Document:

Exhibit 10.1

 

EXECUTION COPY

 

 

$140,000,000

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

among

 

MQ ASSOCIATES, INC.,

 

MEDQUEST, INC.,

 

as Borrower,

 

The Several Lenders from Time to Time Parties Hereto,

 

JPMORGAN CHASE BANK,

 

as Syndication Agent,

 

GENERAL ELECTRIC CAPITAL CORPORATION

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Co-Documentation Agents

 

and

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

 

as Administrative Agent

 

Dated as of September 3, 2003

 

 

 

J.P. MORGAN SECURITIES INC.,

 

as Sole Lead Arranger and Bookrunner

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.

  	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Defined Terms

  
	
   

  	
  1.2

  	
  Other Definitional
  Provisions

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  AMOUNT AND TERMS OF COMMITMENTS

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Term Commitments

  
	
   

  	
  2.2

  	
  Procedure for Term Loan Borrowings

  
	
   

  	
  2.3

  	
  Repayment
  of Term Loans

  
	
   

  	
  2.4

  	
  Revolving
  Commitments

  
	
   

  	
  2.5

  	
  Procedure for
  Revolving Loan Borrowing

  
	
   

  	
  2.6

  	
  Swingline
  Commitment

  
	
   

  	
  2.7

  	
  Procedure
  for Swingline Borrowing; Refunding of Swingline Loans

  
	
   

  	
  2.8

  	
  Commitment Fees, etc.

  
	
   

  	
  2.9

  	
  Termination
  or Reduction of Revolving Commitments

  
	
   

  	
  2.10

  	
  Optional
  Prepayments

  
	
   

  	
  2.11

  	
  Mandatory
  Prepayments and Commitment Reductions

  
	
   

  	
  2.12

  	
  Conversion and
  Continuation Options

  
	
   

  	
  2.13

  	
  Limitations on
  Eurodollar Tranches

  
	
   

  	
  2.14

  	
  Interest Rates and
  Payment Dates

  
	
   

  	
  2.15

  	
  Computation of
  Interest and Fees

  
	
   

  	
  2.16

  	
  Inability to
  Determine Interest Rate

  
	
   

  	
  2.17

  	
  Pro Rata Treatment and
  Payments

  
	
   

  	
  2.18

  	
  Requirements
  of Law

  
	
   

  	
  2.19

  	
  Taxes

  
	
   

  	
  2.20

  	
  Indemnity

  
	
   

  	
  2.21

  	
  Change
  of Lending Office

  
	
   

  	
  2.22

  	
  Replacement
  of Lenders

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  LETTERS OF CREDIT

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  L/C Commitment

  
	
   

  	
  3.2

  	
  Procedure
  for Issuance of Letter of Credit

  
	
   

  	
  3.3

  	
  Fees and Other Charges

  
	
   

  	
  3.4

  	
  L/C
  Participations

  
	
   

  	
  3.5

  	
  Reimbursement
  Obligation of the Borrower

  
	
   

  	
  3.6

  	
  Obligations
  Absolute

  
	
   

  	
  3.7

  	
  Letter of Credit Payments

  
	
   

  	
  3.8

  	
  Applications

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  REPRESENTATIONS AND WARRANTIES

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Financial
  Condition

  
	
   

  	
  4.2

  	
  No Change

  
	
   

  	
  4.3

  	
  Existence; Compliance
  with Law

  
	
   

  	
  4.4

  	
  Power;
  Authorization; Enforceable Obligations

  

 

i

 

	
   

  	
  4.5

  	
  No Legal Bar

  
	
   

  	
  4.6

  	
  Litigation

  
	
   

  	
  4.7

  	
  No Default

  
	
   

  	
  4.8

  	
  Ownership of Property;
  Liens

  
	
   

  	
  4.9

  	
  Intellectual
  Property

  
	
   

  	
  4.10

  	
  Taxes

  
	
   

  	
  4.11

  	
  Federal
  Regulations

  
	
   

  	
  4.12

  	
  Labor Matters

  
	
   

  	
  4.13

  	
  ERISA

  
	
   

  	
  4.14

  	
  Investment
  Company Act; Other Regulations

  
	
   

  	
  4.15

  	
  Subsidiaries

  
	
   

  	
  4.16

  	
  Use of Proceeds

  
	
   

  	
  4.17

  	
  Environmental
  Matters

  
	
   

  	
  4.18

  	
  Accuracy
  of Information, etc.

  
	
   

  	
  4.19

  	
  Security
  Documents

  
	
   

  	
  4.20

  	
  Solvency

  
	
   

  	
  4.21

  	
  Senior
  Indebtedness

  
	
   

  	
  4.22

  	
  Regulation H

  
	
   

  	
  4.23

  	
  Certain
  Documents

  
	
   

  	
  4.24

  	
  Inspections and
  Investigations

  
	
   

  	
  4.25

  	
  Medicare
  Participation

  
	
   

  	
  4.26

  	
  Fraud and Abuse

  
	
   

  	
  4.27

  	
  HIPAA Compliance

  
	
   

  	
  4.28

  	
  Prior
  Representations and Warranties

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  CONDITIONS PRECEDENT

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Conditions
  to Effectiveness of Amended and Restated Credit Agreement

  
	
   

  	
  5.2

  	
  Conditions to
  Each Extension of Credit

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  AFFIRMATIVE COVENANTS

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Financial
  Statements

  
	
   

  	
  6.2

  	
  Certificates; Other
  Information

  
	
   

  	
  6.3

  	
  Payment
  of Obligations

  
	
   

  	
  6.4

  	
  Maintenance of
  Existence; Compliance

  
	
   

  	
  6.5

  	
  Maintenance of
  Property; Insurance

  
	
   

  	
  6.6

  	
  Inspection
  of Property; Books and Records; Discussions

  
	
   

  	
  6.7

  	
  Notices

  
	
   

  	
  6.8

  	
  Environmental
  Laws

  
	
   

  	
  6.9

  	
  Additional
  Collateral, etc

  
	
   

  	
  6.10

  	
  Matters Relating to
  Collateral

  
	
   

  	
  6.11

  	
  USA PATRIOT Act Compliance

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  NEGATIVE COVENANTS

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Financial Condition
  Covenants

  
	
   

  	
  7.2

  	
  Indebtedness

  
	
   

  	
  7.3

  	
  Liens

  
	
   

  	
  7.4

  	
  Fundamental
  Changes

  
	
   

  	
  7.5

  	
  Disposition
  of Property

  

 

ii

 

	
   

  	
  7.6

  	
  Restricted
  Payments

  
	
   

  	
  7.7

  	
  Investments

  
	
   

  	
  7.8

  	
  Optional
  Payments and Modifications of Certain Debt Instruments

  
	
   

  	
  7.9

  	
  Transactions with
  Affiliates

  
	
   

  	
  7.10

  	
  Sales
  and Leasebacks

  
	
   

  	
  7.11

  	
  Changes
  in Fiscal Periods

  
	
   

  	
  7.12

  	
  Negative
  Pledge Clauses

  
	
   

  	
  7.13

  	
  Clauses
  Restricting Subsidiary Distributions

  
	
   

  	
  7.14

  	
  Lines of Business

  
	
   

  	
  7.15

  	
  Amendments
  to Recapitalization Documents

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  EVENTS OF DEFAULT

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  THE AGENTS

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Appointment

  
	
