent shall have so made funds available then, to the
      extent that such Lender shall not have made such portion available to the
      Administrative Agent, such Lender and the 

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

      Borrower
        severally agree to repay to the Administrative Agent forthwith on demand
        such
        corresponding amount together with interest thereon, for each day from the
        date
        such amount is made available to the Borrower to but excluding the date such
        amount is repaid to the Administrative Agent at (i) in the case of the
        Borrower, a rate per annum equal to the interest rate applicable at the time
        to
        the Loans comprising such Borrowing and (ii) in the case of such Lender, a
        rate determined by the Administrative Agent to represent its cost of overnight
        or short-term funds (which determination shall be conclusive absent manifest
        error). If such Lender shall repay to the Administrative Agent such
        corresponding amount, such amount shall constitute such Lender’s Loan as part of
        such Borrowing for purposes of this Agreement.

    

     

    (e)
      Notwithstanding
      any other provision of this Agreement, the Borrower shall not be entitled to
      request any Revolving Credit Borrowing if the Interest Period requested with
      respect thereto would end after the Revolving Credit Maturity Date.

     

    (f)
      If
      the
      Issuing Bank shall not have received from the Borrower the payment required
      to
      be made by Section 2.23(e) with respect to any RF Letter of Credit within
      the time specified in such Section, the Issuing Bank will promptly notify the
      Administrative Agent of the L/C Disbursement and the Administrative Agent will
      promptly notify each Revolving Credit Lender of such L/C Disbursement and its
      Revolving Facility Pro Rata Percentage thereof. Each Revolving Credit Lender
      shall pay by wire transfer of immediately available funds to the Administrative
      Agent not later than 2:00 p.m., New York City time, on such date (or, if such
      Revolving Credit Lender shall have received such notice later than 12:00 (noon),
      New York City time, on any day, not later than 10:00 a.m.,
      New
      York City time, on the immediately following Business Day), an amount equal
      to
      such Lender’s Revolving Facility Pro Rata Percentage of such L/C Disbursement
      (it being understood that such amount shall be deemed to constitute an ABR
      Revolving Loan of such Lender and shall be deemed to have reduced the RF L/C
      Exposure), and the Administrative Agent will promptly pay to the Issuing Bank
      amounts so received by it from such Revolving Credit Lenders. The Administrative
      Agent will promptly pay to the Issuing Bank any amounts received by it from
      the
      Borrower pursuant to Section 2.23(e) prior to the time that any Revolving
      Credit Lender makes any payment pursuant to this paragraph (f); any such
      amounts received by the Administrative Agent thereafter will be promptly
      remitted by the Administrative Agent to the Revolving Credit Lenders that shall
      have made such payments and to the Issuing Bank, as their interests may appear.
      If any Revolving Credit Lender shall not have made its Revolving Facility Pro
      Rata Percentage of such L/C Disbursement available to the Administrative Agent
      as provided above, such Lender and the Borrower severally agree to pay interest
      on such amount, for each day from and including the date such amount is required
      to be paid in accordance with this paragraph to but excluding the date such
      amount is paid, to the Administrative Agent for the account of the Issuing
      Bank
      at (i) in the case of the Borrower, a rate per annum equal to the interest
      rate applicable to Revolving Loans pursuant to Section 2.06(a), and
      (ii) in the case of such Lender, for the first such day, the Federal Funds
      Effective Rate, and for each day thereafter, the Alternate Base
      Rate.

     

    (g)
      If
      the
      Issuing Bank shall not have received from the Borrower the payment required
      to
      be made by Section 2.23(e) with respect to any PF Letter of Credit or Other

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

      PF
        Letter
        of Credit within the time specified in such Section, the Issuing Bank will
        promptly notify the Administrative Agent of the L/C Disbursement and the
        Administrative Agent will promptly notify each PF Lender or Incremental PF
        Lender, respectively, of such L/C Disbursement and its PF Pro Rata Percentage
        or
        Other PF Pro Rata Percentage, respectively, thereof. Each such Lender hereby
        authorizes the Administrative Agent to reimburse the Issuing Bank solely
        from
        such Lender’s PF Pro Rata Percentage or Other PF Pro Rata Percentage, as the
        case may be, of the Credit-Linked Deposits or Other Credit-Linked Deposits,
        respectively, on deposit with the Administrative Agent in the Credit-Linked
        Deposit Account (it being understood that such amount shall be deemed to
        constitute a PF L/C Loan or Other PF L/C Loan, as the case may be, (bearing
        interest as described in paragraph (h) below) of such Lender and such payment
        shall be deemed to have reduced the PF L/C Exposure or Other PF L/C Exposure,
        respectively), and the Administrative Agent will promptly pay to the Issuing
        Bank such amounts. Any amounts received by the Administrative Agent thereafter
        pursuant to Section 2.23(e) will be promptly remitted by the Administrative
        Agent to the Credit-Linked Deposit Account (it being understood that,
        thereafter, such amounts will be available to reimburse the Issuing Bank
        in
        accordance with the preceding sentence of this paragraph).

    

     

    (h)
      On
      each
      date on which the Administrative Agent charges the Credit-Linked Deposit Account
      to reimburse an L/C Disbursement as provided in Section 2.02(g), the
      Borrower shall have the right either to reimburse such amount at any time or
      to
      allow such amount to remain outstanding as a PF L/C Loan or Other PF L/C Loan,
      as the case may be, with an initial Interest Period coincident with the
      then-applicable Interest Period for the Credit-Linked Deposits or Other
      Credit-Linked Deposits, respectively, and the Adjusted LIBO Rate therefor shall
      be the same as the then-applicable LIBO Rate (as adjusted
      pursuant to Section 2.23(l)(ii) for any Statutory Reserves) for the
      Credit-Linked Deposits or Other Credit-Linked Deposits, as the case may be.
      Thereafter, each such Loan shall be comprised either of Eurodollar Loans or
      ABR
      Loans, as the Borrower may elect in accordance with
      Section 2.10.

     

    SECTION
      2.03. Borrowing
      Procedure.
      In
      order to request a Borrowing (other than a Swingline Loan or a deemed Borrowing
      pursuant to Section 2.02(f) or Section 2.02(g), as to which this
      Section 2.03 shall not apply), the Borrower shall notify the Administrative
      Agent of such request by telephone (a) in the case of a Eurodollar
      Borrowing, not later than 12:00 (noon), New York City time, three Business
      Days before a proposed Borrowing (or two Business Days before a proposed
      Borrowing to occur on the Closing Date), and (b) in the case of an ABR
      Borrowing, not later than 12:00 noon, New York City time, one Business
      Day before a proposed Borrowing. Each such telephonic Borrowing Request shall
      be
      irrevocable, and shall be confirmed promptly by hand delivery or fax to the
      Administrative Agent of a written Borrowing Request and shall specify the
      following information:  (i) whether the Borrowing then being
      requested is to be a Term Borrowing, an Incremental Term Borrowing or a
      Revolving Credit Borrowing, and whether such Borrowing is to be a Eurodollar
      Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which shall
      be a Business Day); (iii) the number and location of the account to which
      funds are to be disbursed (which shall be an account that complies with the
      requirements of Section 2.02(c)); (iv) the amount of such

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

       Borrowing;
        and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest
        Period with respect thereto; provided,
        however,
        that,
        notwithstanding any contrary specification in any Borrowing Request, each
        requested Borrowing shall comply with the requirements set forth in
        Section 2.02. If no election as to the Type of Borrowing is specified in
        any such notice, then the requested Borrowing shall be an ABR Borrowing.
        If no
        Interest Period with respect to any Eurodollar Borrowing is specified in
        any
        such notice, then the Borrower shall be deemed to have selected an Interest
        Period of one month’s duration. The Administrative Agent shall promptly advise
        the applicable Lenders of any notice given pursuant to this Section 2.03
        (and the contents thereof), and of each Lender’s portion of the requested
        Borrowing.

    

     

    SECTION
      2.04. Evidence
      of Debt; Repayment of Loans.
      (a)
      The
      Borrower hereby unconditionally promises to pay to the Administrative Agent
      for
      the account of each Lender (i) the principal amount of each Term Loan of such
      Lender as provided in Section 2.11, (ii) the then unpaid principal amount
      of each Revolving Loan of such Lender on the Revolving Credit Maturity Date,
      (iii) the then unpaid principal amount of each PF L/C Loan of such Lender
      on the PF Maturity Date and (iv) the then unpaid principal amount of each
      Other PF L/C Loan of such Lender on the Incremental PF Maturity Date. The
      Borrower hereby promises to pay to the Swingline Lender the then unpaid
      principal amount of each Swingline Loan on the Revolving Credit Maturity
      Date.

     

    (b)
      Each
      Lender shall maintain in accordance with its usual practice an account or
      accounts evidencing the indebtedness of the Borrower to such Lender resulting
      from each Loan made by such Lender from time to time, including the amounts
      of
      principal and interest payable and paid to such Lender from time to time under
      this Agreement.

     

    (c)
      The
      Administrative Agent shall maintain accounts in which it will record
      (i) the amount of each Loan made hereunder, the Class and Type thereof and,
      if applicable,
      the Interest Period applicable thereto, (ii) the amount of any principal or
      interest due and payable or to become due and payable from the Borrower to
      each
      Lender hereunder and (iii) the amount of any sum received by the
      Administrative Agent hereunder from the Borrower or any Subsidiary Guarantor
      and
      each Lender’s share thereof.

     

    (d)
      The
      entries made in the accounts maintained pursuant to paragraphs (b)
      and (c) above shall be prima
      facie
      evidence
      of the existence and amounts of the obligations therein recorded; provided,
      however,
      that
      the failure of any Lender or the Administrative Agent to maintain such accounts
      or any error therein shall not in any manner affect the obligations of the
      Borrower to repay the Loans in accordance with their terms.

     

    (e)
      Any
      Lender may request that Loans made by it hereunder be evidenced by a promissory
      note. In such event, the Borrower shall execute and deliver to such Lender
      a
      promissory note payable to such Lender and its registered assigns and in a
      form
      and substance reasonably acceptable to the Administrative Agent and the
      Borrower. Notwithstanding any other provision of this Agreement, in the event
      any Lender shall request and receive such a promissory note, the interests
      represented by such note shall at 

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

      all
        times
        (including after any assignment of all or part of such interests pursuant
        to
        Section 9.04) be represented by one or more promissory notes payable to the
        payee named therein or its registered assigns.

    

     

    SECTION
      2.05. Fees.
      (a)The
      Borrower agrees to pay to each Lender, through the Administrative Agent, on
      the
      last Business Day of March, June, September and December in each year and on
      each date on which any Revolving Credit Commitment of such Lender shall expire
      or be terminated as provided herein, a commitment fee (a “Revolving
      Credit Commitment Fee”)
      equal
      to the Revolving Credit Commitment Fee Rate per annum on the daily unused amount
      of the Revolving Credit Commitment of such Lender during the preceding quarter
      (or other period commencing with the date hereof or ending with the Revolving
      Credit Maturity Date or the date on which the Revolving Credit Commitment of
      such Lender shall expire or be terminated). The Borrower agrees to pay to each
      Lender, through the Administrative Agent, on the last Business Day of March,
      June, September and December in each year and on the date on which the Delayed
      Draw Term Loan Commitment of such Lender shall expire or be terminated as
      provided herein, a commitment fee (a “Term
      Commitment Fee”)
      equal
      to the Applicable Term Commitment Fee Rate per annum on the daily unused amount
      of the Delayed Draw Term Loan Commitment of such Lender during the preceding
      quarter (or other period commencing with the date hereof or ending with the
      Delayed Draw Commitment Termination Date or the date on which the Delayed Draw
      Term Loan Commitment of such Lender shall expire or be terminated). All
      Commitment Fees shall be computed on the basis of the actual number of days
      elapsed in a year of 360 days. For purposes of calculating the Revolving Credit
      Commitment Fees only, no portion of the Revolving Credit Commitments shall
      be
      deemed utilized as a result of outstanding Swingline Loans.

     

    (b)
      The
      Borrower agrees to pay to the Administrative Agent, for its own account, the
      administrative fees set forth in the Fee Letter at the times and in the amounts
      specified therein (the “Administrative Agent
      Fees”).

     

    (c)
      The
      Borrower agrees to pay (i) to each Revolving Credit Lender, through the
      Administrative Agent, on the last Business Day of March, June, September and
      December of each year and on the date on which the Revolving Credit Commitment
      of such Lender shall be terminated as provided herein, a fee (an “L/C
      Participation Fee”)
      calculated on such Lender’s Revolving Facility Pro Rata Percentage of the daily
      aggregate RF L/C Exposure (excluding the portion thereof attributable to
      unreimbursed L/C Disbursements in respect of RF Letters of Credit) during the
      preceding quarter (or shorter period commencing with the date hereof or ending
      with the Revolving Credit Maturity Date or the date on which all RF Letters
      of
      Credit have been canceled or have expired and the Revolving Credit Commitments
      of all Lenders shall have been terminated) at a rate per annum equal to the
      Applicable Percentage from time to time used to determine the interest rate
      on
      Revolving Credit Borrowings comprised of Eurodollar Loans pursuant to
      Section 2.06, (ii) to each PF Lender, through the Administrative
      Agent, on each Interest Payment Date with respect to the Credit-Linked Deposits
      and on the date on which any Credit-Linked Deposit is terminated and the funds
      therein returned to such Lenders, a fee (a “PF
      L/C Commitment Fee”)
      calculated on such 

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

      Lender’s
        PF Pro Rata Percentage or Other PF Pro Rata Percentage, as the case may be,
        of
        the amounts on deposit in the Credit-Linked Deposit Account during the Interest
        Period ending on such Interest Payment Date at a rate per annum equal to
        (x) in
        the case of the Credit-Linked Deposits, the sum of the Applicable Percentage
        from time to time used to determine the interest rate on Term Borrowings
        comprised of Eurodollar Loans pursuant to Section 2.06 plus
        10 basis
        points or (y) in the case of Other Credit-Linked Deposits, the rate per
        annum provided therefor in the applicable Incremental PF L/C Assumption
        Agreement, and (iii) to the Issuing Bank with respect to each Letter of
        Credit the standard fronting, issuance and drawing fees specified from time
        to
        time by the Issuing Bank (the “Issuing
        Bank Fees”).
        All
        L/C Participation Fees, PF L/C Commitment Fees and Issuing Bank Fees shall
        be
        computed on the basis of the actual number of days elapsed in a year of 360
        days. For the avoidance of doubt, if amounts on deposit in the Credit-Linked
        Deposit Account are used to reimburse the Issuing Bank during any period
        as
        contemplated by Section 2.02(g), then the PF L/C Commitment Fee in respect
        of such Interest Period will be payable only with respect to the amounts
        actually on deposit in the Credit-Linked Deposit Account during such Interest
        Period. From and including the date of the deemed PF L/C Loan or Other PF
        L/C
        Loan, such Loan shall bear interest as provided in Section 2.06 or 2.07, as
        the case may be, and the Borrower shall be responsible to the Administrative
        Agent for any costs arising as a result thereof under
        Section 2.16.

    

     

    (d)
      All
      Fees
      shall be paid on the dates due, in immediately available funds, to the
      Administrative Agent for distribution, if and as appropriate, among the Lenders,
      except that the Issuing Bank Fees shall be paid directly to the Issuing Bank.
      Once paid, none of the Fees shall be refundable under any
      circumstances.

     

    SECTION
      2.06. Interest
      on Loans.
      (a)
      Subject
      to the provisions of Section 2.07, the Loans comprising each
      ABR Borrowing, including each Swingline Loan, shall bear interest (computed
      on the basis of the actual number of days elapsed over a year of 365 or
      366 days, as the case may be, when the Alternate Base Rate is determined by
      reference to the Prime Rate and over a year of 360 days at all other times
      and calculated from and including the date of such Borrowing to but excluding
      the date of repayment thereof) at a rate
      per
      annum equal to the Alternate Base Rate plus
      the
      Applicable Percentage in effect from time to time.

     

    (b)
      Subject to the provisions of Section 2.07, the Loans comprising each
      Eurodollar Borrowing shall bear interest (computed on the basis of the actual
      number of days elapsed over a year of 360 days) at a rate per annum equal
      to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
      plus the Applicable Percentage in effect from time to time.
      Notwithstanding anything herein to the contrary, the Adjusted LIBO Rate for
      each
      initial Interest Period for Borrowings of Eurodollar Delayed Draw Term Loans
      shall be equal to the Adjusted LIBO Rate in respect of the corresponding
      Interest Periods to which such Eurodollar Delayed Draw Term Loans are allocated
      as contemplated by the definition of the term “Interest Period”.

     

    (c)
      Interest
      on each Loan shall be payable on the Interest Payment Dates applicable to such
      Loan except as otherwise provided in this Agreement. The applicable

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

      Alternate
        Base Rate or Adjusted LIBO Rate for each Interest Period or day within an
        Interest Period, as the case may be, shall be determined by the Administrative
        Agent, and such determination shall be conclusive absent manifest
        error.

    

     

    SECTION
      2.07. Default
      Interest.
      If the
      Borrower shall default in the payment of any principal of or interest on any
      Loan or any other amount due hereunder, by acceleration or otherwise, or under
      any other Loan Document, then, until such defaulted amount shall have been
      paid
      in full, to the extent permitted by law, such defaulted amount shall bear
      interest (after as well as before judgment), payable on demand, (a) in the
      case
      of principal, at the rate otherwise applicable to such Loan pursuant to Section
      2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum
      (computed on the basis of the actual number of days elapsed over a year of
      365
      or 366 days, as the case may be, when determined by reference to the Prime
      Rate
      and over a year of 360 days at all other times) equal to the rate that would
      be
      applicable to an ABR Term Loan plus 2.00% per annum.

     

    SECTION
      2.08. Alternate
      Rate of Interest.
      In the
      event, and on each occasion, that on the day two Business Days prior to the
      commencement of any Interest Period for a Eurodollar Borrowing the
      Administrative Agent shall have determined that dollar deposits in the principal
      amounts of the Loans comprising such Borrowing are not generally available
      in
      the London interbank market, or that the rates at which such dollar deposits
      are
      being offered will not adequately and fairly reflect the cost to any Lender
      of
      making or maintaining its Eurodollar Loan during such Interest Period, or that
      reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the
      Administrative Agent shall, as soon as practicable thereafter, give written
      or
      fax notice of such determination to the Borrower and the Lenders. In the event
      of any such determination, until the Administrative Agent shall have advised
      the
      Borrower and the Lenders that the circumstances giving rise to such notice
      no
      longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant
      to
      Section 2.03 or 2.10 shall be deemed to be a request for an
      ABR Borrowing. Each determination by the Administrative Agent under this
      Section 2.08 shall be conclusive absent manifest error.

     

    SECTION
      2.09. Termination
      and Reduction of Commitments.
      (a)The
      Term
      Loan Commitments (other than (i) Delayed Draw Term Loan Commitments, which
      shall be
      reduced pro tanto by the making of Delayed Draw Term Loans and which shall
      terminate on the Delayed Draw Commitment Termination Date, and (ii) any
      Incremental Term Loan Commitments, which shall terminate as provided in the
      related Incremental Term Loan Assumption Agreement) shall automatically
      terminate upon the making of the Term Loans on the Closing Date. The Revolving
      Credit Commitments and the Swingline Commitment shall automatically terminate
      on
      the Revolving Credit Maturity Date. The L/C Commitment shall automatically
      terminate on the earlier to occur of (x) the termination of the Revolving
      Credit Commitments and (y) the date 30 days prior to the Revolving Credit
      Maturity Date. Notwithstanding the foregoing, all the Commitments shall
      automatically terminate at 5:00 p.m., New York City time, on April 30,
      2007, if the initial Credit Event shall not have occurred by such time. The
      PF
      L/C Commitments shall automatically terminate on the PF Maturity Date. Any
      Incremental PF L/C Commitments shall automatically terminate on the Incremental
      PF Maturity Date.

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    (b)
      Upon
      at least three Business Days’ prior irrevocable written or fax notice to the
      Administrative Agent, the Borrower may at any time in whole permanently
      terminate, or from time to time in part permanently reduce, the Term Loan
      Commitments, the Revolving Credit Commitments, the Swingline Commitment or
      the
      PF L/C Commitments; provided, however, that (i) each
      partial reduction of the Term Loan Commitments, the Revolving Credit
      Commitments, the PF L/C Commitments or the Incremental PF L/C Commitment shall
      be in an integral multiple of $1,000,000 and in a minimum amount of $5,000,000,
      (ii) each partial reduction of the Swingline Commitment shall be in an
      integral multiple of $250,000 and in a minimum amount of $1,000,000,
      (iii) the Total Revolving Credit Commitment shall not be reduced to an
      amount that is less than the Aggregate Revolving Credit Exposure at the time,
      (iv) the aggregate amount of the PF L/C Commitments shall not be reduced to
      an amount that is less than the sum of the outstanding PF L/C Loans and the
      PF
      L/C Exposure at any time and (v) the aggregate amount of the Incremental PF
      L/C Commitments shall not be reduced to an amount that is less than the sum
      of
      the outstanding Other PF L/C Loans and the Other PF L/C Exposure at any
      time.

     

    (c)
      Each
      reduction in the Term Loan Commitments, the Revolving Credit Commitments, the
      PF
      L/C Commitments or the Incremental PF L/C Commitments hereunder shall be made
      ratably among the Lenders in accordance with their respective applicable
      Commitments. The Borrower shall pay to the Administrative Agent for the account
      of the applicable Lenders, on the date of each termination or reduction, the
      Commitment Fees or PF L/C Commitment Fees, as the case may be, on the amount
      of
      the Commitments so terminated or reduced accrued to but excluding the date
      of
      such termination or reduction. In addition, in connection with any reduction
      or
      termination of the PF L/C Commitments or the Incremental PF L/C Commitments
      pursuant to this Section 2.09, the Administrative Agent shall return to the
      PF
      Lenders or the Incremental PF Lenders, respectively, from the Credit-Linked
      Deposit Account, in accordance with their respective PF Pro Rata Percentages
      or
      Other PF Pro Rata Percentages, respectively, an amount equal to the amount
      of
      such reduction or termination.

     

    SECTION
      2.10. Conversion
      and Continuation of Borrowings.
      The
      Borrower shall have the right at any time upon prior irrevocable notice to
      the
      Administrative Agent (a) not later than 12:00 (noon), New York City
      time, one Business Day prior to conversion, to convert any Eurodollar Borrowing
      into an ABR Borrowing, (b) not laterthan
      10:00 a.m., New York City time, three Business Days prior to conversion or
      continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to
      continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional
      Interest Period, and (c) not later than 11:00 a.m., New York City
      time, three Business Days prior to conversion, to convert the Interest Period
      with respect to any Eurodollar Borrowing to another permissible Interest Period,
      subject in each case to the following:

     

    (i)
      each
      conversion or continuation shall be made pro rata among the Lenders in
      accordance with the respective principal amounts of the Loans comprising the
      converted or continued Borrowing;

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    (ii)
      if
      less
      than all the outstanding principal amount of any Borrowing shall be converted
      or
      continued, then each resulting Borrowing shall satisfy the limitations specified
      in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum
      number of Borrowings of the relevant Type;

     

    (iii)
      each
      conversion shall be effected by each Lender and the Administrative Agent by
      recording for the account of such Lender the new Loan of such Lender resulting
      from such conversion and reducing the Loan (or portion thereof) of such Lender
      being converted by an equivalent principal amount; accrued interest on any
      Eurodollar Loan (or portion thereof) being converted shall be paid by the
      Borrower at the time of conversion;

     

    (iv)
      if
      any
      Eurodollar Borrowing is converted at a time other than the end of the Interest
      Period applicable thereto, the Borrower shall pay, upon demand, any amounts
      due
      to the Lenders pursuant to Section 2.16;

     

    (v)
      any
      portion of a Borrowing that is maturing or required to be repaid in less than
      one month may not be converted into or continued as a Eurodollar
      Borrowing;

     

    (vi)
      any
      portion of a Eurodollar Borrowing that cannot be converted into or continued
      as
      a Eurodollar Borrowing by reason of the immediately preceding clause shall
      be
      automatically converted at the end of the Interest Period in effect for such
      Borrowing into an ABR Borrowing;

     

    (vii)
      no
      Interest Period may be selected for any Eurodollar Term Borrowing that would
      end
      later than a Term Loan Repayment Date occurring on or after the first day of
      such Interest Period if, after giving effect to such selection, the aggregate
      outstanding amount of (A) the Eurodollar Term Borrowings comprised of Term
      Loans or Other Term Loans, as applicable, with Interest Periods ending on or
      prior to such Term Loan Repayment Date and (B) the ABR Term Borrowings
      comprised of Term Loans or Other Term Loans, as applicable, would not be at
      least equal to the principal amount of Term Borrowings to be paid on such Term
      Loan Repayment Date; and

     

    (viii)
      upon
      notice to the Borrower from the Administrative Agent given at the request of
      the
      Required Lenders, after the occurrence and during the continuance of a Default
      or Event of Default, no outstanding Loan may be converted into, or continued
      as,
      a Eurodollar Loan.

    Each
      notice pursuant to this Section 2.10 shall be irrevocable and shall refer
      to this Agreement and specify (i) the identity and amount of the Borrowing
      that the Borrower requests be converted or continued, (ii) whether such
      Borrowing is to be converted to or continued as a Eurodollar Borrowing or an
      ABR Borrowing, (iii) if such notice requests a conversion, the date of
      such conversion (which shall be a Business Day) and (iv) if such Borrowing
      is to be converted to or continued as a Eurodollar Borrowing, the Interest
      Period with respect thereto. If no Interest Period is specified in any
      such

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

       notice
        with respect to any conversion to or continuation as a Eurodollar Borrowing,
        the
        Borrower shall be deemed to have selected an Interest Period of one month’s
        duration. The Administrative Agent shall advise the Lenders of any notice
        given
        pursuant to this Section 2.10 and of each Lender’s portion of any converted
        or continued Borrowing. If the Borrower shall not have given notice in
        accordance with this Section 2.10 to continue any Borrowing into a
        subsequent Interest Period (and shall not otherwise have given notice in
        accordance with this Section 2.10 to convert such Borrowing), such
        Borrowing shall, at the end of the Interest Period applicable thereto (unless
        repaid pursuant to the terms hereof), automatically be continued into an
        ABR
        Borrowing.

    

     

    SECTION
      2.11. Repayment
      of Term Borrowings.(a)
      (1)The
      Borrower shall pay to the Administrative Agent, for the account of the Lenders,
      on the dates set forth below, or if any such date is not a Business Day, on
      the
      next preceding Business Day (each such date being called a “Repayment
      Date”),
      a
      principal amount of the Term Loans other than Other Term Loans (as adjusted
      from
      time to time pursuant to Sections 2.12, 2.13(h) and 2.24(e)) equal to the
      percentage set forth below for such date of the aggregate principal amount
      of
      the Term Loans (other than Other Term Loans) outstanding on the Delayed Draw
      Commitment Termination Date (after giving effect to any Term Loans (other than
      Other Term Loans) to be made on such date), together in each case with accrued
      and unpaid interest on the principal amount to be paid to but excluding the
      date
      of such payment:

    

    
      	
              Repayment
                Date

            	
              Amount

            
	
              March
                31, 2008

            	
              0.25%

            
	
              June
                30, 2008

            	
              0.25%

            
	
              September
                30, 2008

            	
              0.25%

            
	
              December
                31, 2008

            	
              0.25%

            
	
              March
                31, 2009

            	
              0.25%

            
	
              June
                30, 2009

            	
              0.25%

            
	
              September
                30, 2009

            	
              0.25%

            
	
              December
                31, 2009

            	
              0.25%

            
	
              March
                31, 2010

            	
              0.25%

            
	
              June
                30, 2010

            	
              0.25%

            
	
              September
                30, 2010

            	
              0.25%

            
	
              December
                31, 2010

            	
              0.25%

            
	
              March
                31, 2011

            	
              0.25%

            
	
              June
                30, 2011

            	
              0.25%

            
	
              September
                30, 2011

            	
              0.25%

            
	
              December
                31, 2011

            	
              0.25%

            
	
              March
                31, 2012

            	
              0.25%

            
	
              June
                30, 2012

            	
              0.25%

            
	
              September
                30, 2012

            	
              0.25%

            
	
              December
                31, 2012

            	
              0.25%

            
	
              March
                31, 2013

            	
              0.25%

            
	
              June
                30, 2013

            	
              0.25%

            
	
              September
                30, 2013

            	
              0.25%

            
	
              December
                31, 2013

            	
              0.25%

            
	
              Term
                Loan Maturity Date

            	
              94.00%

            
	 	 

    

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    (ii)
      The
      Borrower shall pay to the Administrative Agent, for the account of the
      Incremental Term Lenders, on each Incremental Term Loan Repayment Date, a
      principal amount of the Other Term Loans (as adjusted from time to time pursuant
      to Sections 2.12 and 2.13(h)) equal to the amount set forth for such date
      in the applicable Incremental Term Loan Assumption Agreement, together in each
      case with accrued and unpaid interest on the principal amount to be paid to
      but
      excluding the date of such payment.

     

    (b)
      To
      the extent not previously paid, all Term Loans and Other Term Loans shall be
      due
      and payable on the Term Loan Maturity Date and the Incremental Term Loan
      Maturity Date, respectively, together with accrued and unpaid interest on the
      principal amount to be paid to but excluding the date of payment.

     

    (c)
      All
      repayments pursuant to this Section 2.11 shall be subject to
      Section 2.16, but shall otherwise be without premium or
      penalty.

     

    SECTION
      2.12. Optional
      Prepayment.(a)
      The
      Borrower shall have the right at any time and from time to time to prepay any
      Borrowing, in whole or in part, upon at least three Business Days’ prior written
      or fax notice (or telephone notice promptly confirmed by written or fax notice)
      in the case of Eurodollar Loans, or written or fax notice (or telephone notice
      promptly confirmed by written or fax notice) at least one Business Day prior
      to
      the date of prepayment in the case of ABR Loans, to the Administrative Agent
      before 11:00 a.m., New York City time; provided,
      however,
      that
      each partial prepayment shall be in an amount that is an integral multiple
      of
      $1,000,000 and not less than $5,000,000.

     

    (b)
      Optional prepayments of Term Loans shall be applied against the remaining
      scheduled installments of principal due in respect of the Term Loans under
      Section 2.11 as designated by the Borrower to the Administrative Agent; if
      there is no designation by the Borrower, such prepayments will be applied pro
      rata against such installments. Optional prepayments of PF L/C Loans or Other
      PF
      L/C Loans made other than in connection with a corresponding reduction of the
      PF
      L/C Commitments or Incremental PF L/C Commitments, respectively, shall be made
      to the Administrative Agent, which shall promptly remit the same to the
      Credit-Linked Deposit Account.

     

    (c)
      Each
      notice of prepayment shall specify the prepayment date and the principal amount
      of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable
      and
      shall commit the Borrower to prepay such Borrowing by the amount stated therein
      on the date stated therein. All prepayments under this Section 2.12 shall
      be subject to Section 2.16 but otherwise without premium or penalty. All
      prepayments under this Section 2.12 (other than prepayments of ABR
      Revolving Loans that are not made in 

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

      connection
        with the termination or permanent reduction of the Revolving Credit Commitments)
        shall be accompanied by accrued and unpaid interest on the principal amount
        to
        be prepaid to but excluding the date of payment.