   

  	
  9.2

  	
  Delegation
  of Duties

  
	
   

  	
  9.3

  	
  Exculpatory
  Provisions

  
	
   

  	
  9.4

  	
  Reliance by
  Administrative Agent

  
	
   

  	
  9.5

  	
  Notice of Default

  
	
   

  	
  9.6

  	
  Non-Reliance
  on Agents and Other Lenders

  
	
   

  	
  9.7

  	
  Indemnification

  
	
   

  	
  9.8

  	
  Agents in Their
  Individual Capacities

  
	
   

  	
  9.9

  	
  Successor
  Administrative Agent

  
	
   

  	
  9.10

  	
  Closing
  Agent, Co-Documentation Agents and Syndication Agent

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Amendments
  and Waivers

  
	
   

  	
  10.2

  	
  Notices

  
	
   

  	
  10.3

  	
  No Waiver; Cumulative
  Remedies

  
	
   

  	
  10.4

  	
  Survival of
  Representations and Warranties

  
	
   

  	
  10.5

  	
  Payment of Expenses and
  Taxes

  
	
   

  	
  10.6

  	
  Successors
  and Assigns; Participations and Assignments

  
	
   

  	
  10.7

  	
  Adjustments;
  Set-off

  
	
   

  	
  10.8

  	
  Counterparts

  
	
   

  	
  10.9

  	
  Severability

  
	
   

  	
  10.10

  	
  Integration

  
	
   

  	
  10.11

  	
  GOVERNING LAW

  
	
   

  	
  10.12

  	
  Submission To
  Jurisdiction; Waivers

  
	
   

  	
  10.13

  	
  Acknowledgements

  
	
   

  	
  10.14

  	
  Releases of
  Guarantees and Liens

  
	
   

  	
  10.15

  	
  Confidentiality

  
	
   

  	
  10.16

  	
  WAIVERS
  OF JURY TRIAL

  

 

iii

 

	
  ANNEX:

  
	
   

  
	
  SCHEDULES:

  
	
   

  
	
  1.1A

  	
  Commitments

  
	
  1.1B

  	
  Mortgaged
  Property

  
	
  1.1C

  	
  Excluded
  Subsidiaries

  
	
  4.4

  	
  Consents,
  Authorizations, Filings and Notices

  
	
  4.6

  	
  Litigation

  
	
  4.9

  	
  Intellectual
  Property

  
	
  4.15

  	
  Subsidiaries

  
	
  4.19(a)

  	
  UCC Filing
  Jurisdictions

  
	
  4.19(b)

  	
  Mortgage
  Filing Jurisdictions

  
	
  7.2(d)

  	
  Existing
  Indebtedness

  
	
  7.3(f)

  	
  Existing
  Liens

  
	
  7.7

  	
  Existing
  Investments

  
	
  7.9

  	
  Permitted
  Affiliate Transactions

  
	
   

  
	
  EXHIBITS:

  
	
   

  
	
  A

  	
  Form of
  Guarantee and Collateral Agreement

  
	
  B

  	
  Form of
  Compliance Certificate

  
	
  C

  	
  Form of
  Closing Certificate

  
	
  D

  	
  Form of
  Assignment and Assumption

  
	
  E

  	
  Form of
  Legal Opinion of O’Melveny & Myers LLP

  
	
  F

  	
  Form of
  Exemption Certificate

  
	
  G

  	
  Form of
  Solvency Certificate

  
	
  H-1

  	
  Form of New
  Lender Supplement

  
	
  H-2

  	
  Form of
  Incremental Facility Activation Notice

  

 

iv

 

AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”),
dated as of September 3, 2003, among MQ ASSOCIATES, INC., a Delaware
corporation (“Holdings”), MEDQUEST, INC., a Delaware corporation (the “Borrower”),
the several banks and other financial institutions or entities from time to
time parties to this Agreement (the “Lenders”), JPMORGAN CHASE BANK, as
syndication agent (in such capacity, the “Syndication Agent”), GENERAL
ELECTRIC CAPITAL CORPORATION and WACHOVIA BANK, NATIONAL ASSOCIATION, as
co-documentation agents (in such capacities, the “Co-Documentation Agents”),
and WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent (in such
capacity, the “Administrative Agent”).

 

W  I  T  N
E  S  S  E  T  H:

 

WHEREAS, Holdings, the Borrower, the lenders
parties thereto (the “Existing Lenders”) and the Administrative Agent
are parties to a Credit Agreement, dated as of August 15, 2002 (the “Existing
Credit Agreement”), as in effect immediately prior to the Amendment
Effective Date (as defined herein);

 

WHEREAS, Holdings and the Borrower have
requested that the Existing Credit Agreement be amended and restated to provide
for a term loan facility in the amount of $60,000,000 and as otherwise provided
herein; and

 

NOW, THEREFORE, Holdings, the Borrower, the
Existing Lenders, the Tranche B Term Lenders, the Administrative Agent, the
Co-Documentation Agents and the Syndication Agent agree that, subject to the
conditions to effectiveness hereof, the Existing Credit Agreement is amended
and restated in its entirety as follows:

 

SECTION 1.  DEFINITIONS

 

1.1                                 Defined Terms. As used in this Agreement,
the terms listed in this Section 1.1 shall have the respective meanings
set forth in this Section 1.1.

 

“ABR”:  for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) 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%.  For purposes hereof:  “Prime Rate” shall mean the rate of
interest per annum publicly announced from time to time by Wachovia Bank,
National Association as its prime rate in effect at its principal office in
Charlotte, North Carolina, (the Prime Rate not being intended to be the lowest
rate of interest charged by Wachovia Bank, National Association in connection
with extensions of credit to debtors). 
Any change in the ABR due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.

 

“ABR Loans”:  Loans the rate of interest applicable to which is based upon the
ABR.

 

“Adjustment Date”:  as defined in the Pricing Grid.

 

“Administrative Agent”:  Wachovia Bank, National Association,
together with its affiliates, as the administrative agent for the Lenders under
this Agreement and the other Loan Documents, together with any of its
successors.

 

“Affiliate”:  as to any Person, any other Person that, directly or indirectly,
is in control of, is controlled by, or is under common control with, such
Person.  For purposes of this
definition, “control”

 

 

of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise.

 

“Agents”:  the collective reference to the Syndication Agent, the
Co-Documentation Agents and the Administrative Agent.

 

“Aggregate Exposure”:  with respect to any Lender at any time, an
amount equal to (a) prior to the Amendment Effective Date, the aggregate amount
of such Lender’s Revolving Commitments at such time and (b) on the Amendment
Effective Date and thereafter, the sum of (i) the aggregate then unpaid
principal amount of such Lender’s Term Loans and (ii) the amount of such
Lender’s Revolving Commitment then in effect or, if the Revolving Commitments
have been terminated, the amount of such Lender’s Revolving Extensions of
Credit then outstanding.

 

“Aggregate Exposure Percentage”:  with respect to any Lender at any time, the
ratio (expressed as a percentage) of such Lender’s Aggregate Exposure at such
time to the Aggregate Exposure of all Lenders at such time.

 

“Agreement”:  as defined in the preamble hereto.

 

“Amendment Effective Date”:  the date on which the conditions precedent
set forth in Section 5.1 shall have been satisfied or waived.

 

“Applicable Margin”:  (a) 
with respect to Tranche B Term Loans that are (i) ABR Loans, 2.75% per
annum and (ii) Eurodollar Loans, 3.75% per annum, (b) with respect to Revolving
Loans and Swingline Loans, the rates per annum determined pursuant to the
Pricing Grid, and (c) with respect to Incremental Term Loans, such per annum
rates as shall be agreed to by the Borrower and the applicable Incremental Term
Lenders as shown in the applicable Incremental Facility Activation Notice.

 

“Application”:  an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to open a
Letter of Credit.

 

“Approved Fund”:  as defined in Section 10.6(b).

 

“Asset Sale”:  any Disposition of property or series of
related Dispositions of property that yields Net Cash Proceeds to any Group
Member in excess of $150,000; provided that the following shall be
excluded from this definition: (i) any Disposition permitted by clause (a),
(b), (d) or (g) of Section 7.5; (ii) any Disposition permitted by
Section 7.5(c) except to the extent such Disposition relates to
Section 7.4(e); (iii) any Disposition of an Investment permitted under
Section 7.5(f) except to the extent such Disposition relates to an
Investment made pursuant to Section 7.7(i)(C) or 7.7(k); and (iv) any
Disposition permitted by Section 7.5(h) to the extent that any Net Cash
Proceeds resulting from any such Disposition are not received, directly or
indirectly, by distribution, contribution or otherwise, by a Loan Party.

 

“Assignee”:  as defined in Section 10.6(b).

 

“Assignment and Assumption”:  an Assignment and Assumption, substantially
in the form of Exhibit D.

 

“Available Revolving Commitment”:  as to any Lender at any time, an amount
equal to the excess, if any, of (a) such Lender’s Revolving Commitment then in
effect over (b) such Lender’s Revolving Extensions of Credit then
outstanding; provided, that in calculating any Lender’s Revolving

 

2

 

Extensions of Credit for the purpose of
determining such Lender’s Available Revolving Commitment pursuant to
Section 2.8(a), other than with respect to the Swingline Lender, the
aggregate principal amount of Swingline Loans then outstanding shall be deemed
to be zero.

 

“Benefitted Lender”:  as defined in Section 10.7(a).

 

“Board”:  the Board of Governors of the Federal Reserve System of the
United States (or any successor).

 

“Borrower”:  as defined in the preamble hereto.

 

“Borrowing Date”:  any Business Day specified by the Borrower
as a date on which the Borrower requests the relevant Lenders to make Loans
hereunder.

 

“Business”:  as defined in Section 4.17(b).

 

“Business Day”:  a day other than a Saturday, Sunday or other
day on which commercial banks in Charlotte are authorized or required by law to
close, provided, that with respect to notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
such day is also a day for trading by and between banks in Dollar deposits in
the interbank eurodollar market.

 

“Capital Expenditures”:  for any period, with respect to any Person,
the aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.

 

“Capital Lease Obligations”:  as to any Person, 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, for the
purposes of this Agreement, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.

 

“Capital Stock”:  any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation).

 

“Cash Equivalents”:  (a) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial paper of an issuer rated
at least A-1 by Standard & Poor’s Ratings Services (“S&P”) or
P-1 by Moody’s Investors Service, Inc. (“Moody’s”), or carrying an
equivalent rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of commercial paper issuers
generally, and maturing within six months from the date of acquisition; (d)
repurchase obligations of any Lender or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than
six months, with respect to securities issued or fully guaranteed or insured by
the United States government; (e) securities with

 

3

 

maturities of one year or less from the date
of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody’s; (f) securities with maturities of
six months or less from the date of acquisition backed by standby letters of
credit issued by any Lender or any commercial bank satisfying the requirements
of clause (b) of this definition; (g) money market mutual or similar funds that
invest exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition; or (h) money market funds that (i) comply with the
criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940,
as amended, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have
portfolio assets of at least $5,000,000,000.

 

“Certificate of Need Regulations”:  regulations issued by any Governmental
Authority requiring a service provider to demonstrate the need for such
services in the local area prior to operating such services.

 

“CHAMPUS”:  collectively, the Civilian Health and Medical Program of the
Uniformed Service and Tricare, 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, and all laws, rules, regulations,
manuals, order, guidelines or requirements pertaining to such program including
(a) all federal statutes (whether set forth in 10 U.S.C. §§ 1071-1106 or
elsewhere) affecting such program; and (b) all rules, regulations (include 32
C.F.R. § 199), manuals, orders and administrative, reimbursement and other
guidelines of all Governmental Authorities promulgated in connection with such
program (whether or not having the force of law), in each case as the same may
be amended.

 

“CLO”:  as defined in Section 10.6(b).

 

“Closing Agent”:  JPMorgan Chase Bank, together with its
affiliates (including, without limitation, J.P. Morgan Securities Inc.), as the
closing agent.

 

“CMS”:  the Centers for Medicare and Medicaid Services, formerly known as
the Health Care Financing Administration, the entity within the United States
Department of Health and Human Services responsible for administering the
Medicare program and the federal aspects of the Medicaid programs, directly and
through its fiscal intermediaries and agents, and any successor entities.

 

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

 

“Co-Documentation Agents”:  as defined in the preamble hereto.

 

 “Collateral”:  all property of the Loan Parties, now owned
or hereafter acquired, upon which a Lien is purported to be created by any
Security Document.

 

“Commitment”:  as to any Lender, the sum of the Tranche B
Term Commitment, any Incremental Term Commitments and the Revolving Commitment
of such Lender.

 

“Commitment Fee Rate”:  the rate per annum determined pursuant to
the Pricing Grid.

 

“Commonly Controlled Entity”:  an entity, whether or not incorporated, that
is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group that includes the Borrower and
that is treated as a single employer under Section 414 of the Code.

 

4

 

“Compliance Certificate”:  a certificate duly executed by a Responsible
Officer substantially in the form of Exhibit B.

 

“Conduit Lender”: any special purpose
corporation organized and administered by any Lender for the purpose of making
Loans otherwise required to be made by such Lender and designated by such
Lender in a written instrument; provided, that the designation by any
Lender of a Conduit Lender shall not relieve the designating Lender of any of
its obligations to fund a Loan under this Agreement if, for any reason, its
Conduit Lender fails to fund any such Loan, and the designating Lender (and not
the Conduit Lender) shall have the sole right and responsibility to deliver all
consents and waivers required or requested under this Agreement with respect to
its Conduit Lender (including, without limitation, all consents and waivers
under Section 10.1), and provided, further, that no Conduit
Lender shall (a) be entitled to receive any greater amount pursuant to
Section 2.18, 2.19, 2.20 or 10.5 than the designating Lender would have
been entitled to receive in respect of the extensions of credit made by such
Conduit Lender (it being understood that the designating Lender shall not be
entitled to any such amount) or (b) be deemed to have any Revolving Commitment.

 

“Consolidated Current Assets”:  at any date, all amounts (other than cash
and Cash Equivalents) that would, in conformity with GAAP, be set forth
opposite the caption “total current assets” (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date.

 

“Consolidated Current Liabilities”:  at any date, all amounts that would, in
conformity with GAAP, be set forth opposite the caption “total current
liabilities” (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date, but excluding (a) the current
portion of any Funded Debt of the Borrower and its Subsidiaries and (b) without
duplication of clause (a) above, all Indebtedness consisting of Revolving Loans
or Swingline Loans to the extent otherwise included therein.