    

     

    SECTION
      2.13. Mandatory
      Prepayments.
      (a)
      In
      the
      event of any termination of all the Revolving Credit Commitments, the Borrower
      shall, on the date of such termination, repay or prepay all its outstanding
      Revolving Credit Borrowings and all outstanding Swingline Loans and replace
      all
      outstanding RF Letters of Credit and/or deposit an amount equal to the RF L/C
      Exposure in cash in a cash collateral account established with the Collateral
      Agent for the benefit of the Secured Parties. In the event of any partial
reduction of the Revolving Credit Commitments, then (i) at or prior to the
      effective date of such reduction, the Administrative Agent shall notify the
      Borrower and the Revolving Credit Lenders of the Aggregate Revolving Credit
      Exposure after giving effect thereto and (ii) if the Aggregate Revolving
      Credit Exposure would exceed the Total Revolving Credit Commitment after giving
      effect to such reduction or termination, then the Borrower shall, on the date
      of
      such reduction or termination, repay or prepay Revolving Credit Borrowings
      or
      Swingline Loans (or a combination thereof) and/or replace or cash collateralize
      outstanding RF Letters of Credit in an amount sufficient to eliminate such
      excess. In the event of any termination of all the PF L/C Commitments or
      Incremental PF L/C Commitments, the Borrower shall, on the date of such
      termination, repay or prepay all its outstanding PF L/C Loans or Other PF L/C
      Loans, respectively, and replace all outstanding PF Letters of Credit or Other
      PF Letters of Credit, respectively, and/or deposit an amount equal to the PF
      L/C
      Exposure or Other PF L/C Exposure, respectively, in cash in a cash collateral
      account established with the Collateral Agent for the benefit of the Issuing
      Bank. In the event of any partial reduction of the PF L/C Commitments or
      Incremental PF L/C Commitments, then (i) at or prior to the effective date
      of such reduction, the Administrative Agent shall notify the Borrower and the
      PF
      Lenders or Incremental PF Lenders, respectively, of the aggregate amount of
      the
      outstanding PF L/C Loans or Other PF L/C Loans, respectively, and the PF L/C
      Exposure or Other PF L/C Exposure, respectively, after giving effect thereto
      and
      (ii) if such aggregate amount would exceed the aggregate amount of the PF
      L/C Commitments or Incremental PF L/C Commitments, as the case may be, after
      giving effect to such reduction or termination, then the Borrower shall repay
      or
      prepay PF L/C Loans or Other PF L/C Exposure, respectively, and/or replace
      or
      cash collateralize outstanding PF Letters of Credit or Other PF Letters of
      Credit, respectively, in an amount sufficient to eliminate such excess. Upon
      any
      replacement or cash collateralization of PF Letters of Credit or Other PF
      Letters of Credit as contemplated and to the extent required by the preceding
      sentence, the Administrative Agent shall return to the PF Lenders or Incremental
      PF Lenders, as the case may be, from the Credit-Linked Deposit Account in
      accordance with their respective PF Pro Rata Percentages or Other PF Pro Rata
      Percentages, respectively, an amount equal to the amount of such reduction
      or
      termination.

     

    (b)
      Not
      later
      than the third Business Day following the receipt of Net Cash Proceeds in
      respect of any Asset Sale, the Borrower shall apply 100% of the Net Cash
      Proceeds received with respect thereto to prepay outstanding Term Loans in
      accordance with Section 2.13(h).

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    (c)
      In
      the event and on each occasion that an Equity Issuance occurs, the Borrower
      shall, substantially simultaneously with (and in any event not later than the
      third Business Day next following) the occurrence of such Equity Issuance,
      apply
      100% of the Net Cash Proceeds therefrom to prepay outstanding Term Loans in
      accordance with Section 2.13(h); provided, however, that
      (i) if the Senior Leverage Ratio as at the time of receipt is less than 3.75
      to
      1.0 but greater than or equal to 2.50 to 1.0, such amount shall be reduced
      to
      50% of the Net Cash Proceeds from the occurrence of such Equity Issuance, and
      (ii) if the Senior Leverage Ratio as at the time of receipt is less than 2.50
      to
      1.0, such amount shall be reduced to 25% of the Net Cash Proceeds from the
      occurrence of such Equity Issuance.

     

    (d)
      No
      later
      than the earlier of (i) 90 days after the end of each fiscal year of
      the Borrower, commencing with the fiscal year ending on December 31, 2008,
      and (ii) the date on which the financial statements with respect to such
      period are delivered pursuant to Section 5.04(a), the Borrower shall prepay
      outstanding Term Loans in accordance with Section 2.13(h) in an aggregate
      principal amount equal to 75% of Excess Cash Flow for the fiscal year then
      ended; provided,
      however,
      that
      (i) if the Senior Leverage Ratio as at the end of such fiscal year was less
      than 2.75 to 1.0 but greater than or equal to 2.0 to 1.0, such amount shall
      be
      reduced to 50% of such Excess Cash Flow and (ii) if the Senior Leverage
      Ratio as at the end of such fiscal year was less than 2.0 to 1.0, such amount
      shall be reduced to 25% of such Excess Cash Flow.

     

    (e)
      In
      the
      event that any Loan Party or any subsidiary of a Loan Party shall receive Net
      Cash Proceeds from the issuance or incurrence of Indebtedness for money borrowed
      of any Loan Party or any subsidiary of a Loan Party (other than any cash
      proceeds from the issuance of Indebtedness for money borrowed permitted pursuant
      to Section 6.01), the Borrower shall, substantially simultaneously with
      (and in any event not later than the third Business Day next following) the
      receipt of such Net Cash Proceeds by such Loan Party or such subsidiary, apply
      an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Term
      Loans in accordance with Section 2.13(h).

     

    (f)
      In
      the
      event that any Loan Party or any subsidiary of a Loan Party shall receive any
      Extraordinary Receipt, the Borrower shall, substantially simultaneously with
      (and in any event not later than the third Business Day next following) the
      receipt of such Extraordinary Receipt, apply 100% of such Extraordinary Receipt
      to prepay outstanding Term Loans in accordance with Section 2.13(h);
provided,
      however,
      that,
      if the Subsidiary receiving such Extraordinary Receipt is a Special Purpose
      Vehicle, the Borrower shall not be required to prepay Term Loans by the amount
      of such Extraordinary Receipt to the extent the terms of any Indebtedness of
      such Special Purpose Vehicle would prohibit the distribution by such Special
      Purpose Vehicle of the amount thereof to the Borrower.

     

    (g)
      In
      the event that any PF Letter of Credit or Other PF Letter of Credit is issued
      pursuant to Section 2.23 for the purpose of securing the Borrower’s or any
Subsidiary’s
      obligations with respect to workers’ compensation claims that were secured by
      Restricted Cash prior to the issuance of such Letter of Credit, the Borrower
      shall, substantially simultaneously with (and in any event not later than the
      third Business Day 

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

      next
        following) the receipt by the Borrower or any Subsidiary of such Restricted
        Cash, apply an amount equal to 75% of the amount of such received Restricted
        Cash to prepay outstanding Term Loans in accordance with
        Section 2.13(h).

    

     

    (h)
      All
      amounts required to be paid pursuant to this Section 2.13 shall be applied
      to prepay outstanding Term Loans of the Term Lenders that accept the same.
      Each
      Term Lender may elect, by notice to the Administrative Agent at or prior to
      the
      time and in the manner specified by the Administrative Agent, prior to any
      prepayment of Term Loans required to be made by the Borrower pursuant to this
      Section 2.13, to decline all (but not a portion) of its pro rata share of
      such prepayment (such declined amounts, the “Declined
      Proceeds”).
      Any
      Declined Proceeds shall be offered to the Term Lenders not so declining such
      prepayment (with such Term Lenders having the right to decline any prepayment
      with Declined Proceeds at the time and in the manner specified by the
      Administrative Agent). All such accepted prepayments shall be allocated pro
      rata
      between the Term Loans and the Other Term Loans and applied pro rata to the
      remaining scheduled installments of principal due in respect of the Term Loans
      and the Other Term Loans under Sections 2.11(a)(i) and (ii), respectively.
      Any such mandatory prepayments that are rejected by the Term Lenders may be
      retained by the Borrower.

     

    (i)
      The
      Borrower shall deliver to the Administrative Agent, at the time of each
      prepayment required under this Section 2.13, (i) a certificate signed by a
      Financial Officer of the Borrower setting forth in reasonable detail the
      calculation of the amount of such prepayment and (ii) to the extent practicable,
      at least three days’ prior written notice of such prepayment. Each notice of
      prepayment shall specify the prepayment date, the Type of each Loan being
      prepaid and the principal amount of each Loan (or portion thereof) to be
      prepaid; provided,
      however,
      that,
      if at the time of any prepayment pursuant to this Section 2.13 there shall
      be Term Borrowings of different Types or Eurodollar Term Borrowings with
      different Interest Periods, and if some but not all Term Lenders shall have
      accepted such mandatory prepayment, then the aggregate amount of such mandatory
      prepayment shall be allocated ratably to each outstanding Term Borrowing of
      the
      accepting Term Lenders. All prepayments of Borrowings under this
      Section 2.13 shall be subject to Section 2.16, but shall otherwise be
      without premium or penalty, and shall be accompanied by accrued and unpaid
      interest on the principal amount to be prepaid to but excluding the date of
      payment.

     

    SECTION
      2.14. Reserve
      Requirements; Change in Circumstances.
      (a)
      Notwithstanding
      any other provision of this Agreement, if any Change in Law shall impose, modify
      or deem applicable any reserve, special deposit or similar requirement against
      assets of, deposits with or for the account of or credit extended by any Lender,
      the Issuing Bank or the Administrative Agent (except any such reserve
      requirement which is reflected in the Adjusted LIBO Rate) or shall impose on
      such Lender, the Issuing Bank or the Administrative Agent or the London
      interbank market any other condition affecting this Agreement or Eurodollar
      Loans made by such Lender, any Credit-Linked Deposit or any Letter of Credit
      or
      participation therein, and the result of any of the foregoing shall be to
      increase the cost to such Lender, the Issuing Bank or the Administrative Agent
      of making or maintaining any Eurodollar Loan or Credit-Linked Deposit or
      increase the cost to
      any
      Lender of issuing or maintaining any Letter of Credit or purchasing or
      maintaining 

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

      a
        participation therein or to reduce the amount of any sum received or receivable
        by such Lender, the Issuing Bank or the Administrative Agent hereunder (whether
        of principal, interest or otherwise), in each case, by an amount deemed by
        such
        Lender, the Issuing Bank or the Administrative Agent to be material, then
        the
        Borrower will pay to such Lender, the Issuing Bank or the Administrative
        Agent,
        as the case may be, upon demand such additional amount or amounts as will
        compensate such Lender, the Issuing Bank or the Administrative Agent, as
        the
        case may be, for such additional costs incurred or reduction
        suffered.

    

     

    (b)
      If
      any Lender or the Issuing Bank shall have determined that any Change in Law
      regarding capital adequacy has or would have the effect of reducing the rate
      of
      return on such Lender’s or the Issuing Bank’s capital or on the capital of such
      Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this
      Agreement or the Loans made or participations in Letters of Credit purchased
      by
      such Lender pursuant hereto or the Letters of Credit issued by the Issuing
      Bank
      pursuant hereto to a level below that which such Lender or the Issuing Bank
      or
      such Lender’s or the Issuing Bank’s holding company could have achieved but for
      such Change in Law (taking into consideration such Lender’s or the Issuing
      Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding
      company with respect to capital adequacy) by an amount deemed by such Lender
      or
      the Issuing Bank to be material, then from time to time in accordance with
      paragraph (c) below the Borrower shall pay to such Lender or the Issuing
      Bank, as the case may be, such additional amount or amounts as will compensate
      such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding
      company for any such reduction suffered.

     

    (c)
      A
      certificate of a Lender, the Issuing Bank or the Administrative Agent setting
      forth the amount or amounts necessary to compensate such Lender, the Issuing
      Bank or the Administrative Agent or its holding company, as applicable, as
      specified in paragraph (a) or (b) above shall be delivered to the Borrower
      and shall be conclusive absent manifest error. The Borrower shall pay such
      Lender, the Issuing Bank or the Administrative Agent the amount shown as due
      on
      any such certificate delivered by it within 10 days after its receipt of
      the same.

     

    (d)
      Failure
      or delay on the part of any Lender, the Issuing Bank or the Administrative
      Agent
      to demand compensation for any increased costs or reduction in amounts received
      or receivable or reduction in return on capital shall not constitute a waiver
      of
      such Lender’s, the Issuing Bank’s or the Administrative Agent’s right to demand
      such compensation; provided
      that the
      Borrower shall not be under any obligation to compensate any Lender, the Issuing
      Bank or the Administrative Agent under paragraph (a) or (b) above with
      respect to increased costs or reductions with respect to any period prior to
      the
      date that is 120 days prior to such request if such Lender, the Issuing
      Bank or the Administrative Agent knew or could reasonably have been expected
      to
      know of the circumstances giving rise to such increased costs or reductions
      and
      of the fact that such circumstances would result in a claim for increased
      compensation by reason of such increased costs or reductions; provided
      further
      that the
      foregoing limitation shall not apply to any increased costs or reductions
      arising out of the retroactive application of any Change in Law within such
      120-day period. The protection 

    
      
        
        

      

      
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      of
        this
        Section shall be available to each Lender, the Issuing Bank and the
        Administrative Agent regardless of any possible contention of the
        invalidity or inapplicability of the Change in Law that shall have occurred
        or
        been imposed.

    

     

    SECTION
      2.15. Change
      in Legality.
      (a)
      Notwithstanding
      any other provision of this Agreement, if any Change in Law shall make it
      unlawful for any Lender to make or maintain any Eurodollar Loan or to give
      effect to its obligations as contemplated hereby with respect to any Eurodollar
      Loan, then, by written notice to the Borrower and to the Administrative
      Agent:

     

    (i)
      such
      Lender may declare that Eurodollar Loans will not thereafter (for the duration
      of such unlawfulness) be made by such Lender hereunder (or be continued for
      additional Interest Periods) and ABR Loans will not thereafter (for such
      duration) be converted into Eurodollar Loans, whereupon any request for a
      Eurodollar Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing
      or to continue a Eurodollar Borrowing for an additional Interest Period) shall,
      as to such Lender only, be deemed a request for an ABR Loan (or a request to
      continue an ABR Loan as such for an additional Interest Period or to convert
      a
      Eurodollar Loan into an ABR Loan, as the case may be), unless such declaration
      shall be subsequently withdrawn; and

     

    (ii)
      such
      Lender may require that all outstanding Eurodollar Loans made by it be converted
      to ABR Loans, in which event all such Eurodollar Loans shall be automatically
      converted to ABR Loans as of the effective date of such notice as provided
      in
      paragraph (b) below.

     

    In
      the
      event any Lender shall exercise its rights under (i) or (ii) above,
      all payments and prepayments of principal that would otherwise have been applied
      to repay the Eurodollar Loans that would have been made by such Lender or the
      converted Eurodollar Loans of such Lender shall instead be applied to repay
      the
      ABR Loans made by such Lender in lieu of, or resulting from the conversion
      of,
      such Eurodollar Loans.

     

    (b)
      For
      purposes of this Section 2.15, a notice to the Borrower by any Lender shall
      be effective as to each Eurodollar Loan made by such Lender, if lawful, on
      the
      last day of the Interest Period then applicable to such Eurodollar Loan; in
      all
      other cases such notice shall be effective on the date of receipt by the
      Borrower.

     

    SECTION
      2.16. Indemnity.
      Without
      duplication of the matters covered in Sections 2.14 and 2.20, the Borrower
      shall
      indemnify each Lender against any loss or expense that such Lender may sustain
      or incur as a consequence of (a) any event, other than a default by such
      Lender in the performance of its obligations hereunder, which results in
      (i) such Lender receiving or being deemed to receive any amount on account
      of the principal of any Eurodollar Loan prior to the end of the Interest Period
      in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR
      Loan, or the conversion of the Interest Period with respect to any Eurodollar
      Loan, in each case other than on the last day of the Interest Period in effect
      therefor, or (iii) any Eurodollar Loan to be made by such Lender (including
      any Eurodollar Loan to be made pursuant to a conversion or 

    
      
        
        

      

      
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      continuation
        under Section 2.10) not being made after notice of such Loan shall have
        been given by the Borrower hereunder (any of the events referred to in this
        clause (a) being called a “Breakage
        Event”)
        or
        (b) any default in the making of any payment or prepayment
        required to be made hereunder. In the case of any Breakage Event, such loss
        shall include an amount equal to the excess, as reasonably determined by
        such
        Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is
        the subject of such Breakage Event for the period from the date of such Breakage
        Event to the last day of the Interest Period in effect (or that would have
        been
        in effect) for such Loan over (ii) the amount of interest likely to be
        realized by such Lender in redeploying the funds released or not utilized
        by
        reason of such Breakage Event for such period. In addition, the Borrower
        shall
        indemnify the Administrative Agent against any loss or expense comparable
        to the
        losses or expenses covered by the preceding sentences of this Section 2.16
        that the Administrative Agent may sustain or incur as a consequence of any
        withdrawal from the Credit-Linked Deposit Account pursuant to the terms of
        this
        Agreement prior to the end of the then-applicable Interest Period for the
        Credit-Linked Deposits. A certificate of any Lender or the Administrative
        Agent
        setting forth in reasonable detail the amount or amounts which such Lender
        or
        the Administrative Agent is entitled to receive pursuant to this
        Section 2.16 shall be delivered to the Borrower and shall be conclusive
        absent manifest error.

    

     

    SECTION
      2.17. Pro
      Rata Treatment.
      Except
      as provided below in this Section 2.17 with respect to Swingline Loans and
      as required under Section 2.13(h) or 2.15, each Borrowing, each payment or
      prepayment of principal of any Borrowing, each payment of interest on the Loans,
      each payment of the Commitment Fees and the PF L/C Commitment Fees, each
      reduction of the Term Loan Commitments, the Revolving Credit Commitments, the
      PF
      L/C Commitments or the Incremental PF L/C Commitments and each conversion of
      any
      Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall
      be allocated pro rata among the Lenders in accordance with their respective
      applicable Commitments (or, if such Commitments shall have expired or been
      terminated, in accordance with the respective principal amounts of their
      outstanding Loans or participations in L/C Disbursements, as applicable). For
      purposes of determining the available Revolving Credit Commitments of the
      Lenders at any time, each outstanding Swingline Loan shall be deemed to have
      utilized the Revolving Credit Commitments of the Lenders (including those
      Lenders which shall not have made Swingline Loans) pro rata in accordance with
      such respective Revolving Credit Commitments. Each Lender agrees that in
      computing such Lender’s portion of any Borrowing to be made hereunder, the
      Administrative Agent may, in its discretion, round each Lender’s percentage of
      such Borrowing to the next higher or lower whole dollar amount.

     

    SECTION
      2.18. Sharing
      of Setoffs.
      Each
      Lender agrees that if it shall, through the exercise of a right of banker’s
      lien, setoff or counterclaim against the Borrower or any other Loan Party,
      or
      pursuant to a secured claim under Section 506 of Title 11 of the
      United States Code or other security or interest arising from, or in lieu of,
      such secured claim, received by such Lender under any applicable bankruptcy,
      insolvency or other similar law or otherwise, or by any other means, obtain
      payment (voluntary or involuntary) in respect of any Loan or Loans or
      participations in L/C Disbursements and 

    
      
        
        

      

      
        50

        
          

        

      

      
        
        

      

      accrued
        interest thereon as a result of which the unpaid principal portion of its
        Loans
        and participations in L/C Disbursements and accrued interest thereon shall
        be
        proportionately less than the unpaid principal portion of the Loans and
        participations in L/C Disbursements of any other Lender, it shall be deemed
        simultaneously to have purchased from such other Lender at face value, and
        shall
        promptly pay to such other Lender the purchase
        price for, a participation in the Loans and participations in L/C Disbursements
        and accrued interest thereon of such other Lender, so that the benefit of
        all
        such payments shall be shared by the Lenders ratably in accordance with the
        aggregate amount of the principal of and accrued interest on their respective
        Loans and participations in L/C Disbursements; provided,
        however,
        that if
        any such purchase or purchases or adjustments shall be made pursuant to this
        Section 2.18 and the payment giving rise thereto shall thereafter be
        recovered, such purchase or purchases or adjustments shall be rescinded to
        the
        extent of such recovery and the purchase price or prices or adjustment restored
        without interest. The Borrower expressly consents to the foregoing arrangements
        and agrees that any Lender holding a participation in a Loan or L/C Disbursement
        deemed to have been so purchased may exercise any and all rights of banker’s
        lien, setoff or counterclaim with respect to any and all moneys owing by
        the
        Borrower to such Lender by reason thereof as fully as if such Lender had
        made a
        Loan directly to the Borrower in the amount of such
        participation.

    

     

    SECTION
      2.19. Payments.(a)
      The
      Borrower shall make each payment (including principal of or interest on any
      Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder and
      under any other Loan Document not later than 12:00 (noon), New York City
      time, on the date when due in immediately available dollars, without setoff,
      defense or counterclaim. Each such payment (other than (i) Issuing Bank
      Fees, which shall be paid directly to the Issuing Bank, and (ii) principal
      of and interest on Swingline Loans, which shall be paid directly to the
      Swingline Lender except as otherwise provided in Section 2.22(e)) shall be
      made to the Administrative Agent at its offices at Eleven Madison Avenue, New
      York, NY 10010. The Administrative Agent shall promptly distribute to each
      Lender any payments received by the Administrative Agent on behalf of such
      Lender.

     

    (b)
      Except as otherwise expressly provided herein, whenever any payment (including
      principal of or interest on any Borrowing or any Fees or other amounts)
      hereunder or under any other Loan Document shall become due, or otherwise would
      occur, on a day that is not a Business Day, such payment may be made on the
      next
      succeeding Business Day, and such extension of time shall in such case be
      included in the computation of interest or Fees, if applicable.

     

    (c)
      Unless
      the Administrative Agent shall have received notice from the Borrower prior
      to
      the date on which any payment is due to the Administrative Agent for the account
      of the Lenders or the Issuing Bank hereunder that the Borrower will not make
      such payment, the Administrative Agent may assume that the Borrower has made
      such payment on such date in accordance herewith and may, in reliance upon
      such
      assumption, distribute to the Lenders or the Issuing Bank, as the case may
      be,
      the amount due. In such event, if the Borrower does not in fact make such
      payment, then each of the Lenders or the Issuing Bank, as the case may be,
      severally agrees to repay to the Administrative 

    
      
        
        

      

      
        51

        
          

        

      

      
        
        

      

      Agent
        forthwith on demand the amount so distributed to such Lender, and to pay
        interest thereon, for each day from and including the date such amount is
        distributed to it to but excluding the date of payment to the Administrative
        Agent, at a rate determined by the Administrative Agent to represent its
        cost of
        overnight or short-term funds (which determination shall be conclusive absent
        manifest error).

    

     

    SECTION
      2.20. Taxes.
      (a)
      Any
      and
      all payments by or on account of any obligation of the Borrower or any other
      Loan Party hereunder or under any other Loan Document shall be made free and
      clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided
      that, if
      the Borrower or any other Loan Party shall be required to deduct any Indemnified
      Taxes or 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) the
      Administrative Agent, Lender or Issuing Bank (as the case may be) receives
      an
      amount equal to the sum it would have received had no such deductions been
      made,
      (ii) the Borrower or such Loan Party shall make such deductions and
      (iii) the Borrower or such Loan Party shall pay the full amount deducted to
      the relevant Governmental Authority in accordance with applicable
      law.

     

    (b)
      In
      addition, the Borrower shall pay any Other Taxes to the relevant Governmental
      Authority in accordance with applicable law.

     

    (c)
      The
      Borrower shall indemnify the Administrative Agent, each Lender and the Issuing
      Bank, within 10 days after written demand therefor, for the full amount of
      any
      Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender
      or the Issuing Bank, as the case may be, on or with respect to any payment
      by or
      on account of any obligation of the Borrower or any other Loan Party hereunder
      or under any other Loan Document (including Indemnified Taxes or Other Taxes
      imposed or asserted on or attributable to amounts payable under this Section)
      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,
      unless such liability results from or is with respect to any period prior to
      the
      date that is 120 days prior to the date on which the Administrative Agent,
      the
      applicable Lender or the Issuing Bank makes a claim hereunder if the
      Administrative Agent, the applicable Lender or the Issuing Bank prior to such
      date knew or could reasonably have been expected to know of the circumstances
      giving rise to the claim hereunder or the fact that such circumstances would
      result in the claim hereunder. A certificate setting forth in reasonable detail
      the status and amount of such payment or liability delivered to the Borrower
      by
      a Lender or the Issuing Bank, or by the Administrative Agent on behalf of
      itself, a Lender or the Issuing Bank, shall be conclusive absent manifest
      error.

     

    (d)
      As
      soon
      as practicable after any payment of Indemnified Taxes or Other Taxes by the
      Borrower or any other Loan Party to a Governmental Authority, the Borrower
      shall
      deliver to the Administrative Agent the original or a certified copy of a
      receipt issued by such Governmental Authority evidencing such payment, a copy
      of
      the 

    
      
        
        

      

      
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      return
        reporting such payment or other evidence of such payment reasonably satisfactory
        to the Administrative Agent.

    

     

    (e)
      Any
      Lender that is entitled to an exemption from or reduction of withholding or
      backup withholding Tax under the law of the jurisdiction in which the Borrower
      is located, or any treaty to which such jurisdiction is a party, with respect
      to
      payments under this Agreement shall deliver to the Borrower (with a copy to
      the
      Administrative Agent), at the time or times prescribed by applicable law, such
      properly completed and executed documentation prescribed by applicable law
      or
      reasonably requested by the Borrower as will
      permit such payments to be made without or at a reduced rate of withholding
      or
      backup withholding.

     

    (f)
      If
      the
      Administrative Agent, a Lender or the Issuing Bank determines, in its sole
      discretion, that it has received a refund (including by way of offset) of any
      Indemnified Taxes or Other Taxes as to which it has been indemnified by the
      Borrower or with
      respect to which the Borrower has paid additional amounts pursuant to this
      Section, it shall pay to the Borrower an amount equal to such refund (but only
      to the extent of indemnity payments made, or additional amounts paid, by the
      Borrower under this Section with respect to the Indemnified Taxes or Other
      Taxes
      giving rise to such refund), net of all out-of-pocket expenses of the
      Administrative Agent, such Lender or the Issuing Bank, 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 the Borrower, upon the
      request of the Administrative Agent, such Lender or the Issuing Bank, agrees
      to
      repay the amount paid over to the Borrower (plus any penalties, interest or
      other charges imposed by the relevant Governmental Authority) to the
      Administrative Agent, such Lender or the Issuing Bank in the event the
      Administrative Agent, such Lender or the Issuing Bank is required to repay
      such
      refund to such Governmental Authority. This paragraph shall not be construed
      to
      require the Administrative Agent, any Lender or the Issuing Bank to make
      available its tax returns (or any other information relating to its taxes that
      it deems confidential) to the Borrower or any other person.

     

    SECTION
      2.21. Assignment
      of Commitments Under Certain Circumstances; Duty to
      Mitigate.
      (a)
      In
      the
      event (i) any Lender or the Issuing Bank delivers a certificate requesting
      compensation pursuant to Section 2.14, (ii) any Lender or the Issuing
      Bank delivers a notice described in Section 2.15, (iii) the Borrower
      is required to pay any additional amount to any Lender or the Issuing Bank
      or
      any Governmental Authority on account of any Lender or the Issuing Bank pursuant
      to Section 2.20 or (iv) any Lender refuses to consent to any amendment,
      waiver or other modification of any Loan Document requested by the Borrower
      that
      requires the consent of a greater percentage of the Lenders than the Required
      Lenders and such amendment, waiver or other modification is consented to by
      the
      Required Lenders, the Borrower may, at its sole expense and effort (including
      with respect to the processing and recordation fee referred to in
      Section 9.04(b)), upon notice to such Lender or the Issuing Bank, as the
      case may be, and the Administrative Agent, require such Lender or the Issuing
      Bank to transfer and assign, without recourse (in accordance with and subject
      to
      the restrictions contained in Section 9.04), all of its interests, rights
      and obligations under this Agreement (or, in the case of clause (iv) above,
      all
      of its interests, rights and obligation with respect to the 

    
      
        
        

      

      
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      Class
        of
        Loans or Commitments that is the subject of the related consent, amendment,
        waiver or other modification) to an Eligible Assignee that shall assume such
        assigned obligations and, with respect to clause (iv) above, shall consent
        to
        such requested amendment, waiver or other modification of any Loan Documents
        (which Eligible Assignee may be another Lender, if a Lender accepts such
        assignment); provided
        that
        (x) such assignment shall not conflict with any law, rule or regulation or
        order of any court or other Governmental Authority having jurisdiction,
        (y) the Borrower shall have received the prior written consent of the
        Administrative Agent (and, if a Revolving Credit Commitment is being assigned,
        of the Issuing Bank and the Swingline Lender), which consents shall not
        unreasonably be withheld or delayed, and (z) the Borrower or such Eligible
        Assignee shall have paid to the affected Lender or the Issuing Bank in
immediately
        available funds an amount equal to the sum of the principal of and interest
        accrued to the date of such payment on the outstanding Loans or L/C
        Disbursements of such Lender or the Issuing Bank, respectively, plus all
        Fees
        and other amounts accrued for the account of such Lender or the Issuing Bank
        hereunder with respect thereto (including any amounts under Sections 2.14
        and 2.16); provided
        further
        that, if
        prior to any such transfer and assignment the circumstances or event that
        resulted in such Lender’s or the Issuing Bank’s claim for compensation under
        Section 2.14, notice under Section 2.15 or the amounts paid pursuant
        to Section 2.20, as the case may be, cease to cause such Lender or the
        Issuing Bank to suffer increased costs or reductions in amounts received
        or
        receivable or reduction in return on capital, or cease to have the consequences
        specified in Section 2.15, or cease to result in amounts being payable
        under Section 2.20, as the case may be (including as a result of any action
        taken by such Lender or the Issuing Bank pursuant to paragraph (b) below),
        or if such Lender or the Issuing Bank shall waive its right to claim further
        compensation under Section 2.14 in respect of such circumstances or event
        or shall withdraw its notice under Section 2.15 or shall waive its right to
        further payments under Section 2.20 in respect of such circumstances or
        event or shall consent to the proposed amendment, waiver, consent or other
        modification, as the case may be, then such Lender or the Issuing Bank shall
        not
        thereafter be required to make any such transfer and assignment hereunder.
        Each
        Lender hereby grants to the Administrative Agent an irrevocable power of
        attorney (which power is coupled with an interest) to execute and deliver,
        on
        behalf of such Lender as assignor, any Assignment and Acceptance necessary
        to
        effectuate any assignment of such Lender’s interests hereunder in the
        circumstances contemplated by this Section 2.21(a).

    

     

    (b)
      If
      (i) any Lender or the Issuing Bank shall request compensation under
      Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice
      described in Section 2.15 or (iii) the Borrower is required to pay any
      additional amount to any Lender or the Issuing Bank or any Governmental
      Authority on account of any Lender or the Issuing Bank, pursuant to
      Section 2.20, then such Lender or the Issuing Bank shall use reasonable
      efforts (which shall not require such Lender or the Issuing Bank to incur an
      unreimbursed loss or unreimbursed cost or expense or otherwise take any action
      inconsistent with its internal policies or legal or regulatory restrictions
      or
      suffer any disadvantage or burden deemed by it to be significant) (x) to
      file any certificate or document reasonably requested in writing by the Borrower
      or (y) to assign its rights and delegate and transfer its obligations
      hereunder to another of its offices, branches or Affiliates, if such filing
      or
      assignment would reduce its claims for compensation under 

    
      
        
        

      

      
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      Section 2.14
        or enable it to withdraw its notice pursuant to Section 2.15 or would
        reduce amounts payable pursuant to Section 2.20, as the case may be, in the
        future. The Borrower hereby agrees to pay all reasonable costs and expenses
        incurred by any Lender or the Issuing Bank in connection with any such filing
        or
        assignment, delegation and transfer.

    

     

    SECTION
      2.22. Swingline
      Loans.
      (a)
      Swingline
      Commitment.
      Subject
      to the terms and conditions and relying upon the representations and warranties
      herein set forth, the Swingline Lender agrees to make loans to the Borrower
      at
      any time and from time to time after the Closing Date and until the earlier
      of
      the Revolving Credit Maturity Date and the termination of the Revolving Credit
      Commitments, in an aggregate principal amount at any time outstanding that
      will
      not result in (i) the aggregate principal amount of all Swingline Loans
      exceeding $10,000,000 in the aggregate or (ii) the Aggregate Revolving
      Credit Exposure, after giving effect to any Swingline Loan, exceeding the Total
      Revolving Credit Commitment. Each Swingline Loan shall be in a principal amount
      that is an integral multiple of $250,000. The Swingline Commitment may be
      terminated or reduced from time to time as provided herein. Within the foregoing
      limits, the Borrower may borrow, pay or prepay and reborrow Swingline Loans
      hereunder, subject to the terms, conditions and limitations set forth
      herein.

     

    (b)
      Swingline Loans. The Borrower shall notify the
      Swingline Lender by fax, or by telephone (promptly confirmed by fax), not later
      than 10:00 a.m., New York City time, on the day of a proposed Swingline Loan.
      Such notice shall be delivered on a Business Day, shall be irrevocable and
      shall
      refer to this Agreement and shall specify the requested date (which shall be
      a
      Business Day) and amount of such Swingline Loan and the wire transfer
      instructions for the account of the Borrower to which the proceeds of the
      Swingline Loan should be disbursed. The Swingline Lender shall make each
      Swingline Loan by wire transfer to the account specified in such
      request.