 

“Consolidated EBITDA”:  for any period, Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period, the
sum of (a) income tax expense, (b) interest expense, amortization or writeoff
of debt discount and debt issuance costs and all commissions, discounts and
other fees and charges associated with Indebtedness (including the Loans,
letters of credit, bankers’ acceptance financing), and net costs under Swap
Agreements, (c) depreciation and amortization expense, (d) amortization or
write-off of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any non-cash expenses or losses, (f) any non-cash
expenses or charges resulting from the grant of stock options, equity or profit
related employment incentives, (g) any extraordinary, unusual or non-recurring
cash expenses or losses, which, together with any cash payments made during
such period in respect of items reflected as extraordinary, unusual or
non-recurring non-cash expenses or losses in the statement of Consolidated Net
Income in a prior period, shall not exceed an aggregate amount of $2,000,000 in
any fiscal year, and (i) Excluded Charges and minus, (a) to the extent
included in the statement of such Consolidated Net Income for such period, the
sum of (i) interest income, (ii) any extraordinary, unusual or non-recurring
non-cash income or gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such period,
gains on the sales of assets outside of the ordinary course of business) and
(iii) any other non-cash income and (b) any cash payments made during such
period in respect of items reflected as extraordinary, unusual or non-recurring
non-cash expenses or losses in the statement of Consolidated Net Income in a
prior period to the extent such non-cash expense or loss was previously
included in the calculation of Consolidated EBITDA and is in excess of the
limitation set forth in clause (h) above, all as determined on a consolidated
basis.  For the purposes of calculating
Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a
“Reference Period”) pursuant to any determination of the Consolidated
Leverage Ratio or the Consolidated Senior Leverage Ratio, (i) if at any time
during such Reference Period the Borrower or any Subsidiary shall have made any

 

5

 

Material Disposition, the Consolidated EBITDA
for such Reference Period shall, after giving Pro Forma Effect thereto, be
reduced by an amount equal to the Consolidated EBITDA (if positive)
attributable to the property that is the subject of such Material Disposition
for such Reference Period or increased by an amount equal to the Consolidated
EBITDA (if negative) attributable thereto for such Reference Period, in each
case, to the same extent that the Indebtedness attributable to such property
was deducted from Consolidated Total Debt in the determination of the
Consolidated Leverage Ratio or the Consolidated Senior Leverage Ratio, and (ii)
if during such Reference Period the Borrower or any Subsidiary shall have made
a Material Acquisition, Consolidated EBITDA for such Reference Period shall be
calculated after giving Pro Forma Effect thereto.  As used in this definition, “Material Acquisition” means any
acquisition of property or series of related acquisitions of property that (a)
constitutes assets comprising all or substantially all of an operating unit of
a business or constitutes all or substantially all of the common stock of a
Person and (b) involves the payment of consideration by the Borrower and its
Subsidiaries in excess of $300,000; and “Material Disposition” means any
Disposition of property or series of related Dispositions of property that
yields total consideration to the Borrower or any of its Subsidiaries in excess
of $300,000.

 

“Consolidated EBITDAR”:  for any period, Consolidated EBITDA plus,
without duplication, Consolidated Lease Expense for such period.

 

“Consolidated Fixed Charge Coverage Ratio”:  for any period, the ratio of (a)
Consolidated EBITDAR for such period to (b) Consolidated Fixed Charges for such
period.

 

“Consolidated Fixed Charges”:  for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period, (b)
Consolidated Lease Expense for such period (c) income tax expenses for the
Borrower and its Subsidiaries for such period paid in cash and (d) scheduled
payments made during such period on account of principal of Indebtedness of the
Borrower or any of its Subsidiaries.

 

“Consolidated Interest Expense”:  for any period, (a) total cash interest
expense (including that attributable to Capital Lease Obligations) of the
Borrower and its Subsidiaries for such period with respect to all outstanding
Indebtedness of the Borrower and its Subsidiaries (including all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers’ acceptance financing and net costs under Swap Agreements in respect of
interest rates to the extent such net costs are allocable to such period in
accordance with GAAP) minus (b) total cash interest income of the
Borrower and its Subsidiaries for such period.

 

“Consolidated Lease Expense”:  for any period, (a) the aggregate amount of
fixed and contingent rentals payable in cash by the Borrower and its
Subsidiaries for such period with respect to operating leases of real and
personal property, determined on a consolidated basis in accordance with GAAP minus
(b) the aggregate amount of rental income under leases of real and personal
property, determined on a consolidated basis in accordance with GAAP.

 

“Consolidated Leverage Ratio”:  as at the last day of any period of four
consecutive fiscal quarters, the ratio of (a) Consolidated Total Debt on such
day to (b) Consolidated EBITDA for such period.

 

“Consolidated Net Income”:  for any period, the consolidated net income
(or loss) of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded (a)
the income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Borrower or is merged into or consolidated with the Borrower
or any of its Subsidiaries, (b) the income (or deficit) of any Person (other
than a Subsidiary of the Borrower) in which the Borrower

 

6

 

or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by the
Borrower or such Subsidiary in the form of dividends or similar distributions
and (c) the undistributed earnings of any Subsidiary of the Borrower to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the time permitted by the terms of any Contractual Obligation
(other than under any Loan Document) or Requirement of Law applicable to such
Subsidiary.

 

“Consolidated Senior Debt”:  all Consolidated Total Debt other than the
Senior Subordinated Notes and other subordinated debt.

 

“Consolidated Senior Leverage Ratio”:  as of the last day of any period of four
consecutive fiscal quarters, the ratio of (a) Consolidated Senior Debt on such
day to (b) Consolidated EBITDA for such period.

 

“Consolidated Total Debt”:  at any date, the aggregate principal amount
of all Indebtedness, without duplication, of the Borrower and its Subsidiaries
at such date, determined on a consolidated basis in accordance with GAAP, but
excluding Indebtedness of the type described in clause (f) of the definition
thereof and, to the extent relating to such clause (f), the types described in
clauses (h) and (i) of the definition thereof, unless such Indebtedness has
been fully liquidated and is no longer a contingent obligation.

 

“Consolidated Working Capital”:  at any date, the excess of Consolidated
Current Assets on such date over Consolidated Current Liabilities on
such date.

 

“Continuing Directors”:  the directors of Holdings on the Original
Closing Date, and each other director, if, in each case, such other director
either (i) was nominated or recommended for election or appointed to the board
of directors of Holdings by a majority of the then Continuing Directors or by
the Permitted Investors, (ii) receives the vote of the Permitted Investors in
his or her election by the shareholders of Holdings, or (iii) was nominated or
elected pursuant to the terms of the Stockholders Agreement.

 

“Contractual Obligation”:  as to any Person, any provision of any
security issued by such Person or of any material agreement, instrument or
other legally binding undertaking to which such Person is a party or by which
it or any of its property is bound.

 

“Control Investment Affiliate”:  as to any Person, any other Person
(including, without limitation, any fund or investment vehicle) that (a)
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person and (b) is organized by such Person primarily for the
purpose of making equity or debt investments in one or more companies.  For purposes of this definition, “control”
of a Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise or acts as investment advisor or manager.

 

“Copyrights”:  as defined in the Guarantee and Collateral
Agreement.

 

“Default”:  any of the events specified in Section 8, whether or not any
requirement for the giving of notice, the lapse of time, or both, has been
satisfied.

 

“Defaulting Lender”:  at any time, any Lender that, at such time,
has failed to make a Loan required to be made by such Lender pursuant to the
terms of this Agreement.

 

7

 

“De Novo Facility”:  as of any time of determination, any Health
Care Facility that has been acquired (solely to the extent relating to a new
construction or development), developed or constructed by, or on behalf of, any
Group Member.

 

“Disposition”:  with respect to any property, any sale,
lease, sale and leaseback, assignment, conveyance, transfer or other
disposition thereof.  The terms “Dispose”
and “Disposed of” shall have correlative meanings.

 

“Disqualified Capital Stock”:  any Capital Stock that is not Qualified
Capital Stock.

 

“Dollars” and “$”:  dollars in lawful currency of the United
States.

 

“Domestic Subsidiary”:  any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States.

 

“Environmental Laws”:  any and all foreign, Federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, lawful requirements of any Governmental Authority or other
Requirements of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health from
environmental or workplace hazards or the protection of the environment, as now
or may at any time hereafter be in effect.

 

“ERISA”:  the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

“Eurocurrency Reserve Requirements”:  for any day as applied to a Eurodollar Loan,
the aggregate (without duplication) of the maximum rates (expressed as a
decimal fraction) of reserve requirements in effect on such day (including
basic, supplemental, marginal and emergency reserves) under any regulations of
the Board or other Governmental Authority having jurisdiction with respect
thereto dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Board) maintained by a member bank of the Federal Reserve System.

 

“Eurodollar Base Rate”:  with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum determined
on the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period appearing
on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business
Days prior to the beginning of such Interest Period.  In the event that such rate does not appear on Page 3750 of the
Telerate screen (or otherwise on such screen), the “Eurodollar Base Rate”
shall be determined by reference to such other comparable publicly available
service for displaying eurodollar rates as may be selected by the
Administrative Agent or, in the absence of such availability, by reference to
the rate at which the Administrative Agent is offered Dollar deposits at or
about 11:00 A.M., Charlotte time, two Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market where its eurodollar
and foreign currency and exchange operations are then being conducted for
delivery on the first day of such Interest Period for the number of days
comprised therein.

 

“Eurodollar Loans”:  Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.

 

“Eurodollar Rate”:  with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum determined
for such day in accordance with the following formula (rounded upward to the nearest
1/100th of 1%):

 

8

 

	
  Eurodollar Base Rate

  	
   

  
	
  1.00 - Eurocurrency Reserve Requirements

  	
   

  

 

“Eurodollar Tranche”:  the collective reference to Eurodollar Loans
having Interest Periods which begin on the same date and end on the same later
date (whether or not such Loans shall originally have been made on the same
day).

 

“Event of Default”:  any of the events specified in
Section 8, provided that any requirement for the giving of notice,
the lapse of time, or both, has been satisfied.

 

“Excess
Cash Flow”:  for any fiscal year of
the Borrower, the excess, if any, of (a) the sum, without duplication, of (i)
Consolidated Net Income for such fiscal year, (ii) the amount of all non-cash
charges (including depreciation and amortization) deducted in arriving at such
Consolidated Net Income, (iii) any decrease in Consolidated Working Capital for
such fiscal year, (iv) the aggregate net amount of non-cash loss on the
Disposition of property by the Borrower and its Subsidiaries during such fiscal
year (other than sales of inventory in the ordinary course of business), to the
extent deducted in arriving at such Consolidated Net Income, and (v) the amount
of all income tax expense, interest expense, amortization or writeoff of debt
discount and debt issuance costs and all commissions, discounts and other fees
and charges associated with Indebtedness (including the Loans, letters of
credit, bankers’ acceptance financing), and net costs under Swap Agreements, in
each case to the extent deducted in arriving at such Consolidated Net Income, over
(b) the sum, without duplication, of (i) the amount of all non-cash credits,
income and gains included in arriving at such Consolidated Net Income, (ii) the
aggregate amount actually paid by the Borrower and its Subsidiaries in cash
during such fiscal year on account of Capital Expenditures (excluding the
principal amount of Funded Debt (other than Funded Debt hereunder) incurred in
connection with such expenditures and any such expenditures financed with the
proceeds of any Reinvestment Deferred Amount or issuance of equity), (iii) the
aggregate amount actually paid by the Borrower and its Subsidiaries in cash
during such fiscal year on account of Permitted Acquisitions in such fiscal year
(as such sum shall be reduced by the principal amount of Funded Debt (other
than Funded Debt hereunder) incurred in connection with such Permitted
Acquisitions and any such expenditures for such Permitted Acquisitions financed
with the proceeds of any Reinvestment Deferred Amount or issuance of equity),
(iv) (x) the aggregate amount of all prepayments of Revolving Loans and
Swingline Loans during such fiscal year to the extent of accompanying permanent
optional reductions of the Revolving Commitments and all optional prepayments
of the Term Loans (together with any prepayment fees accompanying such
prepayments) during such fiscal year, in each such case, divided by (y) the
Prepayment Percentage, (v) the aggregate proceeds of Asset Sales and Recovery
Events during such fiscal year, but only to the extent that such Asset Sales
and Recovery Events increased Consolidated Net Income during such fiscal year,
(vi) the aggregate amount of all regularly scheduled principal payments of
Funded Debt (including the Term Loans and Funded Debt incurred to finance
Capital Expenditures and Permitted Acquisitions) of the Borrower and its
Subsidiaries made during such fiscal year (other than in respect of any
revolving credit facility to the extent there is not an equivalent permanent
reduction in commitments thereunder), (vii) any increase in Consolidated
Working Capital for such fiscal year, (viii) any cash payments made during such
period in respect of items described in clauses (a)(ii) and (a)(iv) above
subsequent to the fiscal quarter in which such relevant non-cash expenses or
losses were reflected as a charge in the statement of Consolidated Net Income,
(ix) the aggregate net amount of non-cash gain on the Disposition of property
by the Borrower and its Subsidiaries during such fiscal year (other than sales
of inventory in the ordinary course of business), to the extent included in
arriving at such Consolidated Net Income, and (x) the aggregate amount actually
paid by the Borrower and its Subsidiaries in cash during such fiscal year on
account of income tax expense, interest expense and all commissions, discounts
and other fees and charges associated with Indebtedness (including the Loans,
letters of credit, bankers’ acceptance financing), and net costs under Swap
Agreements.

 

9

 

“Excess Cash Flow Application Date”:  as defined in Section 2.11(c).

 

“Excluded Charges”:  without duplication, all (i) transaction
fees, costs and expenses incurred in connection with the Recapitalization
Transactions and (ii) with respect to any Permitted Acquisition or any
Disposition of assets outside of the ordinary course of business permitted by
Section 7.5, all adjustments (including, without limitation, operating and
expense reductions and other synergistic benefits) as would be permitted
pursuant to Regulation S-X under the Securities Act of 1933, as amended.