     

    (c)
      Prepayment.
      The
      Borrower shall have the right at any time and from time to time to prepay any
      Swingline Loan, in whole or in part, upon giving written or fax notice (or
      telephone notice promptly confirmed by written, or fax notice) to the Swingline
      Lender before 12:00 (noon), New York City time, on the date of prepayment
      at the Swingline Lender’s address for notices specified in
      Section 9.01.

     

    (d)
      Interest.
      Each
      Swingline Loan shall be an ABR Loan and, subject to the provisions of
      Section 2.07, shall bear interest as provided in
      Section 2.06(a).

     

    (e)
      Participations.
      The
      Swingline Lender may by written notice given to the Administrative Agent not
      later than 1:00 p.m., New York City time, on any Business Day require the
      Revolving Credit Lenders to acquire participations on such Business Day in
      all
      or a portion of the Swingline Loans outstanding. Such notice shall specify
      the
      aggregate amount of Swingline Loans in which Revolving Credit Lenders will
      participate. The Administrative Agent will, promptly upon receipt of such
      notice, give notice to each Revolving Credit Lender, specifying in such notice
      such Lender’s Revolving Facility Pro Rata Percentage of such Swingline Loan or
      Loans. In furtherance of the foregoing, each Revolving Credit Lender hereby
      absolutely and unconditionally 

    
      
        
        

      

      
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      agrees,
        upon receipt of notice as provided above, to pay to the Administrative Agent,
        for the account of the Swingline Lender, such Revolving Credit Lender’s
        Revolving Facility Pro Rata Percentage of such Swingline Loan or Loans. Each
        Revolving Credit Lender acknowledges and agrees that its obligation to acquire
        participations in Swingline Loans pursuant to this paragraph is absolute
        and
        unconditional and shall not be affected by any circumstance whatsoever,
        including the occurrence and continuance of a Default or an Event of Default,
        and that each such payment shall be made without any offset, abatement,
        withholding or reduction whatsoever. Each Revolving Credit Lender shall comply
        with its obligation under this paragraph by wire transfer of immediately
        available funds, in the same manner as provided in Section 2.02(c) with
        respect to Loans made by such Lender (and Section 2.02(c) shall apply,
mutatis
        mutandis,
        to the
        payment obligations of the Lenders) and the Administrative Agent shall promptly
        pay to the Swingline Lender the amounts so received by it from the Lenders.
        The
        Administrative Agent shall notify the Borrower of any participations in any
        Swingline Loan acquired pursuant to this paragraph and thereafter payments
        in
        respect of such Swingline Loan shall
        be
        made to the Administrative Agent and not to the Swingline Lender. Any amounts
        received by the Swingline Lender from the Borrower (or other person on behalf
        of
        the Borrower) in respect of a Swingline Loan after receipt by the Swingline
        Lender of the proceeds of a sale of participations therein shall be promptly
        remitted to the Administrative Agent; any such amounts received by the
        Administrative Agent shall be promptly remitted by the Administrative Agent
        to
        the Lenders that shall have made their payments pursuant to this paragraph
        and
        to the Swingline Lender, as their interests may appear. The purchase of
        participations in a Swingline Loan pursuant to this paragraph shall not relieve
        the Borrower (or other person liable for obligations of the Borrower) of
        any
        default in the payment thereof.

    

     

    SECTION
      2.23. Letters
      of Credit.
      (a)
      General.
      The
      Borrower may request the issuance of a Letter of Credit for its own account
      or
      for the account of any of the Subsidiaries (in which case the Borrower and
      such
      Subsidiary shall be co-applicants with respect to such Letter of Credit), in
      a
      form reasonably acceptable to the Administrative Agent and the Issuing Bank,
      at
      any time and from time to time prior to the date that is 30 days prior to
      (i) the Revolving Credit Maturity Date (in the case of RF Letters of
      Credit), (ii) the PF Maturity Date (in the case of PF Letters of Credit) or
      (iii) the Incremental PF Maturity Date (in the case of Other PF Letters of
      Credit). This Section shall not be construed to impose an obligation upon the
      Issuing Bank to issue any Letter of Credit that is inconsistent with the terms
      and conditions of this Agreement.

     

    (b)
      Notice of Issuance, Amendment, Renewal, Extension; Certain
      Conditions. In order to request the issuance of a Letter
      of Credit (or to amend, renew or extend an existing Letter of Credit), the
      Borrower shall hand deliver or fax to the Issuing Bank and the Administrative
      Agent (reasonably in advance of the requested date of issuance, amendment,
      renewal or extension) a notice requesting the issuance of a Letter of Credit,
      or
      identifying the Letter of Credit to be amended, renewed or extended, whether
      such Letter of Credit shall be an RF Letter of Credit, a PF Letter of Credit
      or
      an Other PF Letter of Credit, the date of issuance, amendment, renewal or
      extension, the date on which such Letter of Credit is to expire (which shall
      comply with paragraph (c) below), the amount of such Letter of Credit, the
      name and address of the beneficiary thereof, 

    
      
        
        

      

      
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      whether
        such Letter of Credit (in the case of requests for a PF Letter of Credit
        or an
        Other PF Letter of Credit) is requested for the purpose of securing the
        Borrower’s or any Subsidiary’s obligations with respect to workers’ compensation
        claims that at the time of such request are secured by Restricted Cash, and
        such
        other information as shall be necessary to prepare such Letter of Credit.
        The
        Issuing Bank shall promptly (i) notify the Administrative Agent in writing
        of the amount and expiry date of each Letter of Credit issued by it and
        (ii) provide a copy of each such Letter of Credit (and any amendments,
        renewals or extensions thereof) to the Administrative Agent. An RF Letter
        of
        Credit shall be issued, amended, renewed or extended only if, and upon issuance,
        amendment, renewal or extension of each such Letter of Credit the Borrower
        shall
        be deemed to represent and warrant that, after giving effect to such issuance,
        amendment, renewal or extension (i) the RF L/C Exposure shall not exceed
        $15,000,000 and (ii) the Aggregate Revolving Credit Exposure shall not
        exceed the Total Revolving Credit Commitment. A PF Letter of Credit shall
        be
        issued, amended, renewed or extended only if, and upon issuance, amendment,
        renewal or extension of each such PF Letter of Credit the Borrower shall
        be
        deemed to represent and warrant that, after giving effect to such issuance,
        amendment, renewal or extension (i) the sum of the PF L/C Exposure and the
outstanding
        PF L/C Loans shall not exceed the aggregate PF L/C Commitments and (ii) the
        aggregate PF L/C Exposure shall not exceed the aggregate Credit-Linked Deposits.
        An Other PF Letter of Credit shall be issued, amended, renewed or extended
        only
        if, and upon issuance, amendment, renewal or extension of such Other PF Letter
        of Credit the Borrower shall be deemed to represent and warrant that, after
        giving effect to such issuance, amendment, renewal or extension, (i) the
        sum of the Other PF L/C Exposure and the outstanding Other PF L/C Loans shall
        not exceed the aggregate Incremental PF L/C Commitments in respect of Other
        Credit-Linked Deposits and (ii) the aggregate Other PF L/C Exposure shall
        not exceed the aggregate Other Credit-Linked Deposits. If the Borrower shall
        fail to specify whether any requested Letter of Credit is to be an RF Letter
        of
        Credit, a PF Letter of Credit or an Other PF Letter of Credit, then the
        requested Letter of Credit shall be deemed to be first, an Other PF Letter
        of
        Credit and then a PF Letter of Credit, in each case unless the issuance thereof
        would not be permitted by the foregoing provisions of this paragraph, in
        which
        case it shall be deemed to be an RF Letter of Credit.

    

     

    (c)
      Expiration
      Date.
      Each
      Letter of Credit shall expire at the close of business on the earlier of the
      date one year after the date of the issuance of such Letter of Credit and the
      date that is five Business Days prior to (i) the Revolving Credit
      Maturity Date (in the case of RF Letters of Credit), (ii) the PF Maturity
      Date (in the case of PF Letters of Credit) and (iii) the Incremental PF
      Maturity Date (in the case of Other PF Letters of Credit), unless such Letter
      of
      Credit expires by its terms on an earlier date; provided,
      however,
      that a
      Letter of Credit may, upon the request of the Borrower, include a provision
      whereby such Letter of Credit shall be renewed automatically for additional
      consecutive periods of 12 months or less (but not beyond the date that is five
      Business Days prior to (i) the Revolving Credit Maturity Date (in the case
      of RF Letters of Credit), (ii) the PF Maturity Date (in the case of PF
      Letters of Credit) or (iii) the Incremental PF Maturity Date (in the case
      of Other PF Letters of Credit)) unless the Issuing Bank notifies the beneficiary
      thereof at least 30 days (or such longer period as may be specified in such

    
      
        
        

      

      
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      Letter
        of
        Credit) prior to the then-applicable expiration date that such Letter of
        Credit
        will not be renewed.

    

     

    (d)
      Participations.
      By the
      issuance of a Letter of Credit and without any further action on the part of
      the
      Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving
      Credit Lender, PF Lender or Incremental PF Lender, as the case may be, and
      each
      such Lender hereby acquires from the Issuing Bank, a participation in such
      Letter of Credit equal to such Lender’s Revolving Facility Pro Rata Percentage
      or applicable PF Pro Rata Percentage, as applicable, of the aggregate amount
      available to be drawn under such Letter of Credit, effective upon the issuance
      of such Letter of Credit. In consideration and in furtherance of the foregoing,
      (i) each Revolving Credit Lender hereby absolutely and unconditionally
      agrees to pay to the Administrative Agent, for the account of the Issuing Bank,
      such Lender’s Revolving Facility Pro Rata Percentage of each L/C Disbursement in
      respect of an RF Letter of Credit made by the Issuing Bank and not reimbursed
      by
      the Borrower (or, if applicable, another party pursuant to its obligations
      under
      any other Loan Document) forthwith on the date due as provided in
      Section 2.02(f), in the case of RF Letters of Credit, and (ii) each PF
      Lender and Incremental PF Lender, if any, hereby absolutely and unconditionally
      authorizes the Administrative Agent to pay the Issuing Bank such Lender’s
      applicable PF Pro Rata Percentage of each L/C Disbursement made by the Issuing
      Bank and not reimbursed by the
      Borrower from the applicable Credit-Linked Deposits on deposit with the
      Administrative Agent in the applicable Credit-Linked Deposit Account forthwith
      on the date due as provided by Section 2.02(g). Each Revolving Credit
      Lender, each PF Lender and each Incremental PF Lender, if any, acknowledges
      and
      agrees that its obligation to acquire participations pursuant to this paragraph
      in respect of Letters of Credit is absolute and unconditional and shall not
      be
      affected by any circumstance whatsoever, including the occurrence and
      continuance of a Default or an Event of Default, and that each such payment
      shall be made without any offset, abatement, withholding or reduction
      whatsoever.

     

    (e)
      Reimbursement.
      If the
      Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit,
      then, subject to Section 2.02(f) or 2.02(g), as applicable, the Borrower
      shall pay to the Administrative Agent an amount equal to such L/C Disbursement
      on the same Business Day that the Borrower shall have received notice from
      the
      Issuing Bank that payment of such draft will be made, or, if the Borrower shall
      have received such notice later than 10:00 a.m., New York City time, on any
      Business Day, not later than 10:00 a.m., New York City time, on the immediately
      following Business Day.

     

    (f)
      Obligations
      Absolute.
      The
      Borrower’s obligations to reimburse L/C Disbursements as provided in
      paragraph (e) above shall be absolute, unconditional and irrevocable, and
      shall be performed strictly in accordance with the terms of this Agreement,
      under any and all circumstances whatsoever, and irrespective of:

     

    (i)
      any
      lack
      of validity or enforceability of any Letter of Credit or any Loan Document,
      or
      any term or provision therein;

    
      
        
        

      

      
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    (ii)
      any
      amendment or waiver of or any consent to departure from all or any of the
      provisions of any Letter of Credit or any Loan Document;

     

    (iii)
      the
      existence of any claim, setoff, defense or other right that the Borrower, any
      other party guaranteeing, or otherwise obligated with, the Borrower, any
      Subsidiary or other Affiliate thereof or any other person may at any time have
      against the beneficiary under any Letter of Credit, the Issuing Bank, the
      Administrative Agent or any Lender or any other person, whether in connection
      with this Agreement, any other Loan Document or any other related or unrelated
      agreement or transaction;

     

    (iv)
      any
      draft
      or other document presented under a Letter of Credit proving to be forged,
      fraudulent, invalid or insufficient in any respect or any statement therein
      being untrue or inaccurate in any respect;

     

    (v)
      payment
      by the Issuing Bank under a Letter of Credit against presentation of a draft
      or
      other document that does not comply with the terms of such Letter of Credit;
      and

     

    (vi)
      any
      other
      act or omission to act or delay of any kind of the Issuing Bank, the Lenders,
      the Administrative Agent or any other person or any other event or circumstance
      whatsoever, whether or not similar to any of the foregoing, that
      might, but for the provisions of this Section, constitute a legal or equitable
      discharge of the Borrower’s obligations hereunder.

     

    Without
      limiting the generality of the foregoing, it is expressly understood and agreed
      that the absolute and unconditional obligation of the Borrower hereunder to
      reimburse L/C Disbursements will not be excused by the gross negligence or
      wilful misconduct of the Issuing Bank. However, the foregoing shall not be
      construed to excuse the Issuing Bank from liability to the Borrower to the
      extent of any direct damages (as opposed to consequential damages, claims in
      respect of which are hereby waived by the Borrower to the extent permitted
      by
      applicable law) suffered by the Borrower that are caused by the Issuing Bank’s
      gross negligence or wilful misconduct in determining whether drafts and other
      documents presented under a Letter of Credit comply with the terms thereof.
      It
      is further understood and agreed that the Issuing Bank may accept documents
      that
      appear on their face to be in order, without responsibility for further
      investigation, regardless of any notice or information to the contrary and,
      in
      making any payment under any Letter of Credit (i) the Issuing Bank’s
      exclusive reliance on the documents presented to it under such Letter of Credit
      as to any and all matters set forth therein, including reliance on the amount
      of
      any draft presented under such Letter of Credit, whether or not the amount
      due
      to the beneficiary thereunder equals the amount of such draft and whether or
      not
      any document presented pursuant to such Letter of Credit proves to be
      insufficient in any respect, if such document on its face appears to be in
      order, and whether or not any other statement or any other document presented
      pursuant to such Letter of Credit proves to be forged or invalid or any
      statement therein proves to be inaccurate or untrue in any respect whatsoever
      and (ii) any noncompliance in any immaterial respect of the documents
      presented under such Letter of Credit with the terms 

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

      thereof
        shall, in each case, be deemed not to constitute gross negligence or wilful
        misconduct of the Issuing Bank.

    

     

    (g)
      Disbursement Procedures. The Issuing Bank
      shall, promptly following its receipt thereof, examine all documents purporting
      to represent a demand for payment under a Letter of Credit. The Issuing Bank
      shall as promptly as possible give telephonic notification, confirmed by fax,
      to
      the Administrative Agent and the Borrower of such demand for payment and whether
      the Issuing Bank has made or will make an L/C Disbursement thereunder;
provided that any failure to give or delay in giving such notice shall
      not relieve the Borrower of its obligation to reimburse the Issuing Bank and
      the
      Revolving Credit Lenders, the PF Lenders or the Incremental PF Lenders, as
      the
      case may be, with respect to any such L/C Disbursement.

     

    (h)
      Interim
      Interest.
      If the
      Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit,
      then, unless the Borrower shall reimburse such L/C Disbursement in full on
      such
      date, the unpaid amount thereof shall bear interest for the account of the
      Issuing Bank, for each day from and including the date of such L/C Disbursement,
      to but excluding the earlier of (i) the date of payment by the Borrower or
      (ii) (x) in the case of an RF Letter of Credit, the date on which
      interest shall commence to accrue thereon as provided in Section 2.02(f),
      and (y) in the case of a PF Letter of Credit or Other PF Letter of Credit,
      the
      date of payment by the Administrative Agent as provided in Section 2.02(g),
      at the rate per annum that would apply to such amount if such amount were an
      ABR
      Revolving Loan.

     

    (i)
      Resignation
      or Removal of the Issuing Bank.
      The
      Issuing Bank may resign at any time by giving 30 days’ prior written notice to
      the Administrative Agent, the Lenders and the Borrower, and may be removed
      at
      any time by the Borrower by notice to the Issuing Bank, the Administrative
      Agent
      and the Lenders. Upon the acceptance of any appointment as the Issuing Bank
      hereunder by a Lender that shall agree to serve as successor Issuing Bank,
      such
      successor shall succeed to and become vested with all the interests, rights
      and
      obligations of the retiring Issuing Bank. At the time such removal or
      resignation shall become effective, the Borrower shall pay all accrued and
      unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any
      appointment as the Issuing Bank hereunder by a successor Lender shall be
      evidenced by an agreement entered into by such successor, in a form satisfactory
      to the Borrower and the Administrative Agent, and, from and after the effective
      date of such agreement, (i) such successor Lender shall have all the rights
      and obligations of the previous Issuing Bank under this Agreement and the other
      Loan Documents and (ii) references herein and in the other Loan Documents
      to the term “Issuing Bank” shall be deemed to refer to such successor or to any
      previous Issuing Bank, or to such successor and all previous Issuing Banks,
      as
      the context shall require. After the resignation or removal of the Issuing
      Bank
      hereunder, the retiring Issuing Bank shall remain a party hereto and shall
      continue to have all the rights and obligations of an Issuing Bank under this
      Agreement and the other Loan Documents with respect to Letters of Credit issued
      by it prior to such resignation or removal, but shall not be required to issue
      additional Letters of Credit.

    
      
        
        

      

      
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    (j)
      Cash
      Collateralization.
      If any
      Event of Default shall occur and be continuing, the Borrower shall, on the
      Business Day it receives notice from the Administrative Agent or the Required
      Lenders (or, if the maturity of the Loans has been accelerated, Revolving Credit
      Lenders holding participations in outstanding Letters of Credit representing
      greater than 50% of the aggregate undrawn amount of all outstanding RF Letters
      of Credit) thereof and of the amount to be deposited, deposit in an account
      with
      the Collateral Agent, for the benefit of the Revolving Credit Lenders, an amount
      in cash equal to the RF L/C Exposure as of such date. Such deposit shall be
      held
      by the Collateral Agent as collateral for the payment and performance of the
      Obligations. The Collateral Agent shall have exclusive dominion and control,
      including the exclusive right of withdrawal, over such account. Other than
      any
      interest earned on the investment of such deposits in Permitted Investments,
      which investments shall be made at the option and sole discretion of the
      Collateral Agent, such deposits shall not bear interest. Interest or profits,
      if
      any, on such investments shall accumulate in such account. Moneys in such
      account shall (i) automatically be applied by the Administrative Agent to
      reimburse the Issuing Bank for L/C Disbursements in respect of RF Letters of
      Credit for which it has not been reimbursed, (ii) be held for the
      satisfaction of the reimbursement obligations of the Borrower for the RF L/C
      Exposure at such time and (iii) if the maturity of the Loans has been
      accelerated (but subject to the consent of Revolving Credit Lenders holding
      participations in outstanding Letters of Credit representing greater than 50%
      of
      the aggregate undrawn amount of all outstanding RF Letters of Credit), be
      applied to satisfy the Obligations. If the Borrower is required to provide
      an
      amount of cash collateral hereunder as a result of the occurrence of an Event
      of
      Default, such amount (to the extent not applied as aforesaid) shall be returned
      to the Borrower within three Business Days after all Events of Default have
      been
      cured or waived.

     

    (k)
      Additional
      Issuing Banks.
      The
      Borrower may, at any time and from time to time with the consent of the
      Administrative Agent (which consent shall not be unreasonably withheld or
      delayed) and such Lender, designate one or more additional Lenders to act as
      an
      issuing bank under the terms of this Agreement. Any Lender designated as an
      issuing bank pursuant to this paragraph (k) shall be deemed to be an “Issuing
      Bank” (in addition to being a Lender) in respect of Letters of Credit issued or
      to be issued by such Lender, and, with respect to such Letters of Credit, such
      term shall thereafter apply to the other Issuing Bank and such
      Lender.

     

    (l)
      Credit-Linked
      Deposit Account. (i)
      On
      the
      Closing Date and subject to the satisfaction of the conditions precedent set
      forth in Sections 4.01 and 4.02, each PF Lender shall pay to the
      Administrative Agent such PF Lender’s Credit-Linked Deposit. Subject to the
      satisfaction of the conditions precedent to effectiveness of any Incremental
      PF
      L/C Assumption Agreement, each Incremental PF Lender shall pay to the
      Administrative Agent such Incremental PF Lender’s Credit-Linked Deposit or Other
      Credit-Linked Deposit, as required by the Incremental PF L/C Assumption
      Agreement. The Credit-Linked Deposits shall be held by the Administrative Agent
      in (or credited to) the Credit-Linked Deposit Account, and no person other
      than
      the Administrative Agent shall have a right of withdrawal from the Credit-Linked
      Deposit Account or any other right or power with respect to the Credit-Linked
      Deposits. Notwithstanding anything herein to the contrary, the funding
      obligation of each PF Lender or Incremental PF 

    
      
        
        

      

      
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      Lender
        in
        respect of its participation in PF Letters of Credit or Other PF Letters
        of
        Credit shall be satisfied in full upon the funding of its Credit-Linked Deposit
        or Other Credit-Linked Deposit, as the case may be.

    

     

    (ii)
      Each
      of
      the Administrative Agent, the Issuing Bank, each PF Lender and each Incremental
      PF Lender hereby acknowledges and agrees that (x) each PF Lender or
      Incremental PF Lender, as the case may be, is funding its Credit-Linked Deposit
      or Other Credit-Linked Deposit to the Administrative Agent for application
      in
      the manner contemplated by Sections 2.02(g) and 2.23(d) and (y) the
      Administrative Agent may invest the Credit-Linked Deposits and Other
      Credit-Linked Deposits in such deposit accounts as may be determined from time
      to time by the Administrative Agent. The Administrative Agent hereby agrees
      to
      pay to each PF Lender or Incremental PF Lender, as the case may be, on each
      Interest Payment Date for the Credit-Linked Deposits and Other Credit-Linked
      Deposits, interest (computed on the basis of the actual number of days elapsed
      over a year of 360 days) on the amount of such PF Lender’s or Incremental PF
      Lender’s PF Pro Rata Percentage or Other PF Pro Rata Percentage, respectively,
      of the aggregate amount of the Credit-Linked Deposits or Other Credit-Linked
      Deposits, respectively, during such Interest Period at a rate per annum equal
      to
      the LIBO Rate for such Interest Period less 10 basis points. With respect to
      any
      Interest Period during which a PF L/C Loan or Other PF L/C Loan is deemed made,
      the Administrative Agent shall determine the amount of interest payable by
      the
      Borrower on such Loan for the portion of such Interest Period during which
      such
      Loan is outstanding pursuant to Section 2.02(h) and the amount of interest
      payable by the Administrative Agent on the Credit-Linked Deposits or Other
      Credit-Linked Deposits during such Interest Period, and such determination
      shall
      be conclusive absent manifest error. In
      addition, if on any Interest Payment Date for the Credit-Linked Deposits or
      Other Credit-Linked Deposits the Adjusted LIBO
      Rate
      for the Interest Period then ended would exceed the LIBO Rate for such Interest
      Period (as a result of the imposition of Statutory Reserves), then on such
      Interest Payment Date the Borrower will pay to the Administrative Agent in
      immediately available funds, for distribution to the Lenders in accordance
      with
      their PF Pro Rata Percentages or Other PF Pro Rata Percentages, as applicable,
      an amount equal to the additional interest that would have accrued on the
      Credit-Linked Deposits or Other Credit-Linked Deposits during such Interest
      Period had the Adjusted LIBO Rate been employed.

     

    (iii)
      The
      Borrower shall have no right, title or interest in or to the Credit-Linked
      Deposit Account or the Credit-Linked Deposits or Other Credit-Linked Deposits
      and no obligations with respect thereto other than as expressly provided in
      this
      Agreement. Without limiting the foregoing, the obligation to return the
      Credit-Linked Deposits and Other Credit-Linked Deposits to the PF Lenders and
      the Incremental PF Lenders is solely an obligation of the Administrative
      Agent.

     

    SECTION
      2.24. Incremental
      Commitments.
      (a)
      The
      Borrower may, by written notice to the Administrative Agent from time to time,
      request Incremental Term Loan Commitments in an amount not to exceed the
      Incremental Term Loan Amount from one 

    
      
        
        

      

      
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      or
        more
        Incremental Term Lenders, which may include any existing Lender; provided
        that
        each
        Incremental Term Lender, if not already a Lender hereunder, shall be subject
        to
        the approval of the Administrative Agent (which approval shall not be
        unreasonably withheld or delayed). Such notice shall set forth (i) the
        amount of the Incremental Term Loan Commitments being requested (which shall
        be
        in minimum increments of $1,000,000 and a minimum amount of $10,000,000 or
        such
        lesser amount equal to the remaining Incremental Term Loan Amount),
        (ii) the date on which such Incremental Term Loan Commitments are requested
        to become effective (which shall not be less than 10 Business Days nor more
        than 60 days after the date of such notice), and (iii) whether such
        Incremental Term Loan Commitments are commitments to make additional Term
        Loans
        or commitments to make term loans with terms different from the Term Loans
        (“Other
        Term Loans”).

    

     

    (b)
      The
      Borrower may, by written notice to the Administrative Agent from time to time,
      request Incremental PF L/C Commitments in an amount not to exceed the
      Incremental PF L/C Amount from one or more Incremental PF Lenders, which may
      include any existing Lender; provided that each Incremental PF Lender,
      if not already a Lender hereunder, shall be subject to the approval of the
      Administrative Agent (which approval shall not be unreasonably withheld or
      delayed). Such notice shall set forth (i) the amount of the Incremental PF
      L/C Commitments being requested (which shall be in minimum increments of
      $1,000,000 and a minimum amount of $10,000,000 or such lesser amount equal
      to
      the remaining Incremental PF L/C Amount), (ii) the date on which such
      Incremental PF L/C Commitments are requested to become effective (which shall
      not be less than 10 Business Days nor more than 60 days after the date
      of such notice) and (iii) whether such Incremental PF L/C Commitments are to
      be
      PF L/C Commitments or commitments to make credit-linked deposits with terms
      different from the Credit-Linked Deposits (“Other Credit-Linked
      Deposits”).

     

    (c)
      The
      Borrower and each Incremental Lender shall execute and deliver to the
      Administrative Agent an Incremental Assumption Agreement and such other
documentation
      as the Administrative Agent shall reasonably specify to evidence the Incremental
      Commitment of such Incremental Lender. Each Incremental Assumption Agreement
      shall specify the terms of the Incremental Term Loans or Incremental PF L/C
      Commitments, as applicable, to be made thereunder; provided
      that,
      without the prior written consent of the Required Lenders, (i) the final
      maturity date of any Other Term Loans or Other PF L/C Loans shall be no earlier
      than the Term Loan Maturity Date and the PF Maturity Date, respectively,
      (ii) the average life to maturity of the Other Term Loans shall be no
      shorter than the average life to maturity of the Term Loans, and (iii) if
      the initial yield on such Other Term Loans or Other Credit-Linked Deposits
      (as
      determined by the Administrative Agent to be equal to the sum of (x) the margin
      above the Adjusted LIBO Rate on such Other Term Loans or the margin above the
      LIBO Rate used to calculate the commitment fee with respect to the Other
      Credit-Linked Deposits on deposit and (y) if, in the case of Other Term Loans,
      such Other Term Loans are initially made at a discount or, in the case of Other
      Term Loans and/or Other Credit-Linked Deposits, the Lenders making or depositing
      the same receive a fee directly or indirectly from the Borrower or any
      Subsidiary for doing so (the amount of such discount or fee, expressed as a
      percentage of the Other Term Loans or Other Credit-Linked Deposits,

    
      
        
        

      

      
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      being
        referred to herein as “OID”),
        the
        amount of such OID divided by the lesser of (A) the average life to maturity
        of
        such Other Term Loans or Other Credit-Linked Deposits and (B) four) exceeds
        by
        more than 50 basis points (the amount of such excess above 50 basis points
        being
        referred to herein as the “Yield
        Differential”)
        the
        Applicable Percentage then in effect for Eurodollar Term Loans, then the
        Applicable Percentage then in effect for Term Loans shall automatically be
        increased by the Yield Differential, effective upon the making of the Other
        Term
        Loans and/or the depositing of the Other Credit-Linked Deposits, for all
        purposes of this Agreement (including for purposes of determining the PF
        L/C
        Commitment Fee from time to time). The Administrative Agent shall promptly
        notify each Lender as to the effectiveness of each Incremental Assumption
        Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness
        of any Incremental Assumption Agreement, this Agreement shall be deemed amended
        to the extent (but only to the extent) necessary to reflect the existence
        and
        terms of the Incremental Commitments and the Incremental Term Loans or
        Incremental PF L/C Commitments, as applicable, evidenced
        thereby.

    

     

    (d)
      Notwithstanding
      the foregoing, no Incremental Commitment shall become effective under this
      Section 2.24 unless (i) on the date of such effectiveness, the
      conditions set forth in paragraphs (b)(ii) and (c) of Section 4.01
      shall be satisfied and the Administrative Agent shall have received a
      certificate to that effect dated such date and executed by a Financial Officer
      of the Borrower, and (ii) except as otherwise specified in the applicable
      Incremental Assumption Agreement, the Administrative Agent shall have received
      (with sufficient copies for each of the Incremental Term Lenders) legal
      opinions, board resolutions and other closing certificates reasonably requested
      by the Administrative Agent and consistent with those delivered on the Closing
      Date under Section 4.02.

     

    (e)
      Each
      of
      the parties hereto hereby agrees that the Administrative Agent may, in
      consultation with the Borrower, take any and all action as may be reasonably
      necessary to ensure that all Incremental Term Loans (other than Other Term
      Loans), when originally made, are included in each Borrowing of outstanding
      Term
      Loans on a pro rata basis. This may be accomplished by requiring each
      outstanding Eurodollar Term Borrowing
      to be converted into an ABR Term Borrowing on the date of each Incremental
      Term
      Loan, or by allocating a portion of each Incremental Term Loan to each
      outstanding Eurodollar Term Borrowing on a pro rata basis. Any conversion of
      Eurodollar Term Loans to ABR Term Loans required by the preceding sentence
      shall
      be subject to Section 2.16. If any Incremental Term Loan is to be allocated
      to an existing Interest Period for a Eurodollar Term Borrowing, then the
      interest rate thereon for such Interest Period and the other economic
      consequences thereof shall be as set forth in the applicable Incremental Term
      Loan Assumption Agreement. In addition, to the extent any Incremental Term
      Loans
      are not Other Term Loans, the scheduled amortization payments under
      Section 2.11(a)(i) required to be made after the making of such Incremental
      Term Loans shall be ratably increased by the aggregate principal amount of
      such
      Incremental Term Loans.

     

    (f)
      Each
      of
      the parties hereto hereby agrees that the Administrative Agent may take any
      and
      all actions as may be reasonably necessary to ensure that, after giving
      effect

    
      
        
        

      

      
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       to
        any Incremental PF L/C Commitment (other than an Incremental PF L/C Commitment
        in respect of Other Credit-Linked Deposits) pursuant to this Section 2.24,
        the
        outstanding PF L/C Loans (if any) and Credit-Linked Deposits are held by
        the PF
        Lenders in accordance with their new PF Pro Rata Percentages. This may be
        accomplished at the discretion of the Administrative Agent by taking any
        action
        comparable to the actions described in Section 2.24(e) above.

    

     

    ARTICLE
      III

     

    Representations
      and Warranties

     

    The
      Borrower represents and warrants to the Administrative Agent, the Collateral
      Agent, the Issuing Bank and each of the Lenders that:

     

    SECTION
      3.01. Organization;
      Powers.
      The
      Borrower and each of the Subsidiaries (a) is duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization, (b) has all requisite power and authority to own its property
      and assets and to carry on its business as now conducted and as proposed to
      be
      conducted, (c) is qualified to do business in, and is in good standing in,
      every jurisdiction where such qualification is required, except where the
      failure so to qualify could not reasonably be expected to result in a Material
      Adverse Effect, and (d) has the power and authority to execute, deliver and
      perform its obligations under each of the Loan Documents and each other
      agreement or instrument contemplated thereby to which it is or will be a party
      and, in the case of the Borrower, to borrow hereunder.

     

    SECTION
      3.02. Authorization.
      The
      Transactions (a) have been duly authorized by all requisite corporate and,
      if required, stockholder action and (b) will not (i) violate
      (A) any provision of law, statute, rule or regulation, or of the
      certificate or articles of incorporation or other constitutive documents or
      by-laws of the Borrower or any Subsidiary, (B) any order of any
      Governmental Authority or (C) any provision of any indenture, agreement or
      other instrument to which the Borrower or any Subsidiary is a party or by which
      any of them or any of their property is or may be bound, (ii) be in
      conflict with, result in a breach of or constitute (alone or with notice or
      lapse of time or both) a default under, or give rise to any right to accelerate
      or to require the prepayment, repurchase
      or redemption of any obligation under any such indenture, agreement or other
      instrument or (iii) result in the creation or imposition of any Lien upon
      or with respect to any property or assets now owned or hereafter acquired by
      the
      Borrower or any Subsidiary (other than any Lien created hereunder or under
      the
      Security Documents) and except, in each case, to the extent such violation,
      conflict, breach, default, right or lien could not reasonably be expected to
      result in a Material Adverse Effect. The execution, delivery and performance
      of
      the Loan Documents have been duly authorized by all requisite corporate and,
      if
      required, stockholder action and will not violate any provision of the
      certificate or articles of incorporation or other constitutive documents or
      bylaws of the Borrower or any Subsidiary.

     

    SECTION
      3.03. Enforceability.
      This
      Agreement has been duly executed and delivered by the Borrower and constitutes,
      and each other Loan Document when 

    
      
        
        

      

      
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      executed
        and delivered by each Loan Party thereto will constitute, a legal, valid
        and
        binding obligation of such Loan Party enforceable against such Loan Party
        in
        accordance with its terms.

    

     

    SECTION
      3.04. Governmental
      Approvals.
      No
      action, consent or approval of, registration or filing with or any other action
      by any Governmental Authority is or will be required in connection with the
      execution and delivery of the Merger Agreement, the Subordinated Note Documents
      and the Loan Documents, the consummation of the Transactions on the Closing
      Date, the Borrowings under the Loan Documents, the repayment of the Loans,
      or
      the granting of the Liens under the Loan Documents, except for (a) the
      filing of Uniform Commercial Code financing statements and filings with the
      United States Patent and Trademark Office and the United States Copyright
      Office, (b) recordation of the Mortgages, (c) such as have been made or
      obtained and are in full force and effect and (d) such actions, consents,
      approvals, registrations, filings or actions which the failure to obtain or
      make
      could not reasonably be expected to result in a Material Adverse
      Effect.

     

    SECTION
      3.05. Financial
      Statements.(a)
      The
      Borrower has heretofore furnished to the Lenders its consolidated balance sheets
      and related statements of income, stockholder’s equity and cash flows of each of
      (i) the Borrower and (ii) Harborside, in each case as of and for the
      2004, 2005 and 2006 fiscal years, audited by and accompanied by the opinion
      of
      Ernst & Young LLP (in the case of the Borrower) or PricewaterhouseCoopers
      LLP (in the case of Harborside), independent public accountants. Such financial
      statements present fairly, in all material respects, the financial condition
      and
      results of operations and cash flows of the Borrower and its consolidated
      subsidiaries and Harborside and its consolidated subsidiaries, as applicable,
      as
      of such dates and for such periods. Such balance sheets and the notes thereto
      disclose all material liabilities, direct or contingent, of the Borrower and
      its
      consolidated subsidiaries and Harborside and its consolidated subsidiaries,
      as
      applicable, as of the dates thereof. Such financial statements were prepared
      in
      accordance with GAAP applied on a consistent basis, subject, in the case of
      unaudited financial statements, to year-end audit adjustments and the absence
      of
      footnotes.

     

    (b)
      The
      Borrower has heretofore delivered to the Lenders (i)  its unaudited pro
      forma consolidated balance sheet as of December 31, 2006 and (ii) a
      certificate from its chief financial officer showing the calculation of
      Consolidated EBITDA for the 12-month period
      ending on December 31, 2006, in each case prepared giving effect to the
      Transactions as if they had occurred, with respect to such balance sheet, on
      such date and, with respect to such certificate, on the first day of the
      12-month period ending on such date. Such pro forma balance sheet and
      certificate have been prepared in good faith by the Borrower, based on the
      assumptions used to prepare the pro forma financial information contained in
      the
      Confidential Information Memorandum (which assumptions are believed by the
      Borrower on the date hereof and on the Closing Date to be reasonable), and
      present fairly, in all material respects, on a pro forma basis the estimated
      consolidated financial position of the Borrower and its consolidated
      subsidiaries as of such date and for such period, assuming that the Transactions
      had actually occurred at such date or at the beginning of such period, as the
      case may be, it being recognized by 

    
      
        
        

      

      
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      the
        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
      3.06. No
      Material Adverse Change.
      No
      event, change or condition has occurred that has had, or could reasonably be
      expected to have, a material adverse effect on the business, assets, operations,
      condition (financial or otherwise) or operating results of the Borrower and
      the
      Subsidiaries, taken as a whole, since December 31, 2006.

     

    SECTION
      3.07. Title
      to Properties; Possession Under Leases.
      (a)
      Each
      of
      the Borrower and the Subsidiaries has good and marketable title to, or valid
      leasehold interests in, all its material properties and assets (including all
      Mortgaged Property), except for minor defects in title that do not interfere
      in
      any material respect with its ability to conduct its business as currently
      conducted or to utilize such properties and assets for their intended purposes.
      All such material properties and assets are free and clear of Liens, other
      than
      Liens expressly permitted by Section 6.02.

     

    (b)
      Each
      of the Borrower and the Subsidiaries has complied with all material obligations
      under all material leases to which it is a party and all such leases are in
      full
      force and effect. Each of the Borrower and the Subsidiaries enjoys peaceful
      and
      undisturbed possession under all such material leases.

     

    (c)
      As
      of the
      Closing Date, the Borrower has not received any written notice of, and has
      no
      knowledge of, any pending or threatened condemnation proceeding affecting the
      Mortgaged Properties or any sale or disposition thereof in lieu of
      condemnation.

     

    (d)
      As
      of the
      Closing Date, none of the Borrower or any of the Subsidiaries is obligated
      under
      any right of first refusal, option or other contractual right to sell, assign
      or
      otherwise dispose of any Mortgaged Property or any interest
      therein.

     

    SECTION
      3.08. Subsidiaries.
      Schedule 3.08 sets forth as of the Closing Date a list of all Subsidiaries
      and the percentage ownership interest of the Borrower therein. The shares of
      capital stock or other ownership interests so indicated on Schedule 3.08 are
      fully paid and non-assessable and are owned by the Borrower, directly or
      indirectly, free and clear of all Liens (other than Liens created under the
      Security Documents).

     

    SECTION
      3.09. Litigation;
      Compliance with Laws.(a)
      Except
      as
      set forth on Schedule 3.09, there are no actions, suits or proceedings at
      law or in equity or by or before
      any Governmental Authority now pending or, to the knowledge of the Borrower,
      threatened against or affecting the Borrower or any Subsidiary or any business,
      property or rights of any such person (i) that involve any Loan Document or
      the Transactions or (ii) as to which there is a reasonable possibility of
      an adverse determination and that, if adversely determined, could reasonably
      be
      expected, individually or in the aggregate, to result in a Material Adverse
      Effect.

     

    (b)
      Since
      the date of this Agreement, there has been no change in the status of the
      matters disclosed on Schedule 3.09 that, individually or in the aggregate,
      has resulted in, or materially increased the likelihood of, a Material Adverse
      Effect.

    
      
        
        

      

      
        67

        
          

        

      

      
        
        

      

    

     

    (c)
      Neither
      the Borrower nor any of the Subsidiaries or any of their respective material
      properties or assets is in violation of, nor will the continued operation of
      their material properties and assets as currently conducted violate, any law,
      rule or regulation (including any zoning, building, Environmental Law,
      Healthcare Requirement, ordinance, code or approval or any building permits)
      or
      any restrictions of record or agreements affecting the Mortgaged Property,
      or is
      in default with respect to the Corporate Integrity Agreement or any judgment,
      writ, injunction (including the Permanent Injunction), decree or order of any
      Governmental Authority, where such violation or default could reasonably be
      expected to result in a Material Adverse Effect.

     

    (d)
      Certificates
      of occupancy and permits are in effect for each Mortgaged Property as currently
      constructed.

     

    SECTION
      3.10. Agreements.
      Neither
      the Borrower nor any of the Subsidiaries is in default under any provision
      of
      any Material Indebtedness, or any other material agreement or instrument to
      which it is a party or by which it or any of its properties or assets are or
      may
      be bound, where such default could reasonably be expected to result in a
      Material Adverse Effect.

     

    SECTION
      3.11. Federal
      Reserve Regulations.
      (a)
      None
      of
      the Borrower or any of the Subsidiaries is engaged principally, or as one of
      its
      important activities, in the business of extending credit for the purpose of
      buying or carrying Margin Stock.

     

    (b)
      No
      part of the proceeds of any Loan or any Letter of Credit will be used, whether
      directly or indirectly, and whether immediately, incidentally or
      ultimately, for any purpose that entails a violation of, or that is
      inconsistent with, the provisions of the Regulations of the Board, including
      Regulation T, U or X.

     

    SECTION
      3.12. Investment
      Company Act. Neither
      the Borrower nor any Subsidiary is an “investment company” as defined in, or
      subject to regulation under, the Investment Company Act of 1940.

     

    SECTION
      3.13. Use
      of Proceeds.
      The
      Borrower will (a) use the proceeds of the Loans (other than any Incremental
      Term Loans) and will request the issuance of Letters of Credit only for the
      purposes specified in the introductory statement to this Agreement and
      (b) use the proceeds of Incremental Term Loans only for the purposes
      specified in the applicable Incremental Assumption Agreement.

     

    SECTION
      3.14. Tax
      Returns.
      Each of
      the Borrower and the Subsidiaries has filed (or caused to be filed) all Federal
      income and all material, state, local and foreign tax returns or materials
      required to have been filed by it and has paid (or caused to be paid) all
      material taxes due and payable by it and all material assessments received
      by
      it, except taxes that are being contested in good faith by appropriate
      proceedings and for which the Borrower or such Subsidiary, as applicable, shall
      have set aside on its books adequate reserves.

     

    SECTION
      3.15. No
      Material Misstatements.
      None of
      (a) the Confidential Information Memorandum or (b) any other
      information, report, financial statement, 

    
      
        
        

      

      
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      exhibit
        or schedule furnished by or on behalf of the Borrower to the Administrative
        Agent, the Arrangers or any Lender in connection with the negotiation of
        any
        Loan Document or included therein or delivered pursuant thereto, taken as
        a
        whole, contained, contains or will contain any material misstatement of fact
        or
        omitted, omits or will omit to state any material fact necessary to make
        the
        statements therein, in the light of the circumstances under which they were,
        are
        or will be made, not misleading; provided
        that to
        the extent any such information, report, financial statement, exhibit or
        schedule was based upon or constitutes a forecast or projection, the Borrower
        represents only that it acted in good faith and utilized reasonable assumptions
        (based upon accounting principles consistent with the historical audited
        financial statements of the Borrower) and due care in the preparation of
        such
        information, report, financial statement, exhibit or schedule, it being
        recognized by the 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
      3.16. Employee
      Benefit Plans.
      Each of
      the Borrower and its ERISA Affiliates is in compliance in all material respects
      with the applicable provisions of ERISA and the Code and the regulations and
      published interpretations thereunder. No ERISA Event has occurred or is
      reasonably expected to occur that, when taken together with all other such
      ERISA
      Events, could reasonably be expected to result in material liability of the
      Borrower or any of its ERISA Affiliates. The present value of all benefit
      liabilities under each Plan (based on the assumptions used for purposes of
      Statement of Financial Accounting Standards No. 87) did not, as of the last
      annual valuation date applicable thereto, exceed by more than $10,000,000 the
      fair market value of the assets of such Plan, and the present value of all
      benefit liabilities of all underfunded Plans (based on the assumptions used
      for
      purposes of Statement of Financial Accounting Standards No. 87) did not, as
      of
      the last annual valuation dates applicable thereto, exceed by more than
      $20,000,000 the fair market value of the assets of all such underfunded
      Plans.

     

    SECTION
      3.17. Environmental
      Matters.
      (a)
      Except
      as
      set forth in Schedule 3.17 and except with respect to any other matters
      that, individually or in the aggregate, could not reasonably be expected to
      result in a Material Adverse Effect, neither the Borrower nor any of the
      Subsidiaries (i) has failed to comply with any Environmental Law or to
      obtain, maintain or comply with any permit, license or other approval required
      under any Environmental Law, (ii) has become subject to any Environmental
      Liability, (iii) has received written notice of any claim with respect to
      any Environmental Liability or (iv) knows of any basis for any Environmental
      Liability.

     

    (b)
      Since
      the
      date of this Agreement, there has been no change in the status of the matters
      disclosed on Schedule 3.17 that, individually or in the aggregate, has
      resulted in, or materially increased the likelihood of, a Material Adverse
      Effect.

     

    SECTION
      3.18. Insurance.
      Schedule 3.18 sets forth a true, complete and correct description of all
      insurance maintained by the Borrower or by the Borrower for the Subsidiaries
      as
      of the date hereof and the Closing Date. As of each such date, such insurance
      is
      in full force and effect and all premiums have been duly paid. The Borrower
      and
      the Subsidiaries have insurance in such amounts and covering such risks and
      

    
      
        
        

      

      
        69

        
          

        

      

      
        
        

      

      liabilities
        as is customary with companies in the same or similar businesses operating
        in
        the same or similar locations.

    

     

    SECTION
      3.19. Security
      Documents.
      (a)
      The
      Guarantee and Collateral Agreement, upon execution and delivery thereof by
      the
      parties thereto, will create in favor of the Collateral Agent, for the ratable
      benefit of the Secured Parties, a legal, valid and enforceable security interest
      in the Collateral (as defined in the Guarantee and Collateral Agreement) and
      the
      proceeds thereof and (i) when the Pledged Collateral (as defined in the
      Guarantee and Collateral Agreement) is delivered to the Collateral Agent, the
      Lien created under Guarantee and Collateral Agreement shall constitute a fully
      perfected first priority Lien on, and security interest in, all right, title
      and
      interest of the Loan Parties in such Pledged Collateral, in each case prior
      and
      superior in right to any other person, and (ii) when financing statements in
      appropriate form are filed in the offices specified on Schedule 3.19(a), the
      Lien created under the Guarantee and Collateral Agreement will constitute a
      fully perfected Lien on, and security interest in, all right, title and interest
      of the Loan Parties in such Collateral (other than Intellectual Property, as
      defined in the Guarantee and Collateral Agreement) in which such Lien and
      security interest may be perfected by filing, recording or registration in
      the
      United States, in each case prior and superior in right to any other person,
      other than with respect to Liens expressly permitted by Section
      6.02.

     

    (b)
      Upon
      the recordation of the Guarantee and Collateral Agreement (or a short-form
      security agreement in form and substance reasonably satisfactory to the Borrower
      and the Collateral Agent) with the United States Patent and Trademark Office
      and
      the United States Copyright Office, together with the financing statements
      in
      appropriate form filed in the offices specified on Schedule 3.19(a), Lien
      created under the Guarantee and Collateral Agreement shall constitute a fully
      perfected Lien on, and security interest in, all right, title and interest
      of
      the Loan Parties in the Intellectual Property (as defined in the Guarantee
      and
      Collateral Agreement) in which a security interest may be perfected by filing
      in
      the United States and its territories and possessions, in each case prior and
      superior in right to any other person (it being understood that subsequent
      recordings in the United States Patent and Trademark Office and the United
      States Copyright Office may be necessary to perfect a Lien on registered
      trademarks and patents, trademark and patent applications and registered
      copyrights acquired by the Loan Parties after the date hereof).

     

    (c)
      The
      Mortgages are effective to create in favor of the Collateral Agent, for the
      ratable benefit of the Secured Parties, a legal, valid and enforceable Lien
      on
      all of the Loan Parties’ right, title and interest in and to the Mortgaged
      Property thereunder and the proceeds thereof, and when the Mortgages are filed
      in the offices specified on Schedule 3.19(c),
      the Mortgages shall constitute a fully perfected Lien on, and security interest
      in, all right, title and interest of the Loan Parties in such Mortgaged Property
      and the proceeds thereof, in each case prior and superior in right to any other
      person, other than with respect to the rights of persons pursuant to Liens
      expressly permitted by Section 6.02.

    
      
        
        

      

      
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    SECTION
      3.20. Location
      of Real Property and Leased Premises.
      (a)
      Schedule 3.20(a)
      lists completely and correctly as of the Closing Date all real property owned
      by
      the Borrower and the Subsidiaries and the addresses thereof. The Borrower and
      the Subsidiaries own in fee all the real property set forth on
      Schedule 3.20(a).

     

    (b)
      Schedule 3.20(b) lists completely and correctly as of the Closing Date all
      real property leased by the Borrower and the Subsidiaries and the addresses
      thereof. The Borrower and the Subsidiaries have no reason to believe that the
      leases for the real property set forth on Schedule 3.20(b) are not in full
      force and effect.

     

    SECTION
      3.21. Labor
      Matters.
      As of
      the date hereof and the Closing Date, there are no strikes, lockouts or
      slowdowns against the Borrower or any Subsidiary pending or, to the knowledge
      of
      the Borrower, threatened. The hours worked by and payments made to employees
      of
      the Borrower and the Subsidiaries have not been in violation of the Fair Labor
      Standards Act or any other applicable Federal, state, local or foreign law
      dealing with such matters. All payments due from the Borrower or any Subsidiary,
      or for which any claim may be made against the Borrower or any Subsidiary,
      on
      account of wages and employee health and welfare insurance and other benefits,
      have been paid or accrued as a liability on the books of the Borrower or such
      Subsidiary. The consummation of the Transactions will not give rise to any
      right
      of termination or right of renegotiation on the part of any union under any
      collective bargaining agreement to which the Borrower or any Subsidiary is
      bound. Except as set forth on Schedule 3.21, as of the Closing Date, neither
      the
      Borrower nor any Subsidiary is a party to any collective bargaining agreement
      or
      other labor contract applicable to persons employed by it at any
      Facility.

     

    SECTION
      3.22. Solvency.
      Immediately after the consummation of the Transactions to occur on the Closing
      Date and immediately following the making of each Loan and after giving effect
      to the application of the proceeds of each Loan, (a) the fair value of the
      assets of each Loan Party, at a fair valuation, will exceed its debts and
      liabilities, subordinated, contingent or otherwise; (b) the present fair
      saleable value of the property of each Loan Party will be greater than the
      amount that will be required to pay the probable liability of its debts and
      other liabilities, subordinated, contingent or otherwise, as such debts and
      other liabilities become absolute and matured; (c) each Loan Party will be
      able to pay its debts and liabilities, subordinated, contingent or otherwise,
      as
      such debts and liabilities become absolute and matured; and (d) each Loan
      Party will not have unreasonably small capital with which to conduct the
      business in which it is engaged as such business is now conducted and is
      proposed to be conducted following the Closing Date.

     

    SECTION
      3.23. Transaction
      Documents.
      The
      Borrower has delivered to the Administrative Agent a complete and correct copy
      of the Merger Agreement (including all schedules, exhibits, amendments,
      supplements and modifications thereto). Neither the Borrower
      nor any Loan Party or, to the knowledge of the Borrower or each Loan Party,
      any
      other person party thereto is in default in the performance or compliance with
      any material provisions thereof. The Merger Agreement complies in all material
      respects with all applicable laws. All representations and warranties set forth
      in the Merger 

    
      
        
        

      

      
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      Agreement
        were true and correct in all material respects at the time as of which such
        representations and warranties were made (or deemed made).

    

     

    SECTION
      3.24. Healthcare
      Representations.
      (a)
      All
      Medicare, Medicaid and TRICARE provider agreements, certificates of need,
      certifications, governmental licenses, permits, regulatory agreements or other
      material agreements and improvements, including certificates of operation,
      completion and occupancy, and state skilled-nursing facility or assisted-living
      facility licenses or other licenses required by healthcare Governmental
      Authorities for the legal use and occupancy of each Facility that are necessary
      to operate each Facility have been obtained and are in full force and effect,
      including approved provider status in any approved provider payor program in
      which any Facility participates, and a valid certificate of need or similar
      certificate and license from the applicable state department of health or
      equivalent (or any subdivision) or the state licensing agency, as applicable,
      for the licensed number of beds at such Facility (collectively, the
“Healthcare
      Licenses”),
      except to the extent that the failure to obtain or maintain the same in full
      force and effect could not reasonably be expected to result in a Material
      Adverse Effect. Each applicable Subsidiary owns and/or possesses, and holds
      free
      from restrictions or conflicts with the rights of others, all such Healthcare
      Licenses in respect of each applicable Facility, and operates each applicable
      Facility in such a manner that the Healthcare Licenses shall remain in full
      force and effect, except to the extent that any such failure could not
      reasonably be expected to result in a Material Adverse Effect.

     

    (b)
      To
      the knowledge of the Borrower, there are no proceedings or actions pending
      or
      contemplated to reduce the number of licensed or certified beds of any Facility,
      unless such actions have been taken at the request of the Borrower or a
      Subsidiary.

     

    (c)
      The
      Borrower and the Subsidiaries (and the operation of each Facility) are in
      compliance in all material respects with all applicable provisions of the laws,
      ordinances, statutes, regulations, orders, standards, policies, restrictions
      or
      rules of all Governmental Authorities having jurisdiction over the ownership,
      use, occupancy or operation of any Facility, including, (i) staffing
      requirements, (ii) health and fire safety codes, including quality and
      safety standards, (iii) accepted professional standards and principles that
      apply to professionals providing services at each Facility, (iv) Federal,
      state or local laws, rules, regulations or published interpretations or policies
      relating to the prevention of fraud and abuse, (v) insurance, reimbursement
      and cost reporting requirements, (vi) government payment program
      requirements and disclosure of ownership and related information requirements,
      (vii) requirements of applicable healthcare Governmental Authorities,
      including those relating to each Facility’s physical structure and environment,
      licensing, quality and adequacy of medical care, distributions of
      pharmaceuticals, rate setting, equipment, personnel, operating policies and
      services and fee splitting, (viii) Section 1128B(b) of the Social Security
      Act, as amended (42 U.S.C. Section 1320a-7(b) (Criminal Penalties Involving
      Medicare or State Health Care Programs), commonly referred to as the
“Federal
      Anti-Kickback Statute”)
      and
      (ix) any other applicable laws, regulations or agreements for reimbursement
      for the type of care or services
      provided by the Borrower or the Subsidiaries with respect to each Facility.
      As
      used in this clause (c), “compliance in all material respects” means a
      level of compliance 

    
      
        
        

      

      
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      that
        would keep the Borrower and the Subsidiaries (and the operation of each Facility
        in the ordinary course of business) free from any material proceedings or
        sanctions by any Governmental Authority having jurisdiction over the operation
        of any Facility that could reasonably be expected to result in a Material
        Adverse Effect.

    

     

    (d)
      The
      Borrower and each Subsidiary, as applicable, (i) is in compliance in all
      material respects with the requirements for participation in the Medicare,
      Medicaid and TRICARE programs with respect to each Facility that currently
      participates in such programs, including the Medicaid and Medicare Patient
      and
      Program Protection Act of 1987, or if not currently in compliance has filed
      and
      is implementing or will timely file and implement a plan of correction to bring
      any such Facility in compliance, and (ii) has a current provider agreement
      under Title XVIII and/or XIX of the Social Security Act, which is in full
      force and effect.

     

    (e)
      To
      the
      knowledge of the Borrower, neither the Borrower nor any Subsidiary is a target
      of, or participant in, any action, proceeding, suit, audit, investigation or
      sanction by any healthcare Governmental Authority or any other administrative
      or
      investigative body or entity or any other third party or any patient or resident
      (including whistleblower suits, or suits brought pursuant to federal or state
      false claims acts, and Medicaid, Medicare, TRICARE, state fraud or abuse laws)
      which may result, directly or indirectly or with the passage of time, in (i)
      the
      imposition of a fine, penalty, alternative, interim or final sanction, a lower
      rate certification, recoupment, recovery, suspension or discontinuance of all
      or
      part of reimbursement from any healthcare Governmental Authority, third-party
      payor, insurance carrier or private payor, or a lower reimbursement rate for
      services rendered to eligible patients, in each case that could reasonably
      be
      expected to result in a Material Adverse Effect, or (ii) any other civil or
      criminal remedy, in the appointment of a receiver or manager, or in the
      modification, limitation, annulment, revocation, transfer, surrender, suspension
      or other impairment of a Healthcare License or affect the Borrower’s or any
      Subsidiary’s participation in the Medicare, Medicaid, TRICARE or third-party
      payor program, as applicable, or any successor program thereto, nor to its
      knowledge has any such action, proceeding, suit, investigation proceeding or
      audit been threatened. 

     

    (f)
      There
      are
      no agreements with residents of any Facility, or with any other persons or
      organizations, which deviate in any material adverse respect from, or which
      conflict with, any Healthcare Requirements. To the knowledge of the Borrower,
      all resident records at each Facility, including patient and/or resident
      accounts records, are true, complete and correct in all material
      respects.

     

    (g)
      None
      of
      the execution and delivery of this Agreement or any other Loan Document, the
      performance thereunder by the Borrower and the Subsidiaries or, to the knowledge
      of the Borrower, any other party thereto, will, on the Closing Date,
      (i) adversely affect, in any material respect, the right of the Borrower or
      any Subsidiary to receive Medicaid, Medicare, TRICARE, insurance company,
      managed care company, or other third-party insurance payments or reimbursements
      or to receive private payor payments or reimbursements, (ii) materially
      reduce the Medicaid, Medicare, TRICARE, insurance company, managed care company,
      or other third-party insurance payments or

    
      
        
        

      

      
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    reimbursements
      or materially reduce private payor payments or reimbursements which the Borrower
      or any Subsidiary is receiving as of the date hereof or (iii) materially
      adversely affect the Healthcare Licenses.

     

    (h)
      To
      the
      extent that and for so long as the Borrower or any Subsidiary is a “covered
      entity” within the meaning of HIPAA, such person (i) has undertaken or will
      promptly undertake all necessary surveys, audits, inventories, reviews, analyses
      and/or assessments (including any necessary risk assessments) of all areas
      of
      its business and operations required by HIPAA and/or that could be adversely
      affected by the failure of the Borrower or such Subsidiary to be HIPAA
      Compliant, (ii) has developed or will promptly develop a detailed plan and
      time line for becoming HIPAA Compliant (a “HIPAA
      Compliance Plan”)
      and
      (iii) has implemented or will implement those provisions of such HIPAA
      Compliance Plan in all material respects necessary to ensure that such person
      is
      or becomes HIPAA Compliant. 

     

    (i)
      No
      penalty enforcement actions pursuant to the Corporate Integrity Agreement have
      been undertaken against any Facility, the Borrower, any Subsidiary or any other
      manager, officer or director by any Governmental Authority since the effective
      date of the Corporate Integrity Agreement and there have been no violations
      of
      the Corporate Integrity Agreement since the effective date of the Corporate
      Integrity Agreement that have threatened any Facility’s, the Borrower’s or any
      Subsidiary’s certification for participation in Medicare, Medicaid, TRICARE or
      any third-party payor program.

     

    (j)
      All
      Medicare and Medicaid cost reports and financial reports submitted by or on
      behalf of each Facility for years commencing on and after December 31, 2001
      are
      materially accurate and complete.

     

    SECTION
      3.25. Senior
      Indebtedness.
      The
      Obligations constitute “Senior Indebtedness” and “Designated Senior Debt” under
      and as defined in the Subordinated Note Documents.

     

    SECTION
      3.26. Sanctioned
      Persons.
      Neither
      the Borrower nor any Subsidiary is currently subject to any U.S. sanctions
      administered by the Office of Foreign Assets Control of the U.S. Treasury
      Department (“OFAC”);
      and
      the Borrower will not directly or indirectly use the proceeds of the Loans
      or
      the Letters of Credit or otherwise make available such proceeds to any person,
      for the purpose of financing the activities of any person currently subject
      to
      any U.S. sanctions administered by OFAC.

     

    ARTICLE
      IV

     

    Conditions
      of Lending

     

    The
      obligations of the Lenders to make Loans and of the Issuing Bank to issue
      Letters of Credit hereunder are subject to the satisfaction of the following
      conditions:

     

    SECTION
      4.01. All
      Credit Events.
      On the
      date of each Borrowing (other than a conversion or a continuation of a
      Borrowing), including each Borrowing of a Swingline 

    
      
        
        

      

      
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      Loan
        and
        on the date of each issuance, amendment, extension or renewal of a Letter
        of
        Credit (each such event being called a “Credit
        Event”):

    

    (a)
      The
      Administrative Agent shall have received a notice of such Borrowing as required
      by Section 2.03 (or such notice shall have been deemed given in accordance
      with
      Section 2.02) or, in the case of the issuance, amendment, extension or
      renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent
      shall have received a notice requesting the issuance, amendment, extension
      or
      renewal of such Letter of Credit as required by Section 2.23(b) or, in the
      case of the Borrowing of a Swingline Loan, the Swingline Lender and the
      Administrative Agent shall have received a notice requesting such Swingline
      Loan
      as required by Section 2.22(b).

     

    (b)
      (i)
      In the case of each Credit Event that occurs on the Closing Date, the condition
      set forth in Section 7.3(a) of the Merger Agreement (without giving effect
      to any waiver, amendment or other modification to such condition in a manner
      adverse to the Lenders in any material respect effected without the consent
      of
      the Arrangers) shall be satisfied and the representations and warranties made
      in
      Section 3.01, the last sentence of Section 3.02, Sections 3.03, 3.11, 3.12,
      3.19
      and 3.25 shall be true and correct in all material respects and (ii) in the
      case
      of each other Credit Event, the representations and warranties set forth in
      Article III and in each other Loan Document shall be true and correct in
      all material respects on and as of the date of such Credit Event with the same
      effect as though made on and as of such date, except to the extent such
      representations and warranties expressly relate to an earlier date.

     

    (c)
      At
      the
      time of and immediately after such Credit Event, no Default or Event of Default
      shall have occurred and be continuing.

     

    Each
      Credit Event shall be deemed to constitute a representation and warranty by
      the
      Borrower on the date of such Credit Event as to the matters specified in
      paragraphs (b) and (c) of this Section 4.01.

     

    SECTION
      4.02. First Credit
      Event.
      On the
      Closing Date:

     

    (a)
      The
      Administrative Agent shall have received, on behalf of itself, the Lenders
      and
      the Issuing Bank, a favorable written opinion of (i) O’Melveny &
Myers LLP, counsel for the Borrower, substantially to the effect set forth
      in
      Exhibit F-1, (ii) Michael Newman, General Counsel to the Borrower, substantially
      to the effect set forth in Exhibit F-2 and (iii) each local counsel listed
      on Schedule 4.02(a), substantially to the effect set forth in Exhibit F-3,
      in
      each case (A) dated the Closing Date and (B) addressed to the Issuing
      Bank, the Administrative Agent and the Lenders, and the Borrower hereby requests
      such counsel to deliver such opinions.

     

    (b)
      All
      legal
      matters incident to this Agreement, the Borrowings and extensions of credit
      hereunder and the other Loan Documents shall be satisfactory to the Lenders,
      to
      the Issuing Bank and to the Administrative Agent.

     

    (c)
      The
      Administrative Agent shall have received (i) a copy of the certificate or
      articles of incorporation, including all amendments thereto, of each Loan Party,
      certified 

    
      
        
        

      

      
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      as
        of a
        recent date by the Secretary of State of the state of its organization, and
        a
        certificate as to the good standing of each Loan Party as of a recent date,
        from
        such Secretary of State; (ii) a certificate of the Secretary or Assistant
        Secretary of each Loan Party dated the Closing Date and certifying (A) that
        attached thereto is a true and complete
        copy of the by-laws of such Loan Party as in effect on the Closing Date and
        at
        all times since a date prior to the date of the resolutions described in
        clause (B) below, (B) that attached thereto is a true and complete
        copy of resolutions duly adopted by the Board of Directors of such Loan Party
        authorizing the execution, delivery and performance of the Loan Documents
        to
        which such person is a party and, in the case of the Borrower, the borrowings
        hereunder, and that such resolutions have not been modified, rescinded or
        amended and are in full force and effect, (C) that the certificate or
        articles of incorporation of such Loan Party have not been amended since
        the
        date of the certified copy furnished pursuant to clause (i) above and
        (D) as to the incumbency and specimen signature of each officer executing
        any Loan Document or any other document delivered in connection herewith
        on
        behalf of such Loan Party; (iii) a certificate of another officer as to the
        incumbency and specimen signature of the Secretary or Assistant Secretary
        executing the certificate pursuant to clause (ii) above; and (iv) such
        other documents as the Lenders, the Issuing Bank or the Administrative Agent
        may
        reasonably request.