 

“Excluded Foreign Subsidiary”:  (i) any Foreign Subsidiary designated as
such on Schedule 4.15 in respect of which either (a) the pledge of all of
the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing by
such Subsidiary of the Obligations, would, in the good faith judgment of the
Borrower, result in material adverse tax consequences to the Borrower, and (ii)
any Subsidiary of an Excluded Foreign Subsidiary as designated on
Schedule 4.15.

 

“Existing Credit Agreement”:  as defined in the recitals. hereto.

 

“Existing Lenders”:  as defined in the recitals hereto.

 

“Facility”:  each of (a) the aggregate Tranche B Term Commitments of all
Lenders and the Tranche B Term Loans made thereunder (the “Tranche B Term
Facility”), (b) the aggregate Incremental Term Loan Commitments of all
Lenders having the same Incremental Term Facility Closing Date and the
Incremental Term Loans made thereunder (each, an “Incremental Term Loan
Facility”) and (c) the Total Revolving Commitments and the Revolving
Extensions of Credit made thereunder (the “Revolving Facility”).

 

“Federal Funds Effective Rate”:  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 of such transactions received by Wachovia Bank from
three federal funds brokers of recognized standing selected by it.

 

“Fee Payment Date”:  (a) the last day of each March, June, September and
December and (b) the last day of the Revolving Commitment Period.

 

“Foreign Subsidiary”:  any Subsidiary of the Borrower that is not a
Domestic Subsidiary.

 

“Funded Debt”:  as to any Person, without duplication, all
Indebtedness of such Person that matures more than one year from the date of
its creation or arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a period of more than
one year from such date and, in the case of the Borrower, Indebtedness in
respect of the Loans.

 

“Funding Office”:  the office of the Administrative Agent
specified in Section 10.2 or such other office as may be specified from
time to time by the Administrative Agent as its funding office by written
notice to the Borrower and the Lenders.

 

“GAAP”:  generally accepted accounting principles in the United States as
in effect from time to time, except that for purposes of Section 7.1, GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent with those used in the preparation of the most recent audited
financial statements referred to in Section 4.1(b).  In the event that any “Accounting Change”
(as defined below) shall occur and such change results in a change in the
method of calculation of financial 

 

10

 

covenants, standards or terms in this
Agreement, then the Borrower and the Administrative Agent agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
reflect equitably such Accounting Changes with the desired result that the
criteria for evaluating the Borrower’s financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.  Until such time as such an amendment shall
have been executed and delivered by the Borrower, the Administrative Agent and
the Required Lenders, all financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed as if such Accounting
Changes had not occurred.  “Accounting
Changes” refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the SEC.

 

“Governmental Authority”:  any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative functions of or pertaining to
government, and, with respect to any Lender, including any central bank, any
securities exchange and any self-regulatory organization (including the
National Association of Insurance Commissioners).

 

“Group Members”:  the collective reference to Holdings, the
Borrower and their respective Subsidiaries, other than those Subsidiaries
listed on Schedule 1.1C.

 

“Guarantee and Collateral Agreement”:  the Guarantee and Collateral Agreement dated
as of August 15, 2002, as executed and delivered by Holdings, the Borrower
and each Subsidiary Guarantor, substantially in the form of Exhibit A.

 

“Guarantee Obligation”:  as to any Person (the “guaranteeing
person”), without duplication, any obligation of the guaranteeing person
guaranteeing or in effect guaranteeing (including through reimbursement,
counterindemnity or similar obligation) any Indebtedness, leases, dividends or
other obligations (the “primary obligations”) of any other third Person
(the “primary obligor”), including any issuing bank under any letter of
credit, in any manner, whether directly or indirectly, including any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of
any such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided, however,
that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation of
any guaranteeing person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made unless such primary obligation for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person’s
maximum reasonably anticipated liability in respect thereof as determined by
the Borrower in good faith.

 

“Guarantors”:  the collective reference to Holdings and the
Subsidiary Guarantors.

 

“Health Care Facility”:  any facility, whether licensed as a skilled
nursing facility, intermediate care facility, personal care facility,
out-patient clinic, diagnostic center or hospital (including, without
limitation, any long-term acute care hospital) which provides any level of
medical care, diagnostic or rehabilitative services or any products or services
reasonably related thereto.

 

11

 

“Health Care Permits”:  any and all licenses, provisional licenses,
JCAHO and/or other accreditations, franchising rights to conduct business,
approvals by a Governmental Authority, authorizations, certificates of need,
consents, qualifications, operating authority, and/or any other permit that is
related to the provision of health care services required by any applicable
Governmental Authority or otherwise necessary for any Group Member to operate
its business or to own, lease, operate or manage a Health Care Facility of any
Group Member.

 

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

 

“Holdings”:  as defined in the preamble hereto.

 

“Incremental Facility Activation Notice”:  a notice substantially in the form of
Exhibit H-2.

 

“Incremental Facility Closing Date”:  any Business Day designated as such in an
Incremental Facility Activation Notice.

 

“Incremental Term Commitment”:  as to any Lender, the obligation of such
Lender, if any, to make an Incremental Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth in the applicable
Incremental Facility Activation Notice.

 

“Incremental Term Lender”:  (a) on any Incremental Facility Closing
Date relating to Incremental Term Loans, the Lenders signatories to the
relevant Incremental Facility Activation Notice and (b) thereafter, each
Lender that is a holder of an Incremental Term Loan.

 

“Incremental Term Loan”:  as defined in Section 2.1(a).

 

“Incremental Term Maturity Date”:  with respect to the Incremental Term Loans
to be made pursuant to any Incremental Facility Activation Notice, the maturity
date specified in such Incremental Facility Activation Notice, which date shall
be on or after the Tranche B Term Maturity Date.

 

“Incremental Term Percentage”:  as to any Lender in respect of any
Incremental Term Loan Facility, the percentage which the aggregate principal
amount of such Lender’s Incremental Term Loans under such Facility then
outstanding constitutes of the aggregate principal amount of the Incremental
Term Loans then outstanding under such Facility.

 

“Indebtedness”:  of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than trade payables and other current liabilities incurred in
the ordinary course of such Person’s business and contingent purchase price
adjustments), (c) all obligations of such Person evidenced by notes, bonds, debentures
or other similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations of such Person,
(f) all obligations of such Person, contingent or otherwise, as an account
party or applicant under or in respect of acceptances, letters of credit,
surety bonds or similar arrangements, (g) the liquidation value of all
Disqualified Capital Stock of such Person, (h) all Guarantee Obligations of
such Person in respect of obligations of the kind referred to in clauses (a)
through (g) above, (i) all obligations of the kind referred to in clauses (a)
through (h) above secured by (or for which the holder of such obligation has an

 

12

 

existing right, contingent or otherwise, to
be secured by) any Lien on property (including accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become liable
for the payment of such obligation, and (j) for the purposes of
Section 8(e) only, all obligations of such Person in respect of Swap
Agreements.  The Indebtedness of any
Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness expressly provide that such Person is not liable therefor.

 

“Insolvency”:  with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.

 

“Insolvent”:  pertaining to a condition of Insolvency.

 

“Intellectual Property”:  the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.

 

“Interest Payment Date”:  (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day that is three months, or a whole multiple thereof,
after the first day of such Interest Period and the last day of such Interest
Period and (d) as to any Loan (other than any Revolving Loan that is an ABR
Loan and any Swingline Loan), the date of any repayment or prepayment made in
respect thereof.