    

     

    (d)
      The
      Administrative Agent shall have received a certificate, dated the Closing Date
      and signed by a Financial Officer of the Borrower, confirming compliance with
      the conditions precedent set forth in paragraphs (b) and (c) of
      Section 4.01, and confirming that since December 31, 2006, no Closing
      Date Material Adverse Effect shall have occurred and be continuing.

     

    (e)
      The
      Administrative Agent shall have received all Fees and other amounts due and
      payable on or prior to the Closing Date, including, to the extent invoiced,
      reimbursement or payment of all out-of-pocket expenses required to be reimbursed
      or paid by the Borrower hereunder or under any other Loan Document.

     

    (f)
      The
      Security Documents shall have been duly executed by each Loan Party that is
      to
      be a party thereto and shall be in full force and effect on the Closing Date.
      The Collateral Agent on behalf of the Secured Parties shall have a security
      interest in the Collateral of the type and priority described in each Security
      Document; provided
      that to
      the extent a perfected security interest in any Collateral (other than any
      Collateral the security interest in which may be perfected by the filing of
      a
      UCC financing statement or the delivery of certificated securities) is not
      able
      to be provided on the Closing Date after the Borrower’s use of commercially
      reasonable efforts to do so, the providing of a perfected security interest
      in
      such Collateral shall not constitute a condition precedent to the first Credit
      Event but such requirement to create a perfected security interest in such
      Collateral shall be satisfied after the Closing Date in accordance with the
      Post-Closing Letter Agreement dated the Closing Date, between the Borrower
      and
      the Administrative Agent.

     

    (g)
      The
      Collateral Agent shall have received a Perfection Certificate with respect
      to
      the Loan Parties dated the Closing Date and duly executed by a Responsible
      Officer of 

    
      
        
        

      

      
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      the
        Borrower, and shall have received the results of a search of the Uniform
        Commercial Code filings (or equivalent filings) made with respect to the
        Loan
        Parties in the states (or other jurisdictions) of formation of such persons,
        as
        indicated on such Perfection Certificate, together with copies of the financing
        statements (or similar documents) disclosed by such search, and accompanied
        by
        evidence satisfactory to the Collateral Agent that the Liens indicated in
        any
        such financing statement (or similar document) would
        be
        permitted under Section 6.02 or have been or will be contemporaneously released
        or terminated.

    

     

    (h)
      (i) Subject
      to the proviso in clause (f) above, each of the Security Documents, in form
      and substance reasonably satisfactory to the Administrative Agent and the
      Collateral Agent, relating to each of the Mortgaged Properties shall have been
      duly executed by the parties thereto and delivered to the Collateral Agent
      and
      shall be in full force and effect, (ii) each of such Mortgaged Properties
      shall not be subject to any Lien other than those permitted under
      Section 6.02, (iii) each of such Security Documents shall have been
      filed and recorded in the recording office as specified on Schedule 3.19(c)
      (or a lender’s title insurance policy, in form and substance reasonably
      acceptable to the Collateral Agent, insuring such Security Document as a first
      lien on such Mortgaged Property (subject to any Lien permitted by
      Section 6.02) shall have been received by the Collateral Agent) and, in
      connection therewith, the Collateral Agent shall have received evidence
      reasonably satisfactory to it of each such filing and recordation and
      (iv) the Collateral Agent shall have received such other documents,
      including a policy or policies of title insurance issued by a nationally
      recognized title insurance company, together with such endorsements, coinsurance
      and reinsurance as may be reasonably requested by the Collateral Agent and
      the
      Lenders, insuring the Mortgages as valid liens on the Mortgaged Properties,
      prior to all Liens other than those permitted under Section 6.02, together
      with such surveys, abstracts, appraisals and legal opinions required to be
      furnished pursuant to the terms of the Mortgages or as reasonably requested
      by
      the Collateral Agent.

     

    (i)
      The
      Administrative Agent shall have received a copy of, or a certificate as to
      coverage under, the insurance policies required by Section 5.02 and the
      applicable provisions of the Security Documents, each of which shall be endorsed
      or otherwise amended to include a customary lender’s loss payable endorsement or
      to name the Collateral Agent as additional insured, in form and substance
      reasonably satisfactory to the Administrative Agent.

     

    (j)
      The
      Merger and the other Transactions shall have been, or substantially
      simultaneously with the initial funding of Loans on the Closing Date shall
      be,
      consummated in accordance in all material respects with the Merger Agreement,
      without giving effect to any waiver or modification of any terms or conditions
      of the Merger Agreement that is materially adverse to the Lenders not approved
      by the Arrangers. The Administrative Agent shall have received copies of the
      Merger Agreement and all certificates, opinions and other documents delivered
      thereunder, certified by a Financial Officer as being complete and
      correct.

    
      
        
        

      

      
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    (k)
      The
      Borrower shall have received the net cash proceeds of the issuance of not less
      than $200,000,000 in aggregate principal amount of the Subordinated Notes.
      The
      Administrative Agent shall have received copies of the Subordinated Note
      Documents, certified by a Financial Officer as being complete and
      correct.

     

    (l)
      All
      principal, premium, if any, interest, fees and other amounts due or outstanding
      under the Existing Indebtedness shall have been paid in full, the commitments
      thereunder terminated and all guarantees and security in support thereof
      discharged and released, and the Administrative Agent shall have received
      reasonably satisfactory
      evidence thereof. Immediately after giving effect to the Transactions and the
      other transactions contemplated hereby, the Borrower and the Subsidiaries shall
      have outstanding no Indebtedness or preferred stock other than
      (a) Indebtedness outstanding under this Agreement, (b) the
      Subordinated Notes and (c) Indebtedness set forth on Schedule 6.01 and
      in clauses (i) and (ii) of the definition of “Existing
      Indebtedness”.

     

    (m)
      The
      Lenders shall have received the financial statements and opinions referred
      to in
      Section 3.05.

     

    (n)
      The
      Administrative Agent shall have received a certificate from the chief financial
      officer of the Borrower showing the calculation of Consolidated EBITDA for
      the
      four-fiscal quarter period most recently ended at least 45 days prior to
      the Closing Date, in form and substance reasonably satisfactory to the Arrangers
      and giving pro forma effect to the Transactions as if they had occurred at
      the
      beginning of such four fiscal quarter period.

     

    (o)
      The
      Administrative Agent shall have received a certificate from the chief financial
      officer of the Borrower certifying that the Borrower and its subsidiaries,
      on a
      consolidated basis after giving effect to the Transactions to occur on the
      Closing Date, are solvent.

     

    (p)
      All
      regulatory approvals required in connection with the change of ultimate
      ownership and control of the Facilities (as defined in the Merger Agreement)
      resulting from the transactions contemplated by the Merger Agreement, the
      consequence of the failure to obtain such approvals would be to prevent
      Harborside or any of its Subsidiaries (as defined in the Merger Agreement)
      from
      lawfully continuing to operate, own or control the Facilities (as defined in
      the
      Merger Agreement), including the approvals set forth on Schedule 7.1(d) of
      the Disclosure Schedules (as defined in the Merger Agreement) to the Merger
      Agreement (to the extent that the approvals set forth on such schedule are
      also
      set forth on Schedule 4.3(a) of the Disclosure Schedules (as defined in the
      Merger Agreement)), shall have been obtained and remain in effect.

     

    (q)
      The
      Arrangers shall have received, at least five Business Days prior to the Closing
      Date, all documentation and any other information that is requested by the
      Arrangers or the Lenders that is required by regulatory authorities under
      applicable “know your customer” and anti-money laundering rules and regulations,
      including the USA PATRIOT Act.

    
      
        
        

      

      
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    ARTICLE
      V

     

    Affirmative
      Covenants

     

    The
      Borrower covenants and agrees with each Lender that so long as this Agreement
      shall remain in effect and until the Commitments have been terminated and the
      principal of and interest on each Loan, all Fees and all other expenses or
      amounts payable under any Loan Document shall have been paid in full and all
      Letters of Credit have been canceled or have expired and all amounts drawn
      thereunder have been reimbursed
      in full, unless the Required Lenders shall otherwise consent in writing, the
      Borrower will, and will cause each of the Subsidiaries to:

     

    SECTION
      5.01. Existence;
      Compliance with Laws; Businesses and Properties.
      (a)
Do
      or
      cause to be done all things necessary to preserve, renew and keep in full force
      and effect its legal existence, except as otherwise expressly permitted under
      Section 6.05.

     

    (b)
      Do or
      cause to be done all things necessary to obtain, preserve, renew, extend and
      keep in full force and effect the rights, licenses, permits, franchises,
      authorizations, patents, copyrights, trademarks and trade names material to
      the
      conduct of its business; comply in all material respects with all applicable
      laws, rules, regulations and decrees and orders of any Governmental Authority,
      whether now in effect or hereafter enacted; except as provided in Section 6.05,
      at all times maintain and preserve all property material to the conduct of
      such
      business and keep such property in good repair, working order and condition,
      ordinary wear and tear excepted; file, as and when due, all Medicaid, Medicare
      and TRICARE cost reports required by law and all claims for reimbursement;
      and
      maintain all certificates of need, provider numbers, provider agreements and
      licenses necessary to conduct the businesses reflected therein as currently
      conducted, except where the failure to maintain the same could not reasonably
      be
      expected to have a Material Adverse Effect or where such business is disposed
      of
      in accordance with Section 6.05. 

     

    SECTION
      5.02. Insurance.(a)
      Maintain
      such insurance, to such extent and against such risks, including fire and other
      risks insured against by extended coverage, as is customary with companies
      in
      the same or similar businesses operating in the same or similar locations,
      including public liability insurance against claims for personal injury or
      death
      or property damage occurring upon, in, about or in connection with the use
      of
      any properties owned, occupied or controlled by it.

     

    (b)
      Cause
      all such policies covering any Collateral to be endorsed or otherwise amended
      to
      include a customary lender’s loss payable endorsement, in form and substance
      reasonably satisfactory to the Administrative Agent and the Collateral Agent,
      which endorsement shall provide that, from and after the Closing Date, if the
      insurance carrier shall have received written notice from the Administrative
      Agent or the Collateral Agent of the occurrence of an Event of Default, the
      insurance carrier shall pay all proceeds otherwise payable to the Borrower
      or
      the Loan Parties under such policies directly to the Collateral Agent; cause
      all
      such policies to provide that neither the Borrower, the Administrative Agent,
      the Collateral Agent nor any other party shall be a 

    
      
        
        

      

      
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      coinsurer
        thereunder and to contain a “Replacement Cost Endorsement”, without any
        deduction for depreciation, and such other provisions as the Administrative
        Agent or the Collateral Agent may reasonably require from time to time to
        protect their interests; deliver original or certified copies of all such
        policies to the Collateral Agent upon its request therefor; cause each such
        policy to provide that it shall not be canceled, modified or not renewed
        (i) by reason of nonpayment of premium upon not less than 10 days’ prior
        written notice thereof by the insurer to the Administrative Agent and the
        Collateral Agent (giving the Administrative Agent and the Collateral Agent
        the
        right to cure defaults in the payment of premiums) or (ii) for any other
        reason upon not less than 30 days’ prior written notice thereof by the
        insurer to the Administrative Agent and the Collateral Agent. 

       

                     (c)
        If
        at any
        time the area in which the Premises (as defined in the Mortgages) are located
        is
        designated (i) a “flood hazard area” in any Flood Insurance Rate Map published
        by the Federal Emergency Management Agency (or any successor agency), obtain
        flood insurance in compliance with the National Flood Insurance Program as
        set
        forth in the Flood Disaster Protection Act of 1973, as it may be amended
        from
        time to time, or (ii) a “Zone 1” area, obtain earthquake insurance in
        such total amount as the Administrative Agent, the Collateral Agent or the
        Required Lenders may from time to time require.

    

     

    SECTION
      5.03. Obligations
      and Taxes.
      Pay its
      Material Indebtedness and other material obligations promptly and in accordance
      with their terms and pay and discharge promptly when due all material taxes,
      assessments and governmental charges or levies imposed upon it or upon its
      income or profits or in respect of its property, before the same shall become
      delinquent or in default, as well as all lawful claims for labor, materials
      and
      supplies or otherwise that, if unpaid, might give rise to a Lien upon such
      properties or any part thereof; provided,
      however,
      that
      such payment and discharge shall not be required with respect to any such tax,
      assessment, charge, levy or claim so long as the validity or amount thereof
      shall be contested in good faith by appropriate proceedings and the Borrower
      shall have set aside on its books adequate reserves with respect thereto in
      accordance with GAAP and such contest operates to suspend or stay enforcement
      of
      any Lien and, in the case of a Mortgaged Property, there is no risk of
      forfeiture of such property.

     

    SECTION
      5.04. Financial
      Statements, Reports, etc.
      In the
      case of the Borrower, furnish to the Administrative Agent, which shall furnish
      to each Lender:

     

    (a)
      within 90 days after the end of each fiscal year (or such earlier date
      required by the SEC), its consolidated balance sheet and related statements
      of
      income, stockholders’ equity and cash flows showing the financial condition of
      the Borrower and its consolidated subsidiaries as of the close of such fiscal
      year and the results of its operations and the operations of such subsidiaries
      during such year, together with comparative figures for the immediately
      preceding fiscal year, all audited by Ernst & Young LLP or other
      independent public accountants of recognized national standing and accompanied
      by an opinion of such accountants (which opinion shall be without a “going
      concern” or like qualification or exception and without any qualification or
      exception as 

    
      
        
        

      

      
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      to
        the
        scope of such audit) to the effect that such consolidated financial statements
        fairly present in all material respects the financial condition and results
        of
        operations of the Borrower and its consolidated subsidiaries on a consolidated
        basis in accordance with GAAP consistently applied;

    

     

    (b)
      within
      45 days after the end of each of the first three fiscal quarters of each
      fiscal year (or such earlier date required by the SEC), its consolidated balance
      sheet and related statements of income, stockholders’ equity and cash flows
      showing the financial condition of the Borrower and its consolidated
      subsidiaries as of the close of such fiscal quarter and the results of its
      operations and the operations of such subsidiaries during such fiscal quarter
      and the then elapsed portion of the fiscal year, and comparative figures for
      the
      same periods in the immediately preceding fiscal year, all certified by one
      of
      its Financial Officers as fairly presenting in all material respects the
      financial condition and results of operations of the Borrower and its
      consolidated subsidiaries on a consolidated basis
      in
      accordance with GAAP consistently applied, subject to normal year-end audit
      adjustments;

     

    (c)
      concurrently
      with any delivery of financial statements under paragraph (a) or (b) above,
      a
      certificate of a Financial Officer of the Borrower (i) certifying that no Event
      of Default or Default has occurred or, if such an Event of Default or Default
      has occurred, specifying the nature and extent thereof and any corrective action
      taken or proposed to be taken with respect thereto, (ii) setting forth
      computations in reasonable detail satisfactory to the Administrative Agent
      demonstrating compliance with the covenants contained in Sections 6.10, 6.11,
      6.12 and 6.13 and (iii) setting forth the amount, if any, of the Initial Pro
      Forma Adjustment included in the calculation of Consolidated EBITDA for such
      period, and, in the case of a certificate delivered with the financial
      statements required by paragraph (a) above, setting forth the Borrower’s
      calculation of Excess Cash Flow;

     

    (d)
      promptly
      after approval by the Borrower’s board of directors and in any event not later
      than 60 days after the beginning of each fiscal year of the Borrower, (i) a
      detailed consolidated budget for such fiscal year (including a projected
      consolidated balance sheet and related statements of projected operations and
      cash flows (including projected capital expenditures), as of the end of and
      for
      such fiscal year and on a quarter by quarter basis and setting forth the
      assumptions used for purposes of preparing such budget) and (ii) a detailed
      reconciliation of such projected financial results to the financial covenants
      set forth in Sections 6.11, 6.12 and 6.13 hereof and, promptly when available,
      any significant revisions of such budget or covenant
      reconciliation;

     

    (e)
      promptly
      after the same become publicly available, copies of all periodic and other
      reports, proxy statements and other materials filed by the Borrower or any
      Subsidiary with the SEC, or any Governmental Authority succeeding to any or
      all
      of the functions of said Commission, or with any national securities exchange,
      or distributed to its shareholders, as the case may be;

    
      
        
        

      

      
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    (f)
      promptly
      after the receipt thereof by the Borrower or any of its subsidiaries, a copy
      of
      any “management letter” received by any such person from its certified public
      accountants and the management’s response thereto;

     

    (g)
      promptly
      after the request by any Lender, all documentation and other information that
      such Lender reasonably requests in order to comply with its ongoing obligations
      under applicable “know your customer” and anti-money laundering rules and
      regulations, including the USA PATRIOT Act; 

     

    (h)
      promptly
      following any request therefor, on and after the effectiveness of Title V of
      the
      Pension Act, copies of (i) any documents described in Section 101(k)(1) of
      ERISA
      that the Borrower or any of its ERISA Affiliates may request with respect to
      any
      Multiemployer Plan and (ii) any notices described in Section 101(l)(1) of ERISA
      that the Borrower or any of its ERISA Affiliates may request with respect to
      any
      Multiemployer Plan; provided
      that if
      the Borrower or any of its ERISA Affiliates has not requested such documents
      or
      notices from the administrator or sponsor of the applicable Multiemployer Plan,
      the Borrower or its ERISA Affiliates shall promptly after the request of any
      Lender make
      a
      request for such documents or notices from the such administrator or sponsor
      and
      shall provide copies of such documents and notices promptly after receipt
      thereof; and

     

    (i)
      promptly,
      from time to time, such other information regarding the operations, business
      affairs and financial condition of the Borrower or any Subsidiary, or compliance
      with the terms of any Loan Document, as the Administrative Agent or any Lender
      may reasonably request.

     

    SECTION
      5.05. Litigation
      and Other Notices.
      Furnish
      to the Administrative Agent, the Issuing Bank and each Lender prompt written
      notice of the following:

     

    (a)
      any
      Event
      of Default or Default, specifying the nature and extent thereof and the
      corrective action (if any) taken or proposed to be taken with respect
      thereto;

     

    (b)
      the
      filing or commencement of, or any written threat or notice of intention of
      any
      person to file or commence, any action, suit or proceeding, whether at law
      or in
      equity or by or before any Governmental Authority, against the Borrower or
      any
      Subsidiary thereof with an amount in dispute (in the good faith judgment of
      the
      Borrower) in excess of $5,000,000 or that could reasonably be expected to result
      in a Material Adverse Effect;

     

    (c)
      the
      occurrence of any ERISA Event that, alone or together with any other ERISA
      Events that have occurred, could reasonably be expected to result in liability
      of the Borrower and the Subsidiaries in an aggregate amount exceeding
      $5,000,000;

     

    (d)
      any
      development that has resulted in, or could reasonably be expected to result
      in,
      a Material Adverse Effect; and

     

    (e)
      any
      change in the Borrower’s corporate rating by S&P, in the Borrower’s
      corporate family rating by Moody’s or in the ratings of the Credit Facilities by
      S&P or Moody’s, or any notice from either such agency indicating its intent
      to effect such a 

    
      
        
        

      

      
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      change
        or
        to place the Borrower or the Credit Facilities on a “CreditWatch” or “WatchList”
or any similar list, in each case with negative implications, or its cessation
        of, or its intent to cease, rating the Borrower or the Credit
        Facilities.

    

     

    SECTION
      5.06. Information
      Regarding Collateral.
      (a)
      Furnish
      to the Administrative Agent prompt written notice of any change (i) in any
      Loan Party’s corporate name, (ii) in the jurisdiction of organization or
      formation of any Loan Party, (iii) in any Loan Party’s identity or
      corporate structure or (iv)  in any Loan Party’s Federal Taxpayer
      Identification Number. The 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.

     

    (b)
      In
      the case of the Borrower, each year, at the time of delivery of the annual
      financial statements with respect to the preceding fiscal year pursuant to
      Section 5.04(a), deliver to the Administrative Agent a certificate of a
      Responsible Officer of the Borrower setting forth the information required
      pursuant to Section 2 of the Perfection Certificate or
      confirming that there has been no change in such information since the date
      of
      the Perfection Certificate delivered on the Closing Date or the date of the
      most
      recent certificate delivered pursuant to this Section 5.06.

     

    SECTION
      5.07. Maintaining
      Records; Access to Properties and Inspections; Maintenance of
      Ratings.
      (a)
      Keep
      proper books of record and account so as to permit the preparation of financial
      statements in conformity with GAAP. Each Loan Party will, and will cause each
      of
      its subsidiaries to, permit any representatives designated by the Administrative
      Agent or any Lender to visit and inspect the financial records and the
      properties of such person at reasonable times and as often as reasonably
      requested and to make extracts from and copies of such financial records, and
      permit any representatives designated by the Administrative Agent or any Lender
      to discuss the affairs, finances and condition of such person with the officers
      thereof and independent accountants therefor, subject in each case to the
      requirements of applicable law, including HIPAA, all at the expense of the
      Borrower; provided
      that,
      unless an Event of Default shall have occurred and be continuing, the Borrower
      shall not be responsible for the expenses of more than one such visit per
      year.

     

    (b)
      In
      the case of the Borrower, use commercially reasonable efforts to cause the
      Credit Facilities to be continuously rated by S&P and Moody’s and to
      maintain a corporate rating from S&P and a corporate family rating from
      Moody’s, in each case in respect of the Borrower.

     

    SECTION
      5.08. Use
      of Proceeds.
      Use the
      proceeds of the Loans and request the issuance of Letters of Credit only for
      the
      purposes specified in the introductory statement to this Agreement.

     

    SECTION
      5.09. Employee
      Benefits.
      (a) Comply in all material respects with the applicable provisions of ERISA
      and the Code and (b) furnish to the Administrative Agent

    
      
        
        

      

      
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      as
        soon
        as possible after, and in any event within ten days after any responsible
        officer of the Borrower or any ERISA Affiliate knows or has reason to know
        that,
        any ERISA Event has occurred that, alone or together with any other ERISA
        Event
        could reasonably be expected to result in liability of the Borrower or any
        ERISA
        Affiliate in an aggregate amount exceeding $5,000,000, a statement of a
        Financial Officer of the Borrower setting forth details as to such ERISA
        Event
        and the action, if any, that the Borrower proposes to take with respect
        thereto.

    

     

    SECTION
      5.10. Compliance
      with Environmental Laws.
      Comply,
      and use good faith efforts to cause all lessees and other persons occupying
      the
      Mortgaged Properties to comply, in all material respects with all Environmental
      Laws applicable thereto; obtain and renew all material environmental permits
      necessary for its operations and properties; and conduct any remedial action
      in
      accordance with Environmental Laws; provided,
      however,
      that
      neither the Borrower nor any Subsidiary shall be required to undertake any
      remedial action required by Environmental Laws to the extent that its obligation
      to do so is being contested in good faith and by proper proceedings and
      appropriate reserves are being maintained with respect to such circumstances
      in
      accordance with GAAP.

     

    SECTION
      5.11. Preparation
      of Environmental Reports.
      If an
      Event of Default caused by reason of a breach of Section 3.17 or Section
      5.10 shall have occurred and be continuing
      for more than 20 days without the Borrower or any Subsidiary commencing
      activities reasonably likely to cure such Default, at the written request of
      the
      Required Lenders through the Administrative Agent, provide to the Lenders within
      45 days after such request, at the expense of the Loan Parties, an
      environmental site assessment report regarding the matters which are the subject
      of such Default prepared by an environmental consulting firm reasonably
      acceptable to the Administrative Agent and indicating the presence or absence
      of
      Hazardous Materials and the estimated cost of any compliance or remedial action
      in connection with such Default.

     

    SECTION
      5.12. Further
      Assurances.
      Execute
      any and all further documents, financing statements, agreements and instruments,
      and take all further action (including filing Uniform Commercial Code and other
      financing statements, mortgages and deeds of trust) that the Administrative
      Agent or the Collateral Agent may reasonably request, in order to effectuate
      the
      transactions contemplated by the Loan Documents and in order to grant, preserve,
      protect and perfect the validity and priority of the security interests created
      or intended to be created by the Security Documents. The Borrower will promptly
      cause any subsequently acquired or organized wholly owned Domestic Subsidiary
      (other than any Special Purpose Vehicle), and the Borrower will use commercially
      reasonable efforts to cause any subsequently acquired or organized non-wholly
      owned Domestic Subsidiary (other than any Special Purpose Vehicle), to become
      a
      Loan Party by executing the Guarantee and Collateral Agreement and each
      applicable Security Document in favor of the Collateral Agent. In the event
      the
      Lien securing any Existing Mortgage Indebtedness (or any permitted refinancing
      thereof) is released, the Borrower will promptly secure the Obligations by
      pledging or creating, or causing to be pledged or created, perfected security
      interests with respect to such released assets and properties. In addition,
      from
      time to time, the Borrower will, at its cost and expense, promptly secure the
      Obligations by pledging or creating, or causing to be pledged or 

    
      
        
        

      

      
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      created,
        perfected security interests with respect to such of its assets and properties
        as the Administrative Agent shall designate (it being understood that it
        is the
        intent of the parties that the Obligations shall be secured by substantially
        all
        the assets of the Borrower and the Domestic Subsidiaries (other than Special
        Purpose Vehicles) (including properties acquired subsequent to the Closing
        Date)
        other than (i) assets and properties subject to Liens permitted under Sections
        6.02(a), 6.02(c) and 6.02(i) (in each case, for so long as such Liens exist
        and
        to the extent the agreements governing the same prohibit Liens securing the
        Obligations), (ii) Medicare/Medicaid Deposit Accounts, (iii) leasehold interests
        in real property, (iv) assets and properties described in Schedule IV to the
        Guarantee and Collateral Agreement, (v) assets of and Equity Interests in
        (a) Inactive Subsidiaries, (b) Special Purpose Vehicles (to the extent any
        HUD-guaranteed or mortgage financings of such Special Purpose Vehicle would
        prevent such pledge or security interests), and (c) Clipper, Bowie Center
        L.P.,
        a Maryland limited partnership, and Physicians Healthcare LLC, a Massachusetts
        limited liability company (in each case, to the extent any HUD-guaranteed
        or
        mortgage financings or partnership or joint venture agreement would prevent
        such
        pledge or security interests), (vi) assets and properties to be sold and
        described on Schedule 6.05 (provided
        that the
        Obligations shall be secured by the assets or properties described on Schedule
        6.05 that are not sold within nine months of the Closing Date), and (vii)
        other
        assets and properties permitted to be so excluded under the Loan Documents).
        Such security interests and Liens will be created under the Security Documents
        and other security agreements, mortgages, deeds of trust and other instruments
        and documents in form and substance reasonably satisfactory to the Collateral
        Agent, and the Borrower promptly shall deliver or cause to be delivered to
        the
        Lenders all such instruments and documents (including legal opinions, title
        insurance policies and lien searches) as the Collateral Agent shall reasonably
        request to evidence compliance with this Section 5.12. The Borrower agrees
        to provide such evidence as the Collateral Agent shall reasonably request
        as to
        the perfection and priority status of each such security interest and Lien.
        In
        furtherance of the foregoing, the Borrower will give prompt notice to the
        Administrative Agent of the acquisition by it or any of the Subsidiaries
        of a
        fee interest in any real property having a value in excess of
        $2,000,000.

    

     

    SECTION
      5.13. Interest
      Rate Protection.
      No
      later than the 90th day after the Closing Date, the Borrower shall enter into,
      and for a minimum of three years thereafter maintain, Hedging Agreements
      acceptable to the Administrative Agent that result in at least 50% of the
      aggregate principal amount of its funded long-term Indebtedness being
      effectively subject to a fixed or maximum interest rate acceptable to the
      Administrative Agent.

     

    SECTION
      5.14. Proceeds
      of Certain Dispositions.
      Subject
      to the provisions of Section 6.09(b), if, as a result of the receipt of any
      cash
      proceeds by the Borrower or any Subsidiary in connection with any sale,
      transfer, lease or other disposition of any asset the Borrower would be required
      by the terms of the Subordinated Note Documents to make an offer to purchase
      any
      Subordinated Notes, then, in the case of the Borrower or any Subsidiary, prior
      to the first day on which the Borrower would be required to commence such an
      offer to purchase, (i) prepay Loans in accordance with Section 2.12 or
      2.13 or (ii) acquire assets in a manner that is permitted hereby, in each
      case in a manner that will eliminate any such requirement to make such an offer
      to purchase.

    
      
        
        

      

      
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    SECTION
      5.15. Healthcare
      Requirements.
      (a)
      The
      operations conducted at each Facility shall be conducted in a manner consistent
      with material Healthcare Requirements and, in connection therewith, the Borrower
      further covenants and agrees that:

     

    (i)
      the
      storage, use, transportation and disposal of all medical equipment, medical
      supplies, medical products or gases and medical waste, of any kind and in any
      form, will be maintained in substantial compliance with all applicable
      regulations and laws;

     

    (ii)
      each
      Facility will be operated in a prudent manner in substantial and material
      compliance with applicable laws and regulations relating thereto and all
      Healthcare Licenses, reimbursement or care contracts, and any other agreements
      necessary for the certification, licensure or operation of such Facility as
      may
      be necessary for participation in the Medicare, Medicaid or TRICARE
      reimbursement programs, or any managed care company, insurance company, or
      other
      third-party payor reimbursement programs to remain in effect without reduction
      in the number of licensed beds or beds authorized for use in Medicare, Medicaid
      or TRICARE reimbursement programs, or any managed care company, insurance
      company, or other third-party payor reimbursement programs (unless such
      reduction is requested by the Borrower or a Subsidiary);

     

    (iii)
      the
      Facilities will be operated in a manner that will not result in a material
      reduction, suspension, denial or elimination of reimbursement for services
      from,
      or material recoupment by, Medicare, Medicaid, TRICARE or any managed care
      company, insurance company or other third-party payor; and

     

    (iv)
      all
      deposits relating to Healthcare Requirements, including deposits relating to
      residents or residency agreements, will be maintained in material compliance
      with all applicable regulatory requirements. If such deposits are in cash,
      the
      Borrower and the Subsidiaries shall deposit and hold such deposits in accordance
      with applicable law. The Borrower and the Subsidiaries shall cause any bond
      or
      other instrument which they are permitted to hold in lieu of cash deposits
      under
      any applicable Healthcare Requirements to be maintained in full force and effect
      and to comply, in all material respects, with any applicable Healthcare
      Requirements. The Borrower and the Subsidiaries shall, upon request, provide
      the
      Administrative Agent with evidence reasonably satisfactory to the Administrative
      Agent of compliance with the foregoing.

     

    (b)
      The
      Borrower and the Subsidiaries shall file all required Medicare, Medicaid and
      TRICARE cost reports on or prior to the date such reports are due and promptly
      make available to the Administrative Agent, if requested, a complete and
      accurate copy of the annual Medicare, Medicaid or TRICARE cost report for the
      Borrower and the Subsidiaries, which will be prepared by the Borrower or the
      applicable Subsidiary and accompanied by an officer’s certificate of the
      Borrower or such Subsidiary certifying as of the date thereof that such report
      is accurate and complete, and promptly furnish the 

    
      
        
        

      

      
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      Administrative
        Agent, if requested, any amendments filed with respect to such reports and
        all
        notices, responses, audit reports or inquiries with respect to such
        reports.

    

     

    (c)
      The
      Borrower and the Subsidiaries shall furnish to the Administrative Agent, if
      requested, within 30 days of such request, the annual Medicaid reimbursement
      rate sheets and the Medicare published rates, and any amendments
      thereto.

     

    (d)
      The
      Borrower and the Subsidiaries shall furnish to the Administrative Agent promptly
      upon request therefor, a copy of any Medicare, Medicaid, TRICARE or other
      licensing entity survey report or statement of deficiencies that will include
      a
      deficiency score of G or higher, or includes a deficiency score of “substandard
      quality of care” (as that term is defined in Part 488 of 42 C.F.R.) and within
      the time period required by the particular agency for furnishing a plan of
      correction also furnish (or cause to be furnished) to the Administrative Agent
      a
      copy of any related plan of correction generated from such survey report for
      the
      Borrower or any Subsidiary and by subsequent correspondence related thereto,
      and
      correct or cause to be corrected any deficiency, the curing of which is a
      condition of continued licensure or of full participation in Medicare, Medicaid
      or TRICARE by the date required for cure by such agency or entity (plus
      extensions granted by such agency or entity).

     

    (e)
      The
      Borrower and the Subsidiaries shall furnish to the Administrative Agent,
      promptly after receipt thereof by the Borrower or any Subsidiary, any other
      notices or charges issued relating to the material non-compliance by the
      Borrower or any Subsidiary with any Governmental Authority, laws, regulations,
      requirements, licenses, permits, certificates, authorizations or approvals
      (including any inquiry or investigation by any state
      or
      by the United States Department of Justice of the Borrower or any Subsidiary
      or
      any Facility), which could reasonably be expected to have a Material Adverse
      Effect.

     

    (f)
      The
      Borrower and the Subsidiaries shall furnish to the Administrative Agent,
      promptly upon receipt thereof, any and all notices (regardless of form) from
      any
      healthcare Governmental Authority that any license, Medicare, Medicaid or
      TRICARE certification is being downgraded, revoked, or suspended, or that action
      is being taken to downgrade, revoke, or suspend any license or
      certification.

     

    SECTION
      5.16. Deposit
      Accounts; Concentration Accounts; Letters of
      Instruction.
      The
      Borrower and the Subsidiaries shall establish (or cause to be established),
      and
      shall at all times during the term of this Agreement maintain (or cause to
      be
      maintained), in accordance with all applicable laws and regulations,
      (i) cash management services of a type and on terms reasonably satisfactory
      to the Collateral Agent at one or more banks and/or depositary institutions
      reasonably satisfactory to the Collateral Agent and (ii) deposit accounts
      with one or more depositary institutions into which payments in respect of
      Medicare, Medicaid, TRICARE and any other Veterans Administration receivables
      shall be initially deposited (all such deposit accounts referred to herein
      as
      the “Medicare/Medicaid
      Deposit Accounts”).
      The
      Borrower and the Subsidiaries shall deliver (or cause to be delivered) to each
      depositary bank in respect of each Medicare/Medicaid Deposit Account, on or
      prior to the Closing Date, a letter of instruction directing each such
      depositary bank to transfer all amounts received in each 

    
      
        
        

      

      
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      Medicare/Medicaid
        Deposit Account, promptly, and in any event no later than the first Business
        Day
        after the receipt thereof, to the applicable Concentration Account. The Borrower
        agrees that (a) each Concentration Account shall at all times be subject to
        a deposit account control agreement in favor of the Collateral Agent, for
        the
        ratable benefit of the Secured Parties, (b) no letter of instruction
        described in the previous sentence shall, at any time during the term of
        this
        Agreement, be revoked, withdrawn or otherwise modified in a manner adverse
        to
        the Secured Parties without the prior written consent of the Collateral Agent,
        and (c) no Medicare/Medicaid Deposit Account shall be subject to any deposit
        account control agreement or security interest in favor of Collateral Agent
        or
        Lenders.

    

     

    ARTICLE
      VI

     

    Negative
      Covenants

     

    The
      Borrower covenants and agrees with each Lender that, so long as this Agreement
      shall remain in effect and until the Commitments have been terminated and the
      principal of and interest on each Loan, all Fees and all other expenses or
      amounts payable under any Loan Document have been paid in full and all Letters
      of Credit have been cancelled or have expired and all amounts drawn thereunder
      have been reimbursed in full, unless the Required Lenders shall otherwise
      consent in writing, the Borrower will not and it will not cause or permit any
      of
      the Subsidiaries to:

     

    SECTION
      6.01. Indebtedness.
      Incur,
      create, assume or permit to exist any Indebtedness, except:

     

    (a)
      Indebtedness
      existing on the date hereof and set forth in Schedule 6.01, the Existing
      Mortgage Indebtedness, the assumption of up to $30,100,000 in existing
      Indebtedness in connection with the acquisition of the Moffie Properties
      pursuant to Section 6.04(h)(iii) (provided
      that
      such Indebtedness is not incurred in contemplation of such acquisition) and
      any
      extensions, renewals or replacements of such Indebtedness to the extent the
      principal amount of such Indebtedness is not increased (other than to the extent
      of any premiums, interest or costs and expenses incurred in connection
      therewith), neither the final maturity nor the weighted average life to maturity
      of such Indebtedness is decreased, such Indebtedness, if subordinated to the
      Obligations, remains so subordinated on terms no less favorable to the Lenders
      in any material respect, and the original obligors in respect of such
      Indebtedness remain the only obligors thereon;

     

    (b)
      Indebtedness
      created hereunder and under the other Loan Documents;

     

    (c)
      intercompany
      Indebtedness of the Borrower and the Subsidiaries to the extent permitted by
      Section 6.04(c);

     

    (d)
      Indebtedness
      of the Borrower or any Subsidiary incurred to finance the acquisition,
      construction or improvement of any fixed or capital assets, and extensions,
      renewals and replacements of any such Indebtedness that do not 

    
      
        
        

      

      
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      increase
        the outstanding principal amount thereof (other than to the extent of any
        premiums, interest or costs and expenses incurred in connection therewith)
        (“Purchase
        Money Indebtedness”);
        provided
        that
        (i) such Indebtedness is incurred prior to or within 90 days after such
        acquisition or the completion of such construction or improvement and
        (ii) the aggregate principal amount of Indebtedness permitted by this
        Section 6.01(d), when combined with the aggregate principal amount of all
        Capital Lease Obligations and Synthetic Lease Obligations incurred pursuant
        to
        Section 6.01(e), shall not exceed $20,000,000 at any time
        outstanding;

    

     

    (e)
      Capital
      Lease Obligations and Synthetic Lease Obligations in an aggregate principal
      amount, when combined with the aggregate principal amount of all Indebtedness
      incurred pursuant to Section 6.01(d), not in excess of $20,000,000 at any
      time outstanding;

     

    (f)
      Indebtedness
      under performance bonds or with respect to workers’ compensation claims, in each
      case incurred in the ordinary course of business;

     

    (g)
      Indebtedness
      incurred pursuant to the Subordinated Note Documents and any extensions,
      renewals or replacements of such Indebtedness to the extent the principal amount
      of such Indebtedness is not increased (other than to the extent of any premiums,
      interest or costs and expenses incurred in connection therewith), neither the
      final maturity nor the weighted average life to maturity of such Indebtedness
      is
      decreased, such Indebtedness remains subordinated to the Obligations on terms
      no
      less favorable to the Lenders than those in the Subordinated Note Documents
      and
      the original obligors in respect of such Indebtedness remain the only obligors
      thereof;

     

    (h)
      Indebtedness
      assumed in connection with a Permitted Acquisition and extensions, renewals
      and
      replacements of any such Indebtedness that do not increase the outstanding
      principal amount thereof (other than to the extent of any premiums, interest
      or
      costs and expenses incurred in connection therewith); provided
      that (i)
      such Indebtedness is not incurred in contemplation of, or in connection with,
      such Permitted Acquisition, (ii) both immediately prior and after giving effect
      thereto, no Default shall exist or result therefrom and (iii) Indebtedness
      incurred pursuant to this Section 6.01(h) shall not exceed $5,000,000 at any
      time outstanding;

     

    (i)
      Indebtedness
      of the Borrower or any Subsidiary consisting of (i) Purchase Money
      Indebtedness, (ii) Capital Lease Obligations or (iii) Indebtedness
      incurred to finance one or more Permitted Acquisitions so long as at the time
      of
      the incurrence thereof and after giving effect thereto, the Borrower would
      be in
      compliance with the covenant set forth in Section 6.13, calculated on a pro
      forma basis as of the most recently completed period of four consecutive fiscal
      quarters ending prior to such incurrence for which the financial statements
      and
      certificates required by Section 5.04(a) or 5.04(b), as the case may be,
      and 5.04(c) have been delivered; 

    
      
        
        

      

      
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    (j)
      Guarantees
      by the Borrower or the Subsidiaries of Indebtedness of the Borrower and the
      Subsidiaries permitted to be incurred hereunder; and

     

    (k)
      other
      unsecured Indebtedness of the Borrower or the Subsidiaries in an aggregate
      principal amount not exceeding $20,000,000 at any time outstanding.

     

    SECTION
      6.02. Liens.
      Create,
      incur, assume or permit to exist any Lien on any property or assets (including
      Equity Interests or other securities of any person, including the Borrower
      or
      any Subsidiary) now owned or hereafter acquired by it or on any income or
      revenues or rights in respect of any thereof, except:

     

    (a)
      Liens
      on
      property or assets of the Borrower and the Subsidiaries existing on the date
      hereof and set forth in Schedule 6.02; provided
      that
      such Liens shall secure only those obligations which they secure on the date
      hereof and extensions, renewals and replacements thereof permitted
      hereunder;

     

    (b)
      any
      Lien
      created under the Loan Documents;

     

    (c)
      any
      Lien
      existing on any property or asset prior to the acquisition thereof by the
      Borrower or any Subsidiary or existing on any property or assets of any person
      that becomes a Subsidiary after the date hereof prior to the time such person
      becomes a Subsidiary, as the case may be; provided
      that
      (i) such Lien is not created in contemplation of or in connection with such
      acquisition or such person becoming a Subsidiary, (ii) such Lien does not
      apply to any other property or assets of the Borrower or any Subsidiary and
      (iii) such Lien secures only those obligations which it secures on the date
      of such acquisition or the date such person becomes a Subsidiary, as the case
      may be, and extensions, renewals and replacement of any such Liens securing
      Indebtedness permitted under Section 6.01(h) hereof;

     

    (d)
      Liens
      for
      taxes not yet due or which are being contested in compliance with
      Section 5.03;

     

    (e)
      carriers’,
      warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
      arising in the ordinary course of business and securing obligations that are
      not
      due and payable or which are being contested in compliance with
      Section 5.03;

     

    (f)
      pledges
      and deposits made in the ordinary course of business in compliance with
      workmen’s compensation, unemployment insurance and other social security laws or
      regulations;

     

    (g)
      deposits
      to secure the performance of bids, trade contracts (other than for
      Indebtedness), leases (other than Capital Lease Obligations), statutory
      obligations, surety and appeal bonds, performance bonds and other obligations
      of
      a like nature incurred in the ordinary course of business;

    
      
        
        

      

      
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    (h)
      zoning
      restrictions, easements, rights-of-way, restrictions on use of real property
      and
      other similar encumbrances incurred in the ordinary course of business which,
      in
      the aggregate, are not substantial in amount and do not materially detract
      from
      the value of the property subject thereto or interfere with the ordinary conduct
      of the business of the Borrower or any of the Subsidiaries;

     

    (i)
      purchase
      money security interests in real property, improvements thereto or equipment
      hereafter acquired (or, in the case of improvements, constructed) by the
      Borrower or any Subsidiary; provided
      that
      (i) such security interests secure Indebtedness permitted by
      Section 6.01, (ii) such security interests are incurred, and the
      Indebtedness secured thereby is created, within 90 days after such
      acquisition (or construction), (iii) the Indebtedness secured thereby does
      not exceed 90% of the lesser of the cost or the fair market value of such real
      property, improvements or equipment at the time of such acquisition (or
      construction) and (iv) such security interests do not apply to any other
      property or assets of the Borrower or any Subsidiary; 

     

    (j)
      Liens
      securing judgments that have not resulted in an Event of Default under
      clause (i) of Article VII; 

     

    (k)
      licenses
      (with respect to Intellectual Property and other property), leases or subleases
      granted to third parties in accordance with any applicable terms of the Loan
      Documents and not interfering in any material respect with the ordinary conduct
      of the business of Borrower or any of the Subsidiaries or resulting in a
      material diminution in the value of any Collateral as security for the
      Obligations;

     

    (l)
      any
      (i)
      interest or title of a lessor or sublessor under any lease not prohibited by
      this Agreement, (ii) Lien or restriction that the interest or title of such
      lessor or sublessor may be subject to, or (iii) subordination of the interest
      of
      the lessee or sublessee under such lease to any Lien or restriction referred
      to
      in the preceding clause (ii), so long as the holder of such Lien or restriction
      agrees to recognize the rights of such lessee or sublessee under such
      lease;

     

    (m)
      Liens
      arising from filing UCC financing statements relating solely to leases not
      prohibited by this Agreement;

     

    (n)
      Liens
      securing obligations (other than obligations representing Indebtedness for
      borrowed money) under operating, reciprocal easement or similar agreements
      entered into in the ordinary course of business of Borrower and the
      Subsidiaries; and

     

    (o)
      other
      Liens with respect to property or assets of the Borrower or any Subsidiary
      securing obligations in an aggregate principal amount outstanding at any time
      not to exceed $2,000,000.

     

    SECTION
      6.03. Sale
      and Lease-Back Transactions.
      Enter
      into any arrangement, directly or indirectly, with any person (other than the
      Borrower or any of its 

    
      
        
        

      

      
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      wholly
        owned subsidiaries) whereby it shall sell or transfer any property, real
        or
        personal, used or useful in its business, whether now owned or hereafter
        acquired, and thereafter rent or lease such property or other property which
        it
        intends to use for substantially the same purpose or purposes as the property
        being sold or transferred unless (a) the sale or transfer of such property
        is permitted by Section 6.05 and (b) any Capital Lease Obligations,
        Synthetic Lease Obligations or Liens arising in connection therewith are
        permitted by Sections 6.01 and 6.02, as the case may be.

    

     

    SECTION
      6.04. Investments,
      Loans and Advances.
      Purchase, hold or acquire any Equity Interests, evidences of indebtedness or
      other securities of, make or permit to exist any loans or advances to, or make
      or permit to exist any investment or any other interest in, any other person,
      except:

     

    (a)
      (i)
      investments by the Borrower and the Subsidiaries existing on the date hereof
      in
      the Equity Interests of the Subsidiaries and (ii) additional investments by
      the Borrower and the Subsidiaries in the Equity Interests of the Subsidiaries;
      provided
      that,
      (A) except as permitted by Section 5.12, any such Equity Interests held by
      a
      Loan Party shall be pledged pursuant to the Guarantee and Collateral Agreement
      (subject to the limitations applicable to voting stock of a Foreign Subsidiary
      referred to therein) and (B) after the date hereof, the aggregate amount of
      investments made pursuant to this Section 6.04(a) and Section 6.04(c) by Loan
      Parties in, and loans and advances made pursuant to this Section 6.04(a) and
      Section 6.04(c) by Loan Parties to, Subsidiaries that are not Loan Parties
      (determined without regard to any write-downs or write-offs of such investments,
      loans and advances) shall not exceed $2,000,000 at any time
      outstanding;

     

    (b)
      Permitted
      Investments;

     

    (c)
      loans
      or
      advances made by the Borrower to any Subsidiary and made by any Subsidiary
      to
      the Borrower or any other Subsidiary; provided
      that (i)
      any such loans and advances made by a Loan Party shall be pledged pursuant
      to
      the Guarantee and Collateral Agreement and (ii) the amount of such loans and
      advances made by Loan Parties to Subsidiaries that are not Loan Parties shall
      be
      subject to the limitation set forth in clause (a) above;

     

    (d)
      investments
      received in connection with the bankruptcy or reorganization of, or settlement
      of delinquent accounts and disputes with, customers and suppliers, in each
      case
      in the ordinary course of business;

     

    (e)
      the
      Borrower and the Subsidiaries may make loans and advances in the ordinary course
      of business to their respective employees so long as the aggregate principal
      amount thereof at any time outstanding (determined without regard to any
      write-downs or write-offs of such loans and advances) shall not exceed
      $1,000,000;

    
      
        
        

      

      
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    (f)
      the
      Borrower and the Subsidiaries may enter into Hedging Agreements that
      (i) are required by Section 5.13 or (ii) are not speculative in
      nature and are related to income derived from foreign operations of the Borrower
      or any Subsidiary or otherwise related to purchases from foreign
      suppliers;

     

    (g)
      the
      Borrower or any Subsidiary may acquire all or substantially all the assets
      of a
      person or line of business of such person, or not less than 75% of the Equity
      Interests (other than directors’ qualifying shares) of a person (referred to
      herein as the “Acquired
      Entity”);
      provided
      that
      (i) such acquisition was not preceded by an unsolicited tender offer for
      such Equity Interests by, or proxy contest initiated by, the Borrower or any
      Subsidiary; (ii) the Acquired Entity shall be in a similar line of business
      as that of the Borrower and the Subsidiaries as conducted during the current
      and
      most recent calendar year; (iii) if
      the
      Acquired Entity would not constitute a wholly owned Subsidiary and would be
      required to become a Subsidiary Guarantor hereunder, the Borrower shall use
      commercially reasonable efforts to cause each holder of an Equity Interest
      therein (other than the Borrower or any wholly owned Subsidiary) to execute
      and
      deliver to the Collateral Agent a Minority Holder Acknowledgement, Consent
      and
      Waiver;
      and
      (iv) at the time of such transaction (A) both before and after giving
      effect thereto, no Default or Event of Default shall have occurred and be
      continuing; (B) the Borrower would be in compliance with the covenants set
      forth in Sections 6.11, 6.12 and 6.13 as of the most recently completed period
      of four consecutive fiscal quarters ending prior to such transaction for which
      the financial statements and certificates required by Section 5.04(a) or
      5.04(b), as the case may be, and 5.04(c) have been delivered or for which
      comparable financial statements have been filed with the SEC, after giving
      pro
      forma effect to such transaction and to any other event occurring after such
      period as to which pro forma recalculation is appropriate (including any other
      transaction described in this Section 6.04(g) occurring after such period)
      as if such transaction had occurred as of the first day of such period
      (assuming, for purposes of pro forma compliance with Section 6.12, that the
      maximum Total Leverage Ratio permitted at the time by such Section was in fact
      0.25 to 1.00 less than the ratio actually provided for in such Section at such
      time); (C) after giving effect to such acquisition, there must be at least
      $15,000,000 of unused and available Revolving Credit Commitments; (D) the
      total consideration paid in connection with such acquisition and any other
      acquisitions pursuant to this Section 6.04(g) (including any Indebtedness
      of the Acquired Entity that is assumed by the Borrower or any Subsidiary
      following such acquisition and any payments following such acquisition pursuant
      to earn-out provisions or similar obligations) shall not in the aggregate exceed
      $50,000,000;
      (E) the Borrower shall have delivered a certificate of a Financial Officer,
      certifying as to the foregoing and containing reasonably detailed calculations
      in support thereof, in form and substance reasonably satisfactory to the
      Administrative Agent; and (F) the Borrower shall comply, and shall cause
      the Acquired Entity to comply, with the applicable provisions of Section 5.12
      and the Security Documents (any acquisition of an Acquired Entity meeting all
      the criteria of this Section 6.04(g) being referred to herein as a
“Permitted
      Acquisition”);
      

    
      
        
        

      

      
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    (h)
      the
      Borrower and the Subsidiaries may acquire (i) Equity Interests of Clipper
      on the terms provided in the Clipper Option Agreement, (ii) the NHP
      Properties on the terms provided in the Restated Master Lease related thereto
      and (iii) the Moffie Properties on the terms provided in the leases for such
      Facilities; 

     

    (i)
      investments
      existing on the date hereof and set forth in Schedule 6.04;

     

    (j)
      the
      Borrower and the Subsidiaries may receive and hold promissory notes and other
      non-cash consideration received in connection with Asset Sales permitted under
      Section 6.05;

     

    (k)
      the
      Borrower and the Subsidiaries may make Capital Expenditures permitted under
      Section 6.10; and

     

    (l)
      in
      addition to investments permitted by paragraphs (a) through (k) above,
      additional investments, loans and advances by the Borrower and the Subsidiaries
      so long as the aggregate amount invested, loaned or advanced pursuant to this
      paragraph (l) (determined without regard to any write-downs or write-offs of
      such investments, loans and advances) does not exceed $25,000,000 in the
      aggregate.

     

    SECTION
      6.05. Mergers,
      Consolidations, Sales of Assets and Acquisitions.
      (a)
      Merge
      into or consolidate with any other person, or permit any other person to merge
      into or consolidate with it, or sell, transfer, lease or otherwise dispose
      of
      (in one transaction or in a series of transactions) all or substantially all
      the
      assets (whether now owned or hereafter acquired) of the Borrower or less than
      all the Equity Interests of any Subsidiary, or purchase, lease or otherwise
      acquire (in one transaction or a series of transactions) all or any substantial
      part of the assets of any other person, except that if at the time thereof
      and
      immediately after giving effect thereto no Event of Default or Default shall
      have occurred and be continuing (x) any wholly owned Subsidiary may merge
      into or consolidate with the Borrower in a transaction in which the Borrower
      is
      the surviving corporation, (y) any wholly owned Subsidiary may merge into
      or consolidate with any other wholly owned Subsidiary in a transaction in which
      the surviving entity is a wholly owned Subsidiary, and no person other than
      the
      Borrower or a wholly owned Subsidiary receives any consideration (provided
      that
      if any party to any such transaction is a Loan Party, the surviving entity
      of
      such transaction shall be a Loan Party) and (z) the Borrower and the
      Subsidiaries may make Permitted Acquisitions. For the avoidance of doubt, the
      Borrower or any of the Subsidiaries may sell, transfer or otherwise dispose
      (including by way of merger) to any person all the Equity Interests of any
      Subsidiary to the extent permitted under paragraph (b) below.

     

    (b)
      Make
      any
      Asset Sale (other than an involuntary Asset Sale, such as casualty, condemnation
      or similar events) otherwise permitted under paragraph (a) above unless
      (i) such Asset Sale is for consideration at least 75% of which is cash,
      (ii) such consideration is at least equal to the fair market value of the
      assets being sold, transferred, leased or disposed of and (iii) the asset
      is (w) not related to the inpatient skilled nursing facility business of
      the Borrower and the Subsidiaries, (x) is described on Schedule 6.05

    
      
        
        

      

      
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      and
        is
        sold within nine months of the Closing Date, (y) is a Facility subject to
        Existing Mortgage Indebtedness and is sold to a Special Purpose Vehicle in
        connection with the permitted refinancing of such Existing Mortgage Indebtedness
        or (z) in the case of all other Asset Sales (including the assets described
        on Schedule 6.05 that are not sold within nine months of the Closing Date),
        the fair market value of all assets sold, transferred, leased or disposed
        of
        pursuant to this paragraph (b) shall not exceed $25,000,000 in any fiscal
        year.

    

     

    SECTION
      6.06. Restricted
      Payments; Restrictive Agreements.(a)
      Declare
      or make, or agree to declare or make, directly or indirectly, any Restricted
      Payment (including pursuant to any Synthetic Purchase Agreement), or incur
      any
      obligation (contingent or otherwise) to do so; provided,
      however,
      that
      (i) any Subsidiary may declare and pay dividends or make other
      distributions ratably to its equity holders and (ii) so long as no Event of
      Default or Default shall have occurred and be continuing or would result
      therefrom, the Borrower may repurchase its Equity Interests owned by employees
      of the Borrower or the Subsidiaries or make payments to employees of the
      Borrower or the Subsidiaries upon termination of employment in connection with
      the exercise of stock options, stock appreciation rights or similar equity
      incentives or equity-based incentives pursuant to management incentive plans
      or
      in connection with the death or disability of such employees in an aggregate
      amount not to exceed $2,000,000 in any fiscal year.

     

    (b)
      Enter
      into, incur or permit to exist any agreement or other arrangement that
      prohibits, restricts or imposes any condition upon (i) the ability of the
      Borrower or any Subsidiary to create, incur or permit to exist any Lien upon
      any
      of its property or assets to secure the Obligations, or (ii) the ability of
      any Subsidiary to pay dividends or other distributions with respect to any
      of
      its Equity Interests or to make or repay loans or advances to the Borrower
      or
      any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other
      Subsidiary; provided that (A) the foregoing shall not apply to
      restrictions and conditions imposed by law or regulations or by any Loan
      Document, any Subordinated Note Document or by the Existing Mortgage
      Indebtedness or such other Indebtedness as is set forth on Schedule 6.01,
      (B) the foregoing shall not apply to customary restrictions and conditions
      contained in agreements relating to the sale of a Subsidiary or any other
      permitted asset sale pending such sale, provided such restrictions and
      conditions apply only to the Subsidiary or other asset that is to be sold and
      such sale is permitted hereunder, (C) the foregoing shall not apply to
      restrictions and conditions imposed on any Foreign Subsidiary or Special Purpose
      Vehicle by the terms of any Indebtedness of such Foreign Subsidiary or Special
      Purpose Vehicle permitted to be incurred hereunder, (D) clause (i) of
      the foregoing shall not apply to restrictions or conditions imposed by any
      agreement relating to secured Indebtedness permitted by this Agreement if such
      restrictions or conditions apply only to the property or assets securing such
      Indebtedness and (E) clause (i) of the foregoing shall not apply to
      customary provisions in leases and other contracts restricting the assignment
      thereof.

     

    SECTION
      6.07. Transactions
      with Affiliates.
      Except
      for transactions between or among the Borrower and wholly owned Subsidiaries,
      sell or transfer any property or assets to, or purchase or acquire any property
      or assets from, or otherwise engage in any 

    
      
        
        

      

      
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      other
        transactions with, any of its Affiliates, except that the Borrower or any
        Subsidiary may engage in any of the foregoing transactions in the ordinary
        course of business at prices and on terms and conditions not less favorable
        to
        the Borrower or such Subsidiary than could be obtained on an arm’s-length basis
        from unrelated third parties; provided
        that the
        foregoing restriction shall not apply to (i) the acquisition of Equity
        Interests in Clipper on the terms provided in the Clipper Option Agreement;
        (ii) the leasing of property from Clipper on terms substantially similar to
        the terms contained in leases in existence on the date hereof, and performance
        of such leases in accordance with such terms; and (iii) the providing of
        general administrative and management services by the Borrower to non-wholly
        owned Subsidiaries on terms substantially similar to the general administrative
        and management services provided by the Borrower to its wholly owned
        Subsidiaries.

    

     

    SECTION
      6.08. Business
      of Borrower and Subsidiaries.
      Engage
      at any time in any business or business activity other than the business
      currently conducted by it and business activities reasonably incidental
      thereto.

     

    SECTION
      6.09. Other
      Indebtedness and Agreements.
      (a)
      Permit
      any waiver, supplement, modification, amendment, termination or release of
      any
      indenture, instrument or agreement pursuant to which any Material Indebtedness
      of the Borrower or any of the Subsidiaries is outstanding if the effect of
      such
      waiver, supplement, modification, amendment, termination or release would
      materially increase the obligations of the obligor or confer additional material
      rights on the holder of such Indebtedness in a manner materially adverse to
      the
      Borrower, such Subsidiary or the Lenders.

     

    (b)
      Make
      any distribution, whether in cash, property, securities or a combination
      thereof, in respect of, or pay, or commit to pay, or directly or indirectly
      (including pursuant to any Synthetic Purchase Agreement) redeem, repurchase,
      retire or otherwise acquire for consideration, other than regular scheduled
      payments of principal and interest as and when due (to the extent not prohibited
      by applicable subordination provisions), or set apart any sum for the aforesaid
      purposes, any Material Indebtedness (other than (i) the Loans or
      (ii) any Existing Mortgage Indebtedness in connection with a refinancing
      permitted pursuant to Section 6.01(a)); provided that the Borrower
      may redeem, repurchase, retire or otherwise acquire for consideration any
      Subordinated Notes with the Declined Proceeds that are rejected by the Term
      Lenders and retained by the Borrower pursuant to the last sentence of Section
      2.13(h), if at the time of such redemption, both before and after giving pro
      forma effect thereto, (x) no Default or Event of Default shall have occurred
      and
      be continuing and (y) the Senior Leverage Ratio is less than 3.0 to
      1.0.

     

    SECTION
      6.10. Capital
      Expenditures.
      Permit
      the aggregate amount of Capital Expenditures made by the Borrower and the
      Subsidiaries in any period set forth below to exceed the amount set forth below
      for such period:

    
      
        
        

      

      
        96

        
          

        

      

      
        
        

      

    

     

    
      	
              Period

            	
              Amount

            
	 	 
	
              Closing
                Date through December 31, 2007

            	
              $25,000,000

            
	
              January
                1, 2008 through December 31, 2008

            	
              $50,000,000

            
	
              January
                1, 2009 through December 31, 2009

            	
              $50,000,000

            
	
              January
                1, 2010 through December 31, 2010

            	
              $55,000,000

            
	
              January
                1, 2011 through December 31, 2011

            	
              $55,000,000

            
	
              January
                1, 2012 through December 31, 2012

            	
              $55,000,000

            
	
              January
                1, 2013 through December 31, 2013

            	
              $55,000,000

            
	
              January
                1, 2014 through March 31, 2014

            	
              $55,000,000

            

    

    

    The
      amount of permitted Capital Expenditures set forth above in respect of any
      fiscal year commencing with the fiscal year ending on December 31, 2007,
      shall be increased (but not decreased) by (a) the amount of unused
      permitted Capital Expenditures for the immediately preceding fiscal year less
      (b) an amount equal to unused Capital Expenditures carried forward to such
      preceding fiscal year.

     

    SECTION
      6.11. Interest
      Coverage Ratio.
      Permit
      the Interest Coverage Ratio for any period of four consecutive fiscal quarters,
      in each case taken as one accounting period, ending as of the last day of each
      fiscal quarter ending on a date or during any period set forth below to be
      less
      than the ratio set forth opposite such period below:

     

    
      	
              Period

            	
              Ratio

            
	 	 
	
              July
                1, 2007 through December 31, 2007

            	
              1.80
                to 1.00

            
	
              January
                1, 2008 through December 31, 2008

            	
              2.25
                to 1.00

            
	
              January
                1, 2009 through December 31, 2009

            	
              2.50
                to 1.00

            
	
              January
                1, 2010 through December 31, 2010

            	
              2.50
                to 1.00

            
	
              Thereafter

            	
              2.75
                to 1.00

            

    

    

    SECTION
      6.12. Maximum
      Total Leverage Ratio.
      Permit
      the Total Leverage Ratio as of the last day of each fiscal quarter ending on
      a
      date or during a period set forth below to be greater than the ratio set forth
      opposite such period below:

     

    
      	
              Period

            	
              Ratio

            
	 	 
	
              July
                1, 2007 through December 31, 2007

            	
              6.25
                to 1.00

            
	
              January
                1, 2008 through December 31, 2008

            	
              5.00
                to 1.00

            
	
              January
                1, 2009 through December 31, 2009

            	
              4.25
                to 1.00

            
	
              January
                1, 2010 through December 31, 2010

            	
              3.50
                to 1.00

            
	
              Thereafter

            	
              3.00
                to 1.00

            

    

     

    
      
        
        

      

      
        97

        
          

        

      

      
        
        

      

    

    SECTION
      6.13. Maximum
      Senior Leverage Ratio.
      Permit
      the Senior Leverage Ratio as of the last day of each fiscal quarter ending
      on a
      date or during a period set forth below to be greater than the ratio set forth
      opposite such period below:

    

    
      	
              Period

            	
              Ratio

            
	 	 
	
              July
                1, 2007 through December 31, 2007

            	
              4.50
                to 1.00

            
	
              January
                1, 2008 through December 31, 2008

            	
              3.50
                to 1.00

            
	
              January
                1, 2009 through December 31, 2009

            	
              2.75
                to 1.00

            
	
              January
                1, 2010 through December 31, 2010

            	
              2.50
                to 1.00

            
	
              Thereafter

            	
              2.00
                to 1.00

            

    

    

    SECTION
      6.14. Fiscal
      Year.
      With
      respect to the Borrower, change its fiscal year-end to a date other than
      December 31.

     

    SECTION
      6.15. Certain
      Equity Securities. Issue
      any
      Equity Interest that is not Qualified Capital Stock.