 

“Interest Period”:  as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not later than 11:00 A.M., Charlotte time, on the date
that is three Business Days prior to the last day of the then current Interest
Period with respect thereto; provided that, all of the foregoing
provisions relating to Interest Periods are subject to the following:

 

(i)                                     if
any Interest Period would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall end on the
immediately preceding Business Day;

 

(ii)                                  the
Borrower may not select an Interest Period under a particular Facility that
would extend beyond the Revolving Termination Date or beyond the date final
payment is due on the Term Loans, as the case may be; and

 

(iii)                               any Interest Period that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a calendar month.

 

13

 

“Investments”:  as defined in Section 7.7.

 

“Issuing Lender”:  Wachovia Bank, National Association or any
affiliate thereof, in its capacity as issuer of any Letter of Credit.

 

“JCAHO”:   the Joint Commission on Accreditation of Healthcare
Organizations.

 

“Joint Venture”:  as to any Person, any other Person or any
arrangement in which such Person has any direct or indirect interest and that
is not a Subsidiary of such Person.

 

“Junior Capital”:  any Qualified Capital Stock of the Borrower
or Holdings and any subordinated Indebtedness of Holdings or the Borrower that
has a final maturity date at least 180 days after the later of the Tranche B
Term Maturity Date and the latest Incremental Term Maturity Date and no
payments in cash of principal or interest thereon (other than in the
circumstances described in the proviso of the definition of Qualified Capital
Stock) prior to the later of the Tranche B Term Maturity Date and the latest
Incremental Term Maturity Date issued to, or placed by, the Sponsor or its
Control Investment Affiliates.

 

“L/C Commitment”:  $5,000,000.

 

“L/C Obligations”:  at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under Letters of
Credit that have not then been reimbursed pursuant to Section 3.5.

 

“L/C Participants”:  the collective reference to all the
Revolving Lenders other than the Issuing Lender.

 

“Lenders”:  as defined in the preamble hereto; provided, that unless
the context otherwise requires, each reference herein to the Lenders shall be
deemed to include any Conduit Lender.

 

“Letters of Credit”:  as defined in Section 3.1(a).

 

“Lien”:  any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or other security agreement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the
foregoing).

 

“Loan”:  any loan made by any Lender pursuant to this Agreement.

 

“Loan Documents”:  this Agreement, the Security Documents, the
Notes and any other document related thereto to which a Loan Party is party
which expressly provides that such document is a Loan Document hereunder.

 

“Loan Parties”:  Each Group Member other than the Excluded
Foreign Subsidiaries.

 

“Majority Facility Lenders”:  with respect to any Facility, the holders of
more than 50% of the aggregate unpaid principal amount of the Term Loans or the
Total Revolving Extensions of Credit, as the case may be, outstanding under
such Facility (or, in the case of the Revolving Facility, prior to any
termination of the Revolving Commitments, the holders of more than 50% of the
Total Revolving Commitments then in effect); provided, however,
that if any Lender shall be a Defaulting Lender at such time, then there shall
be excluded from the determination of the Majority Facility Lenders such

 

14

 

Defaulting Lender’s Term Loans then
outstanding and such Defaulting Lender’s Revolving Commitments, or after
termination of the Total Revolving Commitments, the Revolving Extensions of
Credit of such Defaulting Lender then outstanding.

 

“Material Adverse Effect”:  a material adverse effect on (a) the
business, property, operations or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder or
thereunder.

 

“Materials of Environmental Concern”:  any gasoline or petroleum (including crude
oil or any fraction thereof) or petroleum products or any hazardous or toxic
substances, materials or wastes, defined or regulated as such in or under any
Environmental Law, including asbestos and polychlorinated biphenyls.

 

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

 

“Medicaid Provider Agreement”:  an agreement entered into between a Health
Care Facility, supplier or physician and CMS or any federal or state agency or
other entity administering Medicaid in such state, or any other grant of
authority by CMS or any federal or state agency or other entity administering
Medicaid in such state, under which the Health Care Facility, supplier or
physician is authorized to provide medical goods and services to Medicaid
recipients and to be reimbursed by Medicaid for such goods and services.

 

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

 

“Medicare Provider Agreement”:  an agreement entered into between a Health
Care Facility, supplier or physician and CMS or any federal or state agency or
other entity administering Medicare in such state, or other grant of authority
by CMS or any federal or state agency or other entity administering Medicare in
such state, under which the Health Care Facility, supplier or physician is
authorized to provide medical goods and services to Medicare patients and to be
reimbursed by Medicare for such goods and services.

 

“Mortgaged Properties”:  the real properties listed on Schedule 1.1B,
as to which the Administrative Agent for the benefit of the Lenders shall be
granted a Lien pursuant to the Mortgages.

 

15

 

“Mortgages”:  each of the mortgages and deeds of trust made by any Loan Party
in favor of, or for the benefit of, the Administrative Agent for the benefit of
the Lenders, in form and substance reasonably satisfactory to the
Administrative Agent.

 

“Multiemployer Plan”:  a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.

 

“Net Cash Proceeds”:  in connection with any Asset Sale or any
Recovery Event or any incurrence of Indebtedness, the proceeds thereof in the
form of cash and Cash Equivalents (including any such proceeds received by way
of deferred payment of principal pursuant to a note or installment receivable
or purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event or incurrence of Indebtedness,
net of (i) attorneys’ fees, accountants’ fees, investment banking fees and all
other professionals’ and advisors’ fees, (ii) all reasonable costs and expenses
arising therefrom (including, without limitation, all underwriting, brokerage,
commitment, arrangement, consent, title, filing, recording,  and similar fees, premiums, commissions and
discounts), (iii) amounts required to be applied to the repayment of
Indebtedness secured by a Lien expressly permitted hereunder on any asset that
is the subject of such Asset Sale or Recovery Event, including, without
limitation, all premiums, penalties, breakage, indemnity, consent fees and
similar amounts in connection therewith, and distributions or other payments
required to be made to any minority interest holders in Subsidiaries (which
shall not exceed such holders’ ratable interests), (iv) all reserves reasonably
established by the Borrower in respect of post-closing adjustments, payments,
indemnities and other contingent liabilities, provided that upon the
date upon which such reserve is no longer required to be maintained, the
remaining amount of such reserve shall then be deemed Net Cash Proceeds, and
(v) all other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements).

 

“New Lender”:  as defined in Section 2.1(c).

 

“Non-Excluded Taxes”:  as defined in Section 2.19(a).

 

“Non-U.S. Lender”:  as defined in Section 2.19(d).

 

“Notes”:  the collective reference to any promissory note evidencing Loans.

 

“Obligations”:  the unpaid principal of and interest on
(including interest accruing after the maturity of the Loans and Reimbursement
Obligations and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative Agent or to
any Lender (or, in the case of Specified Swap Agreements, any affiliate of any
Lender), whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or
in connection with, this Agreement, any other Loan Document, the Letters of
Credit, any Specified Swap Agreement (to the extent that, after giving effect
to such Specified Swap Agreement, the aggregate principal amount of outstanding
Loans and Senior Subordinated Notes bearing interest at a fixed rate is not
less than 35% of such aggregate principal amount) or any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by the Borrower
pursuant hereto) or otherwise.

 

16

 

“Original Closing Date”:  August 15, 2002.

 

“Other Taxes”:  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 hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.