     

    ARTICLE
      VII

     

    Events
      of Default

     

    In
      case
      of the happening of any of the following events (“Events
      of Default”):

     

    (a)
      any
      representation or warranty made or deemed made in or in connection with any
      Loan
      Document or the borrowings or issuances of Letters of Credit hereunder, or
      any
      representation, warranty, statement or information contained in any report,
      certificate, financial statement or other instrument furnished in connection
      with or pursuant to any Loan Document, shall prove to have been false or
      misleading in any material respect when so made, deemed made or
      furnished;

     

    (b)
      default
      shall be made in the payment of any principal of any Loan or the reimbursement
      with respect to any L/C Disbursement when and as the same shall become due
      and
      payable, whether at the due date thereof or at a date fixed for prepayment
      thereof or by acceleration thereof or otherwise;

     

    (c)
      default
      shall be made in the payment of any interest on any Loan or any Fee or L/C
      Disbursement or any other amount (other than an amount referred to in
      (b) above) due under any Loan Document, when and as the same shall become
      due and payable, and such default shall continue unremedied for a period of
      three Business Days;

     

    (d)
      default
      shall be made in the due observance or performance by the Borrower or any
      Subsidiary of any covenant, condition or agreement contained in
      Section 5.01(a), 5.05 or 5.08 or in Article VI;

    
      
        
        

      

      
        98

        
          

        

      

      
        
        

      

    

     

    (e)
      default
      shall be made in the due observance or performance by the Borrower or any
      Subsidiary of any covenant, condition or agreement contained in any Loan
      Document (other than those specified in (b), (c) or (d) above) and such
default
      shall continue unremedied for a period of 30 days after notice thereof from
      the Administrative Agent or any Lender to the Borrower;

     

    (f)
      (i)  the
      Borrower or any Subsidiary shall fail to pay any principal or interest,
      regardless of amount, due in respect of any Material Indebtedness, when and
      as
      the same shall become due and payable, or (ii) any other event or condition
      occurs that results in any Material Indebtedness becoming due prior to its
      scheduled maturity or that enables or permits (with or without the giving of
      notice, the lapse of time or both) the holder or holders of any Material
      Indebtedness or any trustee or agent on its or their behalf to cause any
      Material Indebtedness to become due, or to require the prepayment, repurchase,
      redemption or defeasance thereof, prior to its scheduled maturity; provided
      that
      this clause (ii) shall not apply to secured Indebtedness that becomes due
      as a result of the voluntary sale or transfer of the property or assets securing
      such Indebtedness;

     

    (g)
      an
      involuntary proceeding shall be commenced or an involuntary petition shall
      be
      filed in a court of competent jurisdiction seeking (i) relief in respect of
      the Borrower or any Subsidiary (other than an Inactive Subsidiary), or of a
      substantial part of the property or assets of the Borrower or a Subsidiary
      (other than an Inactive Subsidiary), under Title 11 of the United States
      Code, as now constituted or hereafter amended, or any other Federal, state
      or
      foreign bankruptcy, insolvency, receivership or similar law, (ii) the
      appointment of a receiver, trustee, custodian, sequestrator, conservator or
      similar official for the Borrower or any Subsidiary (other than an Inactive
      Subsidiary) or for a substantial part of the property or assets of the Borrower
      or a Subsidiary (other than an Inactive Subsidiary) or (iii) the winding-up
      or liquidation of the Borrower or any Subsidiary (other than an Inactive
      Subsidiary); and such proceeding or petition shall continue undismissed for
      60 days or an order or decree approving or ordering any of the foregoing
      shall be entered;

     

    (h)
      the
      Borrower or any Subsidiary (other than an Inactive Subsidiary) shall
      (i) voluntarily commence any proceeding or file any petition seeking relief
      under Title 11 of the United States Code, as now constituted or hereafter
      amended, or any other Federal, state or foreign bankruptcy, insolvency,
      receivership or similar law, (ii) consent to the institution of, or fail to
      contest in a timely and appropriate manner, any proceeding or the filing of
      any
      petition described in (g) above, (iii) apply for or consent to the
      appointment of a receiver, trustee, custodian, sequestrator, conservator or
      similar official for the Borrower or any Subsidiary (other than an Inactive
      Subsidiary) or for a substantial part of the property or assets of the Borrower
      or any Subsidiary (other than an Inactive Subsidiary), (iv) file an answer
      admitting the material allegations of a petition filed against it in any such
      proceeding, (v) make a general assignment for the benefit of creditors,
      (vi) become unable, admit in writing its inability or fail

    
      
        
        

      

      
        99

        
          

        

      

      
        
        

      

       generally
        to pay its debts as they become due or (vii) take any action for the
        purpose of effecting any of the foregoing;

    

     

    (i)
      other
      than the Permanent Injunction, one or more judgments shall be rendered against
      the Borrower, any Subsidiary or any combination thereof and the same
      shall remain undischarged for a period of 60 consecutive days during which
      execution shall not be effectively stayed, or any writ or warrant of attachment
      or similar process shall be entered or filed upon assets or properties of the
      Borrower or any Subsidiary to enforce any such judgment and such judgment is
      for
      the payment of money in an aggregate amount in excess of $5,000,000 (net of
      any
      amounts covered by applicable insurance or self-insurance);

     

    (j)
      an
      ERISA
      Event shall have occurred that in the opinion of the Required Lenders when
      taken
      together with all other such ERISA Events, could reasonably be expected to
      result in liability of the Borrower and its ERISA Affiliates in an aggregate
      amount exceeding $5,000,000;

     

    (k)
      any
      Guarantee under the Guarantee and Collateral Agreement for any reason shall
      cease to be in full force and effect (other than in accordance with its terms),
      or any Subsidiary Guarantor shall deny in writing that it has any further
      liability under the Guarantee and Collateral Agreement (other than as a result
      of the discharge of such Subsidiary Guarantor in accordance with the terms
      of
      the Loan Documents);

     

    (l)
      any
      security interest purported to be created by any Security Document shall cease
      to be, or shall be asserted by the Borrower or any other Loan Party not to
      be, a
      valid, perfected, first priority (except as otherwise expressly provided in
      this
      Agreement or such Security Document) security interest in the securities, assets
      or properties covered thereby, except to the extent that any such loss of
      perfection or priority results from the failure of the Collateral Agent to
      maintain possession of certificates representing securities pledged under the
      Guarantee and Collateral Agreement and, except to the extent that such loss
      is
      covered by a lender’s title insurance policy and the related insurer promptly
      after such loss, shall have acknowledged in writing that such loss is covered
      by
      such title insurance policy;

     

    (m)
      the
      Indebtedness under the Subordinated Notes or any other subordinated Indebtedness
      of the Borrower and the Subsidiaries constituting Material Indebtedness shall
      cease (or any Loan Party shall so assert), for any reason, to be validly
      subordinated to the Obligations as provided in the Subordinated Note Documents
      or the agreements evidencing such other subordinated Indebtedness;

     

    (n)
      the
      initiation of proceedings by any Governmental Authority for any revocation
      or
      termination of any Healthcare License or any adverse modification of the terms
      thereof which, individually or in the aggregate, could reasonably be expected
      to
      result in a Material Adverse Effect, or 

    
      
        
        

      

      
        100

        
          

        

      

      
        
        

      

    

     

    (o)
      there
      shall have occurred a Change in Control;

     

    then,
      and
      in every such event (other than an event with respect to the Borrower described
      in paragraph (g) or (h) above), and at any time thereafter during the
      continuance of such event, the Administrative Agent may, and at the request
      of
      the Required Lenders shall, by notice to the Borrower, take either or both
      of
      the following actions, at the same or different
      times:  (i) terminate forthwith the Commitments and
      (ii) declare the Loans then outstanding to be forthwith due and payable in
      whole or in part, whereupon the principal of the Loans so declared to be due
      and
      payable, together with accrued interest thereon and any unpaid accrued Fees
      and
      all other liabilities of the Borrower accrued hereunder and under any other
      Loan
      Document, shall become forthwith due and payable, without presentment, demand,
      protest or any other notice of any kind, all of which are hereby expressly
      waived by the Borrower, anything contained herein or in any other Loan Document
      to the contrary notwithstanding; and in any event with respect to the Borrower
      described in paragraph (g) or (h) above, the Commitments shall
      automatically terminate and the principal of the Loans then outstanding,
      together with accrued interest thereon and any unpaid accrued Fees and all
      other
      liabilities of the Borrower accrued hereunder and under any other Loan Document,
      shall automatically become due and payable, without presentment, demand, protest
      or any other notice of any kind, all of which are hereby expressly waived by
      the
      Borrower, anything contained herein or in any other Loan Document to the
      contrary notwithstanding.

     

    ARTICLE
      VIII

     

    The
      Administrative Agent and the Collateral Agent

     

    Each
      of
      the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative
      Agent and the Collateral Agent (for purposes of this Article VIII, the
      Administrative Agent and the Collateral Agent are referred to collectively
      as
      the “Agents”)
      its
      agent and authorizes the Agents to take such actions on its behalf and to
      exercise such powers as are delegated to such Agent by the terms of the Loan
      Documents, together with such actions and powers as are reasonably incidental
      thereto. Without limiting the generality of the foregoing, the Agents are hereby
      expressly authorized to execute any and all documents (including releases)
      with
      respect to the Collateral and the rights of the Secured Parties with respect
      thereto, as contemplated by and in accordance with the provisions of this
      Agreement and the Security Documents.

     

    The
      bank
      serving as the Administrative Agent and/or the Collateral Agent hereunder 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 such bank and
      its
      Affiliates may accept deposits from, lend money to and generally engage in
      any
      kind of business with the Borrower or any Subsidiary or other Affiliate thereof
      as if it were not an Agent hereunder.

     

    Neither
      Agent shall have any duties or obligations except those expressly set forth
      in
      the Loan Documents. Without limiting the generality of the foregoing,
      (a) neither Agent shall be subject to any fiduciary or other implied
      duties, regardless of whether a 

    
      
        
        

      

      
        101

        
          

        

      

      
        
        

      

      Default
        has occurred and is continuing, (b) neither Agent shall have any duty to
        take any discretionary action or exercise any discretionary powers, except
        discretionary rights and powers expressly contemplated hereby that such Agent
        is
        instructed in writing to exercise by the Required Lenders (or such other
        number
        or percentage of the Lenders as shall be necessary under the circumstances
        as
        provided in Section 9.08) and (c) except as expressly set forth in the
        Loan Documents, neither Agent shall have any duty to disclose, nor shall
        it be
        liable for the failure to disclose, any information relating to the Borrower
        or
        any of the Subsidiaries that is communicated to or obtained by the bank serving
        as Administrative
        Agent and/or Collateral Agent or any of its Affiliates in any capacity. Neither
        Agent shall be liable for any action taken or not taken by it with the consent
        or at the request of the Required Lenders (or such other number or percentage
        of
        the Lenders as shall be necessary under the circumstances as provided in
        Section
        9.08) or in the absence of its own gross negligence or wilful misconduct.
        Neither Agent shall be deemed to have knowledge of any Default unless and
        until
        written notice thereof is given to such Agent by the Borrower or a Lender,
        and
        neither 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
        any Loan Document, (ii) the contents of any certificate, report or other
        document delivered thereunder or in connection therewith, (iii) the performance
        or observance of any of the covenants, agreements or other terms or conditions
        set forth in any Loan Document, (iv) the validity, enforceability, effectiveness
        or genuineness of any Loan Document or any other agreement, instrument or
        document, or (v) the satisfaction of any condition set forth in Article IV
        or
        elsewhere in any Loan Document, other than to confirm receipt of items expressly
        required to be delivered to such Agent.

    

     

    Each
      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 believed by it to be genuine and to have been signed
      or sent by the proper person. Each Agent may also 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. Each Agent may
      consult with legal counsel (who may be counsel for the 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.

     

    Each
      Agent may perform any and all its duties and exercise its rights and powers
      by
      or through any one or more sub-agents appointed by it. Each Agent and any such
      sub-agent may perform any and all its duties and exercise its rights and powers
      by or through their respective Related Parties. The exculpatory provisions
      of
      the preceding paragraphs shall apply to any such sub-agent and to the Related
      Parties of each Agent and any such sub-agent, and shall apply to their
      respective activities in connection with the syndication of the Credit
      Facilities as well as activities as Agent.

     

    Subject
      to the appointment and acceptance of a successor Agent as provided below, either
      Agent may resign at any time by notifying the Lenders, the Issuing Bank and
      the
      Borrower. Upon any such resignation, the Required Lenders shall have the right,
      in consultation with the Borrower, to appoint a successor. If no successor
      shall
      have been so appointed by the Required Lenders and shall have accepted such
      appointment within 

    
      
        
        

      

      
        102

        
          

        

      

      
        
        

      

      30 days
        after the retiring Agent gives notice of its resignation, then the retiring
        Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor
        Agent which shall be a bank with an office in New York, New York, or an
        Affiliate of any such bank. Upon the acceptance of its appointment as Agent
        hereunder by a successor, such successor shall succeed to and become vested
        with
        all the rights, powers, privileges and duties of the retiring Agent, and
        the
        retiring Agent shall be discharged from its duties and obligations hereunder.
        The fees payable by the Borrower to a successor Agent shall be the same as
        those
        payable to its predecessor unless otherwise agreed between the Borrower and
        such
        successor. After an Agent’s resignation hereunder, the provisions of
this
        Article and Section 9.05 shall continue in effect for the benefit of such
        retiring 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 acting as
        Agent.

    

     

    Each
      Lender acknowledges that it has, independently and without reliance upon the
      Agents or any other Lender 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 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
      or any other Loan Document, any related agreement or any document furnished
      hereunder or thereunder.

     

    ARTICLE
      IX

     

    Miscellaneous

     

    SECTION
      9.01. Notices.
      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 fax, as follows:

     

    (a)
      if to
      the Borrower, to it at Sun Healthcare Group, Inc., 18831 Von Karman, Suite
      400,
      Irvine, CA 92612, Attention of Treasury Department (Fax
      No. (949) 255-7055); with copy to Law Department (Fax No. (949)
      255-7057);

     

    (b)
      if
      to the
      Administrative Agent, to Credit Suisse, Eleven Madison Avenue, New York, NY
      10010, Attention of Agency Group (Fax No. (212) 325-8304); and

     

    (c)
      if
      to a
      Lender, to it at its address (or fax number) set forth on Schedule 2.01 or
      in
      the Assignment and Acceptance pursuant to which such Lender shall have become
      a
      party hereto.

     

    All
      notices and other communications given to any party hereto in accordance with
      the provisions of this Agreement shall be deemed to have been given on the
      date
      of receipt if delivered by hand or overnight courier service or sent by fax
      or
      on the date five Business Days after dispatch by certified or registered mail
      if
      mailed, in each case delivered, sent or mailed (properly addressed) to such
      party as provided in this 

    
      
        
        

      

      
        103

        
          

        

      

      
        
        

      

      Section 9.01
        or in accordance with the latest unrevoked direction from such party given
        in
        accordance with this Section 9.01. As agreed to among the Borrower, the
        Administrative Agent and the applicable Lenders from time to time, notices
        and
        other communications may also be delivered by e-mail to the e-mail address
        of a
        representative of the applicable person provided from time to time by such
        person.

    

     

    SECTION
      9.02. Survival
      of Agreement.
      All
      covenants, agreements, representations and warranties made by the Borrower
      herein and in the certificates or other instruments prepared or delivered in
      connection with or pursuant to this Agreement or any other Loan Document shall
      be considered to have been relied upon by the Lenders and the Issuing Bank
      and
      shall survive the making by the Lenders of the Loans and the issuance of Letters
      of Credit by the Issuing Bank, regardless of any investigation made by
the
      Lenders or the Issuing Bank or on their behalf, and shall continue in full
      force
      and effect as long as the principal of or any accrued interest on any Loan
      or
      any Fee or any other amount payable under this Agreement or any other Loan
      Document is outstanding and unpaid or any Letter of Credit is outstanding and
      so
      long as the Commitments have not been terminated. The provisions of Sections
      2.14, 2.16, 2.20, 9.05 and 9.16 shall remain operative and in full force and
      effect regardless of the expiration of the term of this Agreement, the
      consummation of the transactions contemplated hereby, the repayment of any
      of
      the Loans, the expiration of the Commitments, the expiration of any Letter
      of
      Credit, the invalidity or unenforceability of any term or provision of this
      Agreement or any other Loan Document, or any investigation made by or on behalf
      of the Administrative Agent, the Collateral Agent, any Lender or the Issuing
      Bank.

     

    SECTION
      9.03. Binding
      Effect.
      This
      Agreement shall become effective when it shall have been executed by the
      Borrower and the Administrative Agent and when the Administrative Agent shall
      have received counterparts hereof which, when taken together, bear the
      signatures of each of the other parties hereto.

     

    SECTION
      9.04. Successors
      and Assigns.
      (a)
      Whenever
      in this Agreement any of the parties hereto is referred to, such reference
      shall
      be deemed to include the permitted successors and assigns of such party; and
      all
      covenants, promises and agreements by or on behalf of the Borrower, the
      Administrative Agent, the Collateral Agent, the Issuing Bank or the Lenders
      that
      are contained in this Agreement shall bind and inure to the benefit of their
      respective successors and assigns.

     

    (b)
      Each
      Lender may assign to one or more Eligible Assignees all or a portion of its
      interests, rights and obligations under this Agreement (including all or a
      portion of its Commitment and the Loans at the time owing to it), with notice
      to
      the Borrower and the prior written consent of the Administrative Agent (not
      to
      be unreasonably withheld or delayed); provided, however, that
      (i) in the case of an assignment of a Revolving Credit Commitment, each of
      the Borrower, the Issuing Bank and the Swingline Lender must also give its
      prior
      written consent to such assignment (which consent shall not be unreasonably
      withheld or delayed) (provided that the consent of the Borrower shall
      not be required to any such assignment made (A) to another Lender or an
      Affiliate of a Lender, (B) during the primary syndication of the Facilities
      to persons identified by the Administrative Agent to the Borrower on or prior
      to
      the Closing Date or (C) after the 

    
      
        
        

      

      
        104

        
          

        

      

      
        
        

      

      occurrence
        and during the continuance of any Event of Default), (ii) the amount of the
        Commitment or Loans of the assigning Lender subject to each such assignment
        (determined as of the date the Assignment and Acceptance with respect to
        such
        assignment is delivered to the Administrative Agent) shall be in an integral
        multiple of, and not less than, $1,000,000 (or, if less, the entire remaining
        amount of such Lender’s Commitment or Loans of the relevant Class),
        (iii) the parties to each such assignment shall execute and deliver to the
        Administrative Agent an Assignment and Acceptance via an electronic settlement
        system acceptable to the Administrative Agent (or, if previously agreed with
        the
        Administrative Agent, manually), and shall pay to the Administrative Agent
        a
        processing and recordation fee of $3,500 (which fee may be waived or reduced
        in
        the sole discretion of the Administrative Agent), and (iv) the assignee, if
        it shall not be a Lender, shall deliver to the Administrative Agent an
        Administrative Questionnaire and all applicable tax forms. Upon acceptance
        and
        recording pursuant to paragraph (e) of this Section 9.04, from and
        after the effective date specified in each Assignment and Acceptance,
        (A) the assignee thereunder shall be a party hereto and, to the extent of
        the
        interest assigned by such Assignment and Acceptance, have the rights and
        obligations of a Lender under this Agreement and (B) the assigning Lender
        thereunder shall, to the extent of the interest assigned by such Assignment
        and
        Acceptance, be released from its obligations under this Agreement (and, in
        the
        case of an Assignment and Acceptance covering all or the remaining portion
        of an
        assigning Lender’s rights and obligations under this Agreement, such Lender
        shall cease to be a party hereto but shall continue to be entitled to the
        benefits and obligations of Sections 2.14, 2.16, 2.20, 9.05 and 9.16, as
        well as to any Fees accrued for its account and not yet
        paid).

    

     

    (c)
      By
      executing and delivering an Assignment and Acceptance, the assigning Lender
      thereunder and the assignee thereunder shall be deemed to confirm to and agree
      with each other and the other parties hereto as
      follows:  (i) such assigning Lender warrants that it is the legal
      and beneficial owner of the interest being assigned thereby free and clear
      of
      any adverse claim and that its Commitments, and the outstanding balances of
      its
      Loans, in each case without giving effect to assignments thereof which have
      not
      become effective, are as set forth in such Assignment and Acceptance,
      (ii) except as set forth in clause (i) above, such assigning Lender
      makes no representation or warranty and assumes no responsibility with respect
      to any statements, warranties or representations made in or in connection with
      this Agreement, or the execution, legality, validity, enforceability,
      genuineness, sufficiency or value of this Agreement, any other Loan Document
      or
      any other instrument or document furnished pursuant hereto, or the financial
      condition of the Borrower or any Subsidiary or the performance or observance
      by
      the Borrower or any Subsidiary of any of its obligations under this Agreement,
      any other Loan Document or any other instrument or document furnished pursuant
      hereto; (iii) such assignee represents and warrants that it is an Eligible
      Assignee, legally authorized to enter into such Assignment and Acceptance;
      (iv) such assignee confirms that it has received a copy of this Agreement,
      together with copies of the most recent financial statements referred to in
      Section 3.05(a) or delivered pursuant to Section 5.04 and such other
      documents and information as it has deemed appropriate to make its own credit
      analysis and decision to enter into such Assignment and Acceptance;
      (v) such assignee will independently and without reliance upon the
      Administrative Agent, the Collateral Agent, such assigning Lender or any other
      Lender and based on such 

    
      
        
        

      

      
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      documents
        and information as it shall deem appropriate at the time, continue to make
        its
        own credit decisions in taking or not taking action under this Agreement;
        (vi) such assignee appoints and authorizes the Administrative Agent and the
        Collateral Agent to take such action as agent on its behalf and to exercise
        such
        powers under this Agreement as are delegated to the Administrative Agent
        and the
        Collateral Agent, respectively, by the terms hereof, together with such powers
        as are reasonably incidental thereto; and (vii) such assignee agrees that
        it will perform in accordance with their terms all the obligations which
        by the
        terms of this Agreement are required to be performed by it as a
        Lender.

    

     

    (d)
      The
      Administrative Agent, acting for this purpose as an agent of the Borrower,
      shall
      maintain at one of its offices in The City of New York a copy of each Assignment
      and Acceptance delivered to it and a register for the recordation of the names
      and addresses of the Lenders, and the Commitment of, and principal amount of
      the
      Loans and interest owing to, each Lender pursuant to the terms hereof from
      time
      to time (the “Register”).
      The
      entries in the Register shall be conclusive and the Borrower, the Administrative
      Agent, the Issuing Bank, the Collateral Agent and the Lenders may 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 the Borrower,
      the Issuing Bank, the Collateral Agent and any Lender, at any reasonable time
      and from time to time upon reasonable prior notice.

     

    (e)
      Upon
      its
      receipt of, and consent to, a duly completed Assignment and Acceptance executed
      by an assigning Lender and an assignee, an Administrative Questionnaire
      completed in respect of the assignee (unless the assignee shall already be
      a
      Lender hereunder), the processing and recordation fee referred to in
      paragraph (b) above, if applicable, and the written consent of the
      Administrative Agent and, if required, the Borrower, the Swingline Lender and
      the Issuing Bank to such assignment and any applicable tax forms, the
      Administrative Agent shall (i) accept such Assignment and Acceptance and
      (ii) record the information contained therein in the Register. No
      assignment shall be effective unless it has been recorded in the Register as
      provided in this paragraph (e).

     

    (f)
      Each
      Lender may without the consent of the Borrower, the Swingline Lender, the
      Issuing Bank or the Administrative Agent sell participations to one or more
      banks or other persons in all or a portion of its rights and obligations under
      this Agreement (including all or a portion of its Commitment and the Loans
      owing
      to it); provided,
      however,
      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, (iii) the participating
      banks or other persons shall be entitled to the benefit of the cost protection
      provisions contained in Sections 2.14, 2.16 and 2.20 and subject to the
      obligations of Section 9.16 to the same extent as if they were Lenders (but,
      with respect to any particular participant, to no greater extent than the Lender
      that sold the participation to such participant) and (iv) the Borrower, the
      Administrative Agent, the Issuing Bank and the Lenders shall continue to deal
      solely and directly with such Lender in connection with such Lender’s rights and
      obligations under

    
      
        
        

      

      
        106

        
          

        

      

      
        
        

      

       this
        Agreement, and such Lender shall retain the sole right to enforce the
        obligations of the Borrower relating to the Loans or L/C Disbursements and
        to
        approve any amendment, modification or waiver of any provision of this Agreement
        (other than amendments, modifications or waivers decreasing any fees payable
        to
        such participating bank or person hereunder or the amount of principal of
        or the
        rate at which interest is payable on the Loans in which such participating
        bank
        or person has an interest, extending any scheduled principal payment date
        or
        date fixed for the payment of interest on the Loans in which such participating
        bank or person has an interest, increasing or extending the Commitments in
        which
        such participating bank or person has an interest or releasing any Subsidiary
        Guarantor (other than in connection with the sale of such Subsidiary Guarantor
        in a transaction permitted by Section 6.05) or all or substantially all of
        the
        Collateral). Notwithstanding the foregoing, a participant shall not be entitled
        to the benefits of Section 2.20 unless the Borrower is notified in writing
        of
        such participation and the participant agrees, for the benefit of the Borrower,
        to comply with Section 2.20(e) as though it were a Lender. Each Lender shall,
        acting for this purpose as an agent of the Borrower, maintain at one of its
        offices a register substantially similar to the Register for the recordation
        of
        the names and addresses of its participants, and the amount and terms of
        its
        participations; provided
        that no
        Lender shall be required to disclose or share the information
        contained in such register with the Borrower or any other person, except
        as
        required by applicable law.

    

     

    (g)
      Any
      Lender or participant may, in connection with any assignment or participation
      or
      proposed assignment or participation pursuant to this Section 9.04,
      disclose to the assignee or participant or proposed assignee or participant
      any
      information relating to the Borrower furnished to such Lender by or on behalf
      of
      the Borrower; provided that, prior to any such disclosure of
      information designated by the Borrower as confidential, each such assignee
      or
      participant or proposed assignee or participant shall execute an agreement
      whereby such assignee or participant shall agree (subject to customary
      exceptions) to preserve the confidentiality of such confidential information
      on
      terms no less restrictive than those applicable to the Lenders pursuant to
      Section 9.16.

     

    (h)
      Any
      Lender may at any time assign all or any portion of its rights under this
      Agreement to secure extensions of credit to such Lender or in support of
      obligations owed by such Lender; provided
      that no
      such assignment shall release a Lender from any of its obligations hereunder
      or
      substitute any such assignee for such Lender as a party hereto.

     

    (i)
      Notwithstanding
      anything to the contrary contained herein, any Lender (a “Granting
      Lender”)
      may
      grant to a special purpose funding vehicle (an “SPC”),
      identified as such in writing from time to time by the Granting Lender to the
      Administrative Agent and the Borrower, the option to provide to the Borrower
      all
      or any part of any Loan that such Granting Lender would otherwise be obligated
      to make to the Borrower pursuant to this Agreement; provided
      that (i) nothing herein shall constitute a commitment by any SPC to
      make any Loan and (ii) if an SPC elects not to exercise such option or
      otherwise fails to provide all or any part of such Loan, the Granting Lender
      shall be obligated to make such Loan pursuant to the terms hereof. The making
      of
      a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender
      to the same 

    
      
        
        

      

      
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      extent,
        and as if, such Loan were made by such Granting Lender. Each party hereto
        hereby
        agrees that no SPC shall be liable for any indemnity or similar payment
        obligation under this Agreement (all liability for which shall remain with
        the
        Granting Lender). In furtherance of the foregoing, each party hereto hereby
        agrees (which agreement shall survive the termination of this Agreement)
        that,
        prior to the date that is one year and one day after the payment in full
        of all
        outstanding commercial paper or other senior indebtedness of any SPC, it
        will
        not institute against, or join any other person in instituting against, such
        SPC
        any bankruptcy, reorganization, arrangement, insolvency or liquidation
        proceedings under the laws of the United States or any state thereof. In
        addition, notwithstanding anything to the contrary contained in this
        Section 9.04, any SPC may (i) with notice to, but without the prior
        written consent of, the Borrower and the Administrative Agent and without
        paying
        any processing fee therefor, assign all or a portion of its interests in
        any
        Loans to the Granting Lender or to any financial institutions (consented
        to by
        the Borrower and Administrative Agent) providing liquidity and/or credit
        support
        to or for the account of such SPC to support the funding or maintenance of
        Loans
        and (ii) disclose on a confidential basis any non-public information
        relating to its Loans to any rating agency, commercial paper dealer or provider
        of any surety, guarantee or credit or liquidity enhancement to such SPC.
        Each
        Granting Lender shall, acting for this purpose as an agent of the Borrower,
        maintain at one of its offices a register
        substantially similar to the Register
        for the
        recordation of the names and addresses of any SPC
        that
        has exercised an option to provide a Loan to the Borrower and the amount
        and
        terms of such Loan; provided
        that no
        Granting Lender shall be required to disclose or share the information contained
        in such register with the Borrower or any other person, except as required
        by
        applicable law.

    

     

    (j)
      The
      Borrower shall not assign or delegate any of its rights or duties hereunder
      without the prior written consent of the Administrative Agent, the Issuing
      Bank
      and each Lender, and any attempted assignment without such consent shall be
      null
      and void.

     

    (k)
      In
      the
      event that any Revolving Credit Lender shall become a Defaulting Lender or
      S&P, Moody’s and Thompson’s BankWatch (or InsuranceWatch Ratings Service, in
      the case of Lenders that are insurance companies (or Best’s Insurance Reports,
      if such insurance company is not rated by Insurance Watch Ratings Service))
      shall, after the date that any Lender becomes a Revolving Credit Lender,
      downgrade the long-term certificate deposit ratings of such Lender, and the
      resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of a
      Lender that is an insurance company (or B, in the case of an insurance company
      not rated by InsuranceWatch Ratings Service)) (or, with respect to any Revolving
      Credit Lender that is not rated by any such ratings service or provider, the
      Issuing Bank or the Swingline Lender shall have reasonably determined that
      there
      has occurred a material adverse change in the financial condition of any such
      Lender, or a material impairment of the ability of any such Lender to perform
      its obligations hereunder, as compared to such condition or ability as of the
      date that any such Lender became a Revolving Credit Lender) then the Issuing
      Bank shall have the right, but not the obligation, at its own expense, upon
      notice to such Lender and the Administrative Agent, to replace such Lender
      with
      an assignee (in accordance with and subject to the 

    
      
        
        

      

      
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      restrictions
        contained in paragraph (b) above), and such Lender hereby agrees to
        transfer and assign without recourse (in accordance with and subject to the
        restrictions contained in paragraph (b) above) all its interests, rights
        and obligations in respect of its Revolving Credit Commitment to such assignee;
        provided,
        however,
        that
        (i) no such assignment shall conflict with any law, rule and regulation or
        order of any Governmental Authority and (ii) the Issuing Bank or such
        assignee, as the case may be, shall pay to such Lender in immediately available
        funds on the date of such assignment the principal of and interest accrued
        to
        the date of payment on the Loans made by such Lender hereunder and all other
        amounts accrued for such Lender’s account or owed to it
        hereunder.

    

     

    SECTION
      9.05. Expenses;
      Indemnity.
      (a)
      The
      Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the
      Administrative Agent, the Collateral Agent, the Issuing Bank and the Swingline
      Lender in connection with the syndication of the Credit Facilities and the
      preparation and administration of this Agreement and the other Loan Documents
      or
      in connection with any amendments, modifications or waivers of the provisions
      hereof or thereof (whether or not the transactions hereby or thereby
      contemplated shall be consummated) or incurred by the Administrative Agent,
      the
      Collateral Agent or any Lender in connection with the enforcement or protection
      of its rights in connection with this Agreement and the other Loan Documents
      or
      in connection with the Loans made or Letters of Credit issued hereunder,
      including the reasonable fees, charges and disbursements of Cravath,
      Swaine & Moore LLP, counsel for the Administrative Agent and the
      Collateral Agent, and, in connection with any such enforcement
      or protection, the reasonable fees, charges and disbursements of any other
      counsel for the Administrative Agent, the Collateral Agent or any
      Lender.

     

    (b)
      Subject to the provisions of Section 2.14, 2.16 and 2.20 (which shall provide
      the only source of indemnification for the matters covered therein), the
      Borrower agrees to indemnify the Administrative Agent, the Collateral Agent,
      each Lender, the Issuing Bank and each Related Party of any of the foregoing
      persons (each such person being called an “Indemnitee”) against, and to
      hold each Indemnitee harmless from, any and all losses, claims, damages,
      liabilities and related expenses, including reasonable counsel fees, charges
      and
      disbursements, incurred by or asserted against any Indemnitee arising out of,
      in
      any way connected with, or as a result of (i) the execution or delivery of
      this Agreement or any other Loan Document or any agreement or instrument
      contemplated thereby, the performance by the parties thereto of their respective
      obligations thereunder or the consummation of the Transactions and the other
      transactions contemplated thereby (including the syndication of the Credit
      Facilities), (ii) the use of the proceeds of the Loans or issuance of
      Letters of Credit, (iii) any claim, litigation, investigation or proceeding
      relating to any of the foregoing, whether or not any Indemnitee is a party
      thereto (and regardless of whether such matter is initiated by a third party
      or
      by the Borrower, any other Loan Party or any of their respective Affiliates),
      or
      (iv) any actual or alleged presence or Release of Hazardous Materials on any
      property currently or formerly owned or operated by the Borrower or any of
      the
      Subsidiaries, or any Environmental Liability related in any way to the Borrower
      or the Subsidiaries; 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 primarily
      from
      the gross negligence or wilful misconduct of such Indemnitee.

    
      
        
        

      

      
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    (c)
      To
      the
      extent that the Borrower fails to pay any amount required to be paid by it
      to
      the Administrative Agent, the Collateral Agent, the Issuing Bank or the
      Swingline Lender under paragraph (a) or (b) of this Section 9.05, each
      Lender severally agrees to pay to the Administrative Agent, the Collateral
      Agent, the Issuing Bank or the Swingline Lender, as the case may be, such
      Lender’s pro rata share (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
      Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline
      Lender in its capacity as such. For purposes hereof, a Lender’s “pro rata share”
shall be determined based upon its share of the sum of the Aggregate Revolving
      Credit Exposure, outstanding Term Loans and unused Commitments at the
      time.

     

    (d)
      To
      the
      extent permitted by applicable law, the 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 or any agreement or instrument contemplated hereby, the Transactions,
      any Loan or Letter of Credit or the use of the proceeds thereof.

     

    (e)
      The
      provisions of this Section 9.05 shall remain operative and in full force
      and effect regardless of the expiration of the term of this Agreement, the
      consummation of
      the
      transactions contemplated hereby, the repayment of any of the Loans, the
      expiration of the Commitments, the expiration of any Letter of Credit, the
      invalidity or unenforceability of any term or provision of this Agreement or
      any
      other Loan Document, or any investigation made by or on behalf of the
      Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank.
      All
      amounts due under this Section 9.05 shall be payable on written demand
      therefor.

     

    SECTION
      9.06. Right
      of Setoff.
      If an
      Event of Default shall have occurred and be continuing, each Lender is hereby
      authorized at any time and from time to time, except to the extent prohibited
      by
      law, to set off and apply any and all deposits (general or special, time or
      demand, provisional or final) at any time held and other indebtedness at any
      time owing by such Lender to or for the credit or the account of the Borrower
      against any of and all the obligations of the Borrower now or hereafter existing
      under this Agreement and other Loan Documents held by such Lender, irrespective
      of whether or not such Lender shall have made any demand under this Agreement
      or
      such other Loan Document and although such obligations may be unmatured. The
      rights of each Lender under this Section 9.06 are in addition to other
      rights and remedies (including other rights of setoff) which such Lender may
      have.

     

    SECTION
      9.07. Applicable
      Law.
      THIS
      AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS
      EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE
      WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT
      SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR
      RULES DESIGNATED IN 

    
      
        
        

      

      
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      SUCH
        LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM
        CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS MOST RECENTLY PUBLISHED AND
        IN
        EFFECT, ON THE DATE SUCH LETTER OF CREDIT WAS ISSUED, BY THE INTERNATIONAL
        CHAMBER OF COMMERCE (THE “UNIFORM CUSTOMS”) AND, AS TO MATTERS NOT GOVERNED BY
        THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

    

     

    SECTION
      9.08. Waivers;
      Amendment.(a)
      No
      failure or delay of the Administrative Agent, the Collateral Agent, any Lender
      or the Issuing Bank in exercising any power or right hereunder or under any
      other Loan Document shall operate as a waiver thereof, nor shall any single
      or
      partial exercise of any such right or power, or any abandonment or
      discontinuance of steps to enforce such a right or power, preclude any other
      or
      further exercise thereof or the exercise of any other right or power. The rights
      and remedies of the Administrative Agent, the Collateral Agent, the Issuing
      Bank
      and the Lenders hereunder and under the other Loan Documents are cumulative
      and
      are not exclusive of any rights or remedies that they would otherwise have.
      No
      waiver of any provision of this Agreement or any other Loan Document or consent
      to any departure by the Borrower or any other Loan Party therefrom shall in
      any
      event be effective unless the same shall be permitted by paragraph (b)
      below, and then such waiver or consent shall be effective only in the specific
      instance and for the purpose for which given. No notice or demand on the
      Borrower in any case shall entitle the Borrower to any other or further notice
      or demand in similar or other circumstances.

    (b)
      Neither
      this Agreement nor any provision hereof may be waived, amended or modified
      except pursuant to an agreement or agreements in writing entered into by the
      Borrower and the Required Lenders; provided,
      however,
      that no
      such agreement shall (i) decrease the principal amount of, or extend
      the maturity of or any scheduled principal payment date or date for the payment
      of any interest on any Loan or any date for reimbursement of an L/C
      Disbursement, or waive or excuse any such payment or any part thereof, or
      decrease the rate of interest on any Loan or L/C Disbursement, without the
      prior
      written consent of each Lender directly adversely affected
      thereby, (ii) increase or extend the Commitment or decrease or extend
      the date for payment of any Fees of any Lender without the prior written consent
      of such Lender, (iii) amend or modify the pro rata requirements of
      Section 2.17, the provisions of Section 9.04(j) or the provisions of this
      Section 9.08 or release all or substantially all of the Subsidiary
      Guarantors (other than in connection with the sale of such Subsidiary Guarantor
      in a transaction permitted by Section 6.05) or all or substantially all of
      the Collateral, without the prior written consent of each
      Lender, (iv) change the provisions of any Loan Document in a manner
      that by its terms adversely affects the rights in respect of payments due to
      Lenders holding Loans of one Class differently from the rights of Lenders
      holding Loans of any other Class without the prior written consent of
 Lenders holding a majority in interest of the outstanding Loans and unused
      Commitments of each adversely affected Class, (v) modify the protections
      afforded to an SPC pursuant to the provisions of Section 9.04(i) without the
      written consent of such SPC, (vi) reduce the percentage contained in the
      definition of the term “Required Lenders” without the prior written consent of
      each Lender (it being understood that with the consent of the Required Lenders,
      additional 

    
      
        
        

      

      
        111

        
          

        

      

      
        
        

      

      extensions
        of credit pursuant to this Agreement may be included in the determination
        of the
        Required Lenders on substantially the same basis as the Term Loan Commitments
        and Revolving Credit Commitments on the date hereof) or (vii) modify, amend
        or
        waive any conditions precedent set forth in Section 4.01, or any
        representation and warranty, covenant or Default to the extent the modification,
        amendment or waiver thereof would constitute a waiver of a condition precedent
        set forth in Section 4.01, without the prior written consent of Lenders
        holding a majority of the Revolving Credit Commitments; provided further
        that no
        such agreement shall amend, modify or otherwise affect the rights or duties
        of
        the Administrative Agent, the Collateral Agent, the Issuing Bank or the
        Swingline Lender hereunder or under any other Loan Document without the prior
        written consent of the Administrative Agent, the Collateral Agent, the Issuing
        Bank or the Swingline Lender.

    

     

    SECTION
      9.09. Interest
      Rate Limitation.
      Notwithstanding anything herein to the contrary, if at any time the interest
      rate applicable to any Loan or participation in any L/C Disbursement, together
      with all fees, charges and other amounts which are treated as interest on such
      Loan or participation in such L/C Disbursement under applicable law
      (collectively the “Charges”),
      shall
      exceed the maximum lawful rate (the “Maximum
      Rate”)
      which
      may be contracted for, charged, taken, received or reserved by the Lender
      holding such Loan or participation in accordance with applicable law, the rate
      of interest payable in respect of such Loan or participation hereunder, together
      with all Charges payable in respect thereof, shall be limited to the Maximum
      Rate and, to the extent lawful, the interest and Charges that would have been
      payable in respect of such Loan or participation but were not payable as a
      result of the operation of this Section 9.09 shall be cumulated and the
      interest and Charges payable to such Lender in respect of other Loans or
      participations or periods shall be increased (but not above the Maximum Rate
      therefor) until
      such cumulated amount, together with interest thereon at the Federal Funds
      Effective Rate to the date of repayment, shall have been received by such
      Lender.

     

    SECTION
      9.10. Entire
      Agreement.
      This
      Agreement, the Fee Letter and the other Loan Documents constitute the entire
      contract between the parties relative to the subject matter hereof. Any other
      previous agreement among the parties with respect to the subject matter hereof
      is superseded by this Agreement and the other Loan Documents. Nothing in this
      Agreement or in the other Loan Documents, expressed or implied, is intended
      to
      confer upon any person (other than the parties hereto and thereto, their
      respective successors and assigns permitted hereunder (including any Affiliate
      of the Issuing Bank that issues any Letter of Credit) and, to the extent
      expressly contemplated hereby, the Related Parties of each of the Administrative
      Agent, the Collateral Agent, the Issuing Bank and the Lenders) any rights,
      remedies, obligations or liabilities under or by reason of this Agreement or
      the
      other Loan Documents.

     

    SECTION
      9.11. WAIVER
      OF JURY TRIAL.
      EACH
      PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
      ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
      OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
      ANY
      OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO

    
      
        
        

      

      
        112

        
          

        

      

      
        
        

      

      REPRESENTATIVE,
        AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
        THAT SUCH OTHER PARTY 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,
        AS
        APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
        IN
        THIS SECTION 9.11.

    

     

    SECTION
      9.12. Severability.
      In the
      event any one or more of the provisions contained in this Agreement or in any
      other Loan Document should be held invalid, illegal or unenforceable in any
      respect, the validity, legality and enforceability of the remaining provisions
      contained herein and therein shall not in any way be affected or impaired
      thereby (it being understood that the invalidity of a particular provision
      in a
      particular jurisdiction shall not in and of itself affect the validity of such
      provision in any other jurisdiction). The parties shall endeavor in good-faith
      negotiations to replace the invalid, illegal or unenforceable provisions with
      valid provisions the economic effect of which comes as close as possible to
      that
      of the invalid, illegal or unenforceable provisions.

     

    SECTION
      9.13. Counterparts.
      This
      Agreement may be executed in counterparts (and by different parties hereto
      on
      different counterparts), each of which shall constitute an original but all
      of
      which when taken together shall constitute a single contract, and shall become
      effective as provided in Section 9.03. Delivery of an executed signature
      page to this Agreement by facsimile transmission shall be as effective as
      delivery of a manually signed counterpart of this Agreement.

     

    SECTION
      9.14. Headings.
      Article
      and Section headings and the Table of Contents used herein are for convenience
      of reference only, are not part of this Agreement and are not to affect the
      construction of, or to be taken into consideration in interpreting, this
      Agreement.

     

    SECTION
      9.15. Jurisdiction;
      Consent
      to Service of Process.
      (a)
      The
      Borrower hereby irrevocably and unconditionally submits, for itself and its
      property, to the exclusive jurisdiction of any New York State court or
      Federal court of the United States of America sitting in New York City, and
      any appellate court from any thereof, in any action or proceeding arising out
      of
      or relating to this Agreement or the other Loan Documents, or for recognition
      or
      enforcement of any judgment, and each of the parties hereto hereby 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 or, to the
      extent permitted by 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 shall affect
      any
      right that the Administrative Agent, the Collateral Agent, the Issuing Bank
      or
      any Lender may otherwise have to bring any action or proceeding relating to
      this
      Agreement or the other Loan Documents against the Borrower or its properties
      in
      the courts of any jurisdiction.

    
      
        
        

      

      
        113

        
          

        

      

      
        
        

      

    

     

    (b)
      The
      Borrower hereby irrevocably and unconditionally waives, to the fullest extent
      it
      may legally and effectively do so, any objection which it may now or hereafter
      have to the laying of venue of any suit, action or proceeding arising out of
      or
      relating to this Agreement or the other Loan Documents in any New York
      State or Federal court. Each of the parties hereto hereby irrevocably waives,
      to
      the fullest extent permitted by law, the defense of an inconvenient forum to
      the
      maintenance of such action or proceeding in any such court.

     

    (c)
      Each
      party to this Agreement irrevocably consents to service of process in the manner
      provided for notices in Section 9.01. Nothing in this Agreement will affect
      the right of any party to this Agreement to serve process in any other manner
      permitted by law.

     

    SECTION
      9.16. Confidentiality.
      Each of
      the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders
      agrees to maintain the confidentiality of the Information (as defined below),
      except that Information may be disclosed (a) to its and its Affiliates’
officers, directors, employees and agents, including accountants, legal counsel
      and other advisors (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), (b) to the extent
      requested by any regulatory authority or quasi-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) in connection with the exercise of any remedies hereunder or under
      the other Loan Documents or any suit, action or proceeding relating to the
      enforcement of its rights hereunder or thereunder, (e) subject to an
      agreement containing provisions substantially the same as those of this
      Section 9.16, to (i) any actual or prospective assignee of or
      participant in any of its rights or obligations under this Agreement and the
      other Loan Documents or (ii) any actual or prospective counterparty
(or
      its
      advisors) to any swap or derivative transaction relating to the Borrower or
      any
      Subsidiary or any of their respective obligations, (f) with the consent of
      the Borrower or (g) to the extent such Information becomes publicly
      available other than as a result of a breach of this Section 9.16. For the
      purposes of this Section 9.16, “Information”
shall
      mean all information received from the Borrower and related to the Borrower
      or
      its business, other than any such information that was available to the
      Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender
      on a
      nonconfidential basis prior to its disclosure by the Borrower. Any person
      required to maintain the confidentiality of Information as provided in this
      Section 9.16 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 its own
      confidential information.

     

    SECTION
      9.17. USA
      PATRIOT Act Notice.
      Each
      Lender and the Administrative Agent (for itself and not on behalf of any Lender)
      hereby notifies the Borrower that pursuant to the requirements of the USA
      PATRIOT Act, it is required to obtain, verify and record information that
      identifies the Borrower, which information includes the name and address of
      the
      Borrower and other information that will allow such 

    
      
        
        

      

      
        114

        
          

        

      

      
        
        

      

      Lender
        or
        the Administrative Agent, as applicable, to identify the Borrower in accordance
        with the USA PATRIOT Act.

    

    
      
        
        

      

      
        115

        
          

        

      

      
        
        

      

    

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

     

    
      	
              SUN
                HEALTHCARE GROUP, INC.,

               

            
	
              by

            
	 	
              /s/
                Michael Newman

            
	 	
              Name:
                Michael Newman

            
	 	
              Title:
                Executive Vice President

            

    

    

    

    
      	
              CREDIT
                SUISSE, CAYMAN
                ISLANDS
BRANCH,
                individually
                and as 
Administrative Agent, Collateral Agent,
Swingline Lender and
                Issuing Bank,

               

            
	
              by

            
	 	
              /s/
                Joel Glodowski

            
	 	
              Name:
                Joel Glodowski

            
	 	
              Title:
                Managing Director

            

    

    

    

    
      	
              by

            
	 	
              /s/
                James Neira

            
	 	
              Name:
                James Neira

            
	 	
              Title:
                Associate

            

    

    
    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      

      
        	 	
                SIGNATURE
                  PAGE TO THE SUN

                HEALTHCARE
                  GROUP, INC. CREDIT

                AGREEMENT
                  DATED APRIL 19, 2007

              
	 	 
	
                Name
                  of Lender:

              	
                Jefferies
                  Finance C.P. Funding LLC

              
	 	 
	 	
                by

              
	 	 	
                /s/
                  E.J. Hess

              
	 	 	
                Name:
                  E.J. Hess

              
	 	 	
                Title:
                  Managing Director

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	 	
                SIGNATURE
                  PAGE TO THE SUN

                HEALTHCARE
                  GROUP, INC. CREDIT

                AGREEMENT
                  DATED APRIL 19, 2007

              
	 	 
	
                Name
                  of Lender:

              	
                UBS
                  LOAN FINANCE LLC

              
	 	 
	 	
                by

              
	 	 	
                /s/
                  Richard L. Tavrow

              
	 	 	
                Name:
                  Richard L. Tavrow

              
	 	 	
                Title:
                  Director

              

      

      

      

      
        	 	
                by

              
	 	 	
                /s/
                  Irja R. Otsa

              
	 	 	
                Name:
                  Irja R. Otsa

              
	 	 	
                Title:
                  Associate Director

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	 	
                SIGNATURE
                  PAGE TO THE SUN

                HEALTHCARE
                  GROUP, INC. CREDIT

                AGREEMENT
                  DATED APRIL 19, 2007

              
	 	 
	
                Name
                  of Lender:

              	
                LaSalle
                  Bank National Association

              
	 	 
	 	
                by

              
	 	 	
                /s/
                  Joshua Kochek

              
	 	 	
                Name:
                  Joshua Kochek

              
	 	 	
                Title:
                  Vice President

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	 	
                SIGNATURE
                  PAGE TO THE SUN

                HEALTHCARE
                  GROUP, INC. CREDIT

                AGREEMENT
                  DATED APRIL 19, 2007

              
	 	 
	
              	
                CIBC
                  Inc.,

              
	 	 
	 	
                by

              
	 	 	
                /s/
                  Caroline Adams

              
	 	 	
                Name:  Caroline
                  Adams

              
	 	 	
                Title:    Authorized
                  Signatory

                            CIBC
                  Inc.Wolverine World Wide, Inc, Exhibit 10.1 to Form 8-K - 04-25-07

Exhibit 10.1

          The following current executive officers and directors have entered into Indemnification Agreements with the Company in the form filed herewith:

	 	
Executive Officers
	
Directors

	 	
Kenneth A. Grady
	
Jeffrey M. Boromisa

	 	
Stephen L. Gulis, Jr.
	
Alberto L. Grimoldi

	 	
Cheryl L. Johnson
	
David T. Kollat

	 	
Blake W. Krueger
	
Brenda J. Lauderback

	 	
Nicholas P. Ottenwess
	
Phillip D. Matthews

	 	 	
David P. Mehney

	 	 	
Timothy J. O'Donovan

	 	 	
Shirley D. Peterson

	 	 	
Michael A. Volkema

INDEMNIFICATION AGREEMENT

          This Indemnification Agreement is made as of the ___ day of _______ , 2007, by and between Wolverine World Wide, Inc., a Delaware Corporation (the "Corporation"), and __________________ ("Indemnitee"), a director and/or officer of the Corporation.

RECITAL

          It is essential that the Corporation retain and attract the most capable persons available as directors and officers.  There has been a substantial increase in corporate litigation that subjects directors and officers to great personal financial risks.  Directors' and officers' liability insurance, if available at all, is becoming increasingly expensive and contains many limitations, deductibles, and exclusions.  It is now and has always been the express policy of the Corporation to indemnify and advance expenses to its directors and officers so as to provide them with the maximum possible protection permitted by law.  In order to provide directors and officers with the maximum lawful protection, the Corporation has determined and agreed to enter into this Indemnification Agreement with Indemnitee.

          ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:

          Section 1.          Definitions.  As used in this Agreement:

          (a)          "Expenses" shall mean all costs, expenses and obligations paid or incurred in connection with investigating, litigating, being a witness in, defending or participating in, or preparing to litigate, defend, be a witness in or participate in any matter that is the subject of a Proceeding (as defined below), including attorneys' and accountants' fees and court costs, and any expenses incurred in establishing a right to indemnification or payment of Expenses under this Agreement.

          (b)          "Proceeding" shall mean any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, in which Indemnitee may be or may have been involved as a party or otherwise by reason of the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Corporation, or by reason of any action taken by Indemnitee or any inaction on Indemnitee's part while acting as a director, officer, employee, agent or fiduciary of the Corporation, or by reason of the fact that Indemnitee is or was serving at the request of the Corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise.

          (c)          "Resolution Costs" shall include any amount paid in connection with a Proceeding and in satisfaction of a judgment, fine, penalty or any amount paid in settlement.

          Section 2.          Agreement to Serve.  Indemnitee agrees to serve as a director and/or officer of the Corporation for so long as Indemnitee is duly elected or appointed or until the tender of Indemnitee's written resignation.

2

          Section 3.          Indemnification.  The indemnification provided under this Agreement shall be as follows:

          (a)          The Corporation shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with any Proceeding.  Additionally, in any Proceeding other than a Proceeding by or in the right of the Corporation, the Corporation shall indemnify Indemnitee against all Resolution Costs actually and reasonably incurred by Indemnitee in connection with such Proceeding.  No indemnification shall be made under this subsection:

          (i)          With respect to remuneration paid to Indemnitee if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law;

          (ii)          On account of any suit in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Corporation pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state, or local law;

          (iii)          On account of Indemnitee's conduct which is determined by a final judgment or other final adjudication to have been knowingly fraudulent, deliberately dishonest or willful misconduct;

          (iv)          On account of Indemnitee's conduct which by a final judgment or other final adjudication is determined to have been in bad faith, in opposition to best interests of the Corporation or produced an unlawful personal benefit;

          (v)          With respect to a criminal proceeding if the Indemnitee knew or reasonably should have known that Indemnitee's conduct was unlawful; or

          (vi)          If a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful.

          (b)          In addition to any indemnification provided under Subsection 3(a) above, the Corporation shall indemnify Indemnitee against any Expenses or Resolution Costs incurred by Indemnitee, regardless of the nature of the Proceeding in which Expenses and/or Resolution Costs were incurred, if such Expenses or Resolution Costs would have been covered under the directors' and officers' liability insurance policies in effect on the effective date of this Agreement or any such insurance policies which become effective on any subsequent date.

          (c)          The Corporation shall provide Indemnitee with indemnification under Subsections 3(a) and 3(b) above, and otherwise under this Agreement, to the fullest extent allowed by law as presently or hereafter enacted or interpreted, against any Expenses and/or Resolution Costs incurred by Indemnitee in connection with any Proceeding.  To the extent a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification, either by agreement or otherwise, than presently provided by law or this

3

Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

          (d)          Without limiting Indemnitee's right to indemnification under any other provision of this Agreement, the Corporation shall indemnify Indemnitee in accordance with the provisions of this subsection if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee was or is a director and/or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all Expenses actually and reasonably incurred by Indemnitee and any amounts paid by Indemnitee in settlement of such Proceeding, but only if Indemnitee acted in good faith in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made under this subsection in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged to be liable to the Corporation in the performance of his duty to the Corporation, unless and only to the extent that any court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such amounts as such court shall deem proper.

          (e)          Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control (as hereafter defined), Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated by Indemnitee against the Corporation or any director, officer, employee, agent or fiduciary of the Corporation (in such capacity) unless the Corporation has joined in or consented to the initiation of such Proceeding.

          Section 4.          Payment of Expenses and Indemnification.

          (a)          Expenses incurred by the Indemnitee in advance of the final disposition of a Proceeding and subject to indemnification under Section 3 above shall be paid directly by the Corporation or reimbursed to the Indemnitee within two (2) days after the receipt by the Corporation of a written request of the Indemnitee providing that Indemnitee undertakes to repay any amount paid or advanced under this section to the extent that it is ultimately determined that Indemnitee is not entitled to such indemnification.  Such request shall reasonably evidence the Expenses incurred by Indemnitee.

          (b)          Except as otherwise provided in Section 4(a) above, any indemnification under Section 3 above shall be made no later than thirty (30) days after receipt by the Corporation of the written request of Indemnitee, unless within said 30-day period the board of directors, by a majority vote of a quorum consisting of directors who are not parties to such Proceeding, determines that the Indemnitee is not entitled to the indemnification set forth in Section 3 or unless the board of directors refers the Indemnitee's indemnification request to independent legal counsel.  In cases where there are no directors who are not parties to the Proceeding, the indemnification request shall be referred to independent legal counsel.  If the indemnification request is referred to independent legal counsel, then Indemnitee shall be paid no later than forty-five (45) days after Indemnitee's initial request to the Corporation unless within that time independent legal counsel presents to the board of directors a written opinion stating in

4

unconditional terms that indemnification is not allowed under Section 3 of this Agreement.  The indemnification request shall include such documentation or information as is reasonably necessary for the determination as to whether Indemnitee is entitled to indemnification and as is reasonably available to Indemnitee.  If a Change in Control (as defined in Section 5) occurs and results in individuals who were directors prior to the circumstances giving rise to the Change in Control ceasing for any reason to constitute a majority of the board of directors, the above determination, if any, shall be made by independent legal counsel and not the board of directors.  The Corporation agrees to pay the reasonable fees of the independent legal counsel and to fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant thereto.  If there has not been a Change in Control as defined in Section 5, independent legal counsel shall be selected by the board of directors or the executive committee of the board, and if there has been a Change in Control, the independent legal counsel shall be selected by Indemnitee.  Upon making a request for indemnification, Indemnitee shall be presumed entitled to indemnification under this Agreement.  If the board of directors or independent legal counsel shall fail to make the requested determination within the time frames specified in this subsection, a determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be absolutely entitled to such indemnification, absent actual and material fraud in the request for indemnification.  Any Expenses incurred by Indemnitee in connection with a request for indemnification or payment of Expenses under this Agreement, or under any other agreement, any provision of the Certificate of Incorporation or the Bylaws, or any directors' and officers' liability insurance, shall be borne by the Corporation. 

          (c)          The right to indemnification and payment of Expenses as provided by this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction.  The burden of proving that indemnification is not permitted by this Agreement shall be on the Corporation or on the person challenging the indemnification.  Neither the failure of the Corporation, including its board of directors, to have made a determination prior to the commencement of any Proceeding that indemnification is proper, nor an actual determination by the Corporation, including its board of directors or independent legal counsel, that indemnification is not proper, shall bar the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement.  If the board of directors or independent legal counsel determines in accordance with Section 4(b) above that Indemnitee would not be permitted to be indemnified in whole or in part, if payment is not timely made following a determination of entitlement to indemnification pursuant to Section 4(b) above, or if Expenses are not paid pursuant to Section 4(a) above, Indemnitee shall have the right to commence litigation in any court in the states of Michigan or Delaware having subject matter jurisdiction thereof and in which venue is proper seeking a determination of entitlement to indemnification or payment of Expenses by the court, and the Corporation hereby consents to service of process and to appear in any such proceeding.  Expenses incurred by Indemnitee in connection with successfully establishing Indemnitee's right to indemnification, or to the payment of Expenses under Section 4(a) above, in whole or in part, shall also be reimbursed by the Corporation.

          Section 5.          Establishment of Trust.  In the event of a Potential Change in Control of the Corporation, as hereafter defined, the Corporation shall, upon written request by Indemnitee, create a trust for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to satisfy any and all Expenses or

5

Resolution Costs that may properly be subject to indemnification under Section 3 above anticipated at the time of each such request.  The amount or amounts to be deposited in the trust pursuant to this funding obligation shall be determined by a majority vote of a quorum consisting of directors who are not parties to such Proceeding, the executive committee of the board of directors or the President of the Corporation.  If all such individuals are parties to the Proceeding, the amount or amounts to be deposited in the trust shall be determined by independent legal counsel.  The terms of the trust shall provide that upon a Change in Control (i) the trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii) the trustee shall advance, within two (2) business days of a request by the Indemnitee, any amount properly payable to Indemnitee under Section 4(a) of this Agreement, (iii) the trust shall continue to be funded by the Corporation in accordance with the funding obligation set forth above, (iv) the trustee shall promptly pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such trust shall revert to the Corporation upon a final determination by a court of competent jurisdiction that the Indemnitee has been fully indemnified under the terms of this Agreement.  The trustee shall be chosen by the Indemnitee and shall be a national or state bank having a combined capital and surplus of not less than $50,000,000.  Nothing in this section shall relieve the Corporation of any of its obligations under this Agreement.  At the time of each draw from the trust fund for the purpose of paying any amount properly payable under Section 4(a) above, the Indemnitee shall provide the trustee with a written request providing that Indemnitee undertakes to repay such amount to the extent that it is ultimately determined that Indemnitee is not entitled to such indemnification.  Any funds, including interest or investment earnings thereon, remaining in the trust fund shall revert and be paid to the Corporation if (i) a Change in Control has not occurred, and (ii) if the executive committee of the board of directors or the Chairman or Chief Executive Officer of the Corporation determines that the circumstances giving rise to that particular funding of the trust no longer exists.

          For purposes of this section, a "Change in Control" shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Corporation representing 20% or more of the total voting power represented by the Corporation's then outstanding voting securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the board of directors of the Corporation and any new director whose election by the board of directors or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the total voting power represented by the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the

6

Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets.

          For purpose of this section, a "Potential Change in Control" shall be deemed to have occurred if (i) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, or (ii) any person (including the Corporation) publicly announces an intention to take or to consider taking actions which once consummated would constitute a Change in Control, or (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, who is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 9.5% or more of the combined voting power of the Corporation's then outstanding voting securities, increases such person's beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof, or (iv) the board of directors adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

          Section 6.          Partial Indemnification; Successful Defense.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Expenses or Resolution Costs actually and reasonably incurred by Indemnitee but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such Expenses or Resolution Costs to which Indemnitee is entitled.  Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all claims relating in whole or in part to a Proceeding or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

          Section 7.          Consent.  Unless and until a Change in Control (as defined in Section 5) has occurred, the Corporation shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Corporation's written consent.  The Corporation shall not settle any Proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent.  Neither the Corporation nor the Indemnitee will unreasonably withhold their consent to any proposed settlement.

          Section 8.          Severability.  If this Agreement or any portion thereof (including any provision within a single section, subsection or sentence) shall be held to be invalid, void or otherwise unenforceable on any ground by any court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the Corporation shall nevertheless indemnify Indemnitee as to any Expenses or Resolution Costs with respect to any Proceeding, and shall pay Expenses incurred by Indemnitee with respect to any Proceeding and subject to indemnification under Section 3 above, to the full extent permitted by law or any applicable portion of this Agreement that shall not have been invalidated, declared void or otherwise held to be unenforceable.

7

          Section 9.          Rights Hereunder Not Exclusive.  The indemnification and payment of Expenses provided by this Agreement shall be in addition to any other rights to which Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise, both as to actions in Indemnitee's official capacity and as to actions in another capacity while holding such office.

          Section 10.          No Presumption.  For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

          Section 11.          Subrogation.  In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation to effectively bring suit to enforce such rights.

          Section 12.          No Duplication of Payments.  The Company shall not be liable under this Agreement to make any payment to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise payable hereunder.

          Section 13.          Notice and Defense of Claims.  Indemnitee shall, as a condition precedent to his right to be indemnified or paid Expenses under this Agreement, give to the Corporation notice in writing as soon as practicable of any claim for which indemnification or payment of Expenses will or could be sought under this Agreement; but the omission so to notify the Corporation shall not relieve the Corporation from any liability that it may have to Indemnitee.  Notice to the Corporation shall be directed to Wolverine World Wide, Inc., 9341 Courtland Drive, Rockford, Michigan 49351, Attention: General Counsel.  Notice shall be deemed received three (3) days after the date postmarked if sent by prepaid mail properly addressed.  In addition, Indemnitee shall give the Corporation such information and cooperation as it may reasonably require and shall be within Indemnitee's power to give.  Notwithstanding any other provision of this Agreement, with respect to any Proceeding of which Indemnitee gives notice to the Corporation:

          (a)          The Corporation shall be entitled to participate in the Proceeding at its own expense; and

          (b)          Except as otherwise provided in this section, to the extent that it may wish, the Corporation, jointly with any other indemnifying party similarly notified, shall be entitled to assume the defense of the Proceeding, with counsel satisfactory to Indemnitee.  After notice from the Corporation to Indemnitee of its election to assume the defense of the Proceeding, the Corporation shall not be liable to Indemnitee under this Agreement for any expenses of counsel

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subsequently incurred by Indemnitee in connection with the defense thereof except as otherwise provided below.  Indemnitee shall have the right to employ Indemnitee's own counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Corporation, (ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Corporation and Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not within sixty (60) calendar days of receipt of notice from Indemnitee in fact have employed counsel to assume the defense of the action, in each of which cases the fees and expenses of Indemnitee's counsel shall be at the expense of the Corporation.  The Corporation shall not be entitled to assume the defense of any Proceeding brought by or in the right of the Corporation or as to which Indemnitee shall have made the conclusion provided for in (ii) above.

          Section 14.          Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall constitute the original.

          Section 15.          Continuation of Rights.  The rights provided to Indemnitee under this Agreement, including the right provided under Subsection 4(a) above, shall continue after Indemnitee has ceased to be a director, officer, employee, agent or fiduciary of the Corporation or any other corporation, partnership, joint venture, trust or other enterprise in which Indemnitee served in any such capacity at the request of the Corporation.

          Section 16.          Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Corporation, spouses, heirs, and personal and legal representatives.

          Section 17.          Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effects to the principles of conflicts of laws.

          Section 18.          Liability Insurance.  To the extent the Corporation maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any officer, employee, agent or fiduciary of the Corporation.

          Section 19.          Period of Limitations.  No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Corporation or any affiliate of the Corporation against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, and any claim or cause of action of the Corporation or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.

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          Section 20.          Amendments, Etc.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.  This Agreement shall supersede and replace any prior indemnification agreements entered into by and between the Corporation and Indemnitee and any such prior agreements shall be terminated upon execution of this Agreement.

	
WOLVERINE WORLD WIDE, INC.
	 
	 	 
	 	 
	
By:
	 
	 
	 	 
	
Its:
	 
	 
	 	 
	 	 
	
INDEMNITEE
	 
	 	 
	 
	 

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