 

“Patents”:  as defined in the Guarantee and Collateral Agreement.

 

“Participant”:  as defined in Section 10.6(c).

 

“PBGC”:  the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA (or any successor).

 

“Permitted Acquisition”: any
acquisition of property or series of related acquisitions of property that (a)
constitutes assets constituting all or substantially all of a business unit or
constitutes all or substantially all of the Capital Stock of a Person, and (b)
is permitted by and consummated in compliance with the requirements of Section 7.7(g).

 

“Permitted Investor Preferred Stock”:  the Series A Redeemable Preferred Stock and
the Series B Redeemable Preferred Stock of Holdings as set forth in the Fourth
Amended and Restated Certificate of Incorporation of Holdings, as further
amended and modified from time to time.

 

“Permitted Investors”:  the collective reference to (i) the Sponsor
and its Control Investment Affiliates and (ii) senior management of Holdings
and the Borrower as of the Amendment Effective Date, together with any other
members of such senior management approved by the Board of Directors of
Holdings or the Borrower, as the case may be.

 

“Person”:  an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.

 

“Plan”:  at a particular time, any employee benefit plan that is covered
by ERISA and in respect of which the Borrower or a Commonly Controlled Entity
is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA.

 

“Prepayment Percentage”:  75%; provided, that, the Prepayment
Percentage shall be reduced to 50% if the Consolidated Leverage Ratio as of the
last day of such fiscal year is not greater than 3.75 to 1.0.

 

“Pricing Grid”:  the table set forth below.

 

	
  Consolidated

  Leverage Ratio

  	
   

  	
  Applicable Margin for

  Eurodollar Loans

  	
   

  	
  Applicable Margin for

  ABR Loans

  	
   

  	
  Commitment Fee Rate

  	
   

  
	
  Greater than
  or equal to 4.0 to 1.0

  	
   

  	
  2.75

  	
  %

  	
  1.75

  	
  %

  	
  .500

  	
  %

  
	
  Less than
  4.0 but greater than or equal to 3.25 to 1.0

  	
   

  	
  2.50

  	
  %

  	
  1.50

  	
  %

  	
  .500

  	
  %

  
	
  Less than
  3.25 but greater than 2.5 to 1.0

  	
   

  	
  2.25

  	
  %

  	
  1.25

  	
  %

  	
  .500

  	
  %

  
	
  Equal to or
  less than 2.5 to 1.0

  	
   

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  	
  .375

  	
  %

  

 

17

 

For the purposes of the Pricing Grid, changes
in the Applicable Margin resulting from changes in the Consolidated Leverage
Ratio shall become effective on the date (the “Adjustment Date”) that is
three Business Days after the date on which financial statements are delivered
to the Lenders pursuant to Section 6.1 and shall remain in effect until
the next change to be effected pursuant to this paragraph.  If any financial statements referred to
above are not delivered within the time periods specified in Section 6.1,
then, until the date that is three Business Days after the date on which such
financial statements are delivered, the highest rate set forth in each column
of the Pricing Grid shall apply.  In
addition, at all times while an Event of Default shall have occurred and be
continuing, the highest rate set forth in each column of the Pricing Grid shall
apply.  Each determination of the
Consolidated Leverage Ratio pursuant to the Pricing Grid shall be made in a
manner consistent with the determination thereof pursuant to
Section 7.1.  As of the Amendment
Effective Date, and until adjustment as provided herein, the Applicable Margins
shall be determined based on the financial statements most recently delivered
to the Lenders pursuant to Section 6.1 of the Existing Credit Agreement
(which reflect a Consolidated Leverage Ratio greater than 4.0 to 1.0).

 

“Pro Forma Balance Sheet”:  as defined in Section 4.1(a).

 

“Pro Forma Effect”:  with respect to any event or transaction
occurring during any period of four consecutive fiscal quarters, such event or
transaction (including any other transactions consummated in connection
therewith or required thereby) shall be deemed to have been made on the first
day of such period of four consecutive fiscal quarters.

 

“Projections”:  as defined in Section 6.2(c).

 

“Properties”:  as defined in Section 4.17(a).

 

“Qualified Capital Stock”:  any
Capital Stock that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable or exercisable) or upon the
happening of any event does not provide for scheduled payments of dividends in
cash and does not (i) mature or becomes mandatorily redeemable pursuant to a
sinking fund obligation or otherwise; (ii) become convertible or exchangeable
at the option of the holder thereof for Indebtedness or Capital Stock that is
not Qualified Capital Stock; or (iii) become redeemable at the option of the
holder thereof, in whole or in part, in each case, on or prior to the later of
(A) the date that is 180 days after the later of the Tranche B Term
Maturity Date and the latest Incremental
Term Maturity Date and (B) the final maturity date of the Senior Subordinated
Notes; provided, that any Capital Stock that would not constitute
Qualified Capital Stock solely because the holders thereof have the right to
require Holdings to repurchase such Capital Stock upon the occurrence of a
change of control or asset sale (each defined in a substantially similar manner
to the description of change of control in Section 8(k) of this Agreement
and to the corresponding definition of Asset Sale in this Agreement) shall
nonetheless constitute Qualified Capital Stock.  Notwithstanding anything to
the contrary, the Permitted Investor Preferred Stock shall be deemed to be
Qualified Capital Stock.

 

“Qualified Public Offering”: any QPO
as such term is defined in the Fourth Amended and Restated Certificate of
Incorporation of Holdings, as further amended and modified from time to time.

 

18

 

“Recapitalization”:  (i) the purchase by MQ Investment Holdings,
LLC (together with any other Control Investment Affiliates of the Sponsor) of
equity securities of Holdings representing approximately 70.5% of the
post-closing equity of Holdings, (ii) the exchange by the Rollover Stockholders
of existing equity in Holdings for newly issued shares in Holdings representing
approximately 29.5% of the post-closing equity of Holdings and (iii) the
redemption or repurchase by Holdings of the Seller Shares (other than the
Seller Shares held by the Rollover Stockholders exchanged for “rollover equity”
as contemplated by clause (ii) above), in each case, in accordance with the
Recapitalization Agreement.

 

“Recapitalization Agreement”:  the Recapitalization Agreement among MQ
Investment Holdings, LLC, Holdings, the stockholders of Holdings signatory
thereto and Gene Venesky and David Lang, as the stockholders’ representatives,
dated as of July 16, 2002 and amended as of August 8, 2002.

 

“Recapitalization Documentation”:  collectively, the Recapitalization Agreement
and all schedules, exhibits and annexes thereto and all side letters and
agreements modifying or supplementing the terms thereof or entered into in
connection therewith.

 

“Recapitalization Transactions”:  collectively, the Recapitalization, the
repayment of certain Indebtedness and the other transactions contemplated by
the Recapitalization Documentation, any other transactions consummated in
connection with any of the foregoing (including, without limitation, the
payment of transaction fees and expenses) and the financing of any of the
foregoing.

 

“Receivable”:  as defined in the Guarantee and Collateral
Agreement.

 

“Recovery Event”:  any settlement of or payment in respect of
any property or casualty insurance claim or any condemnation proceeding
relating to any asset of any Group Member.

 

“Refunded Swingline Loans”:  as defined in Section 2.7.

 

“Register”:  as defined in Section 10.6(b).

 

“Regulation U”:  Regulation U of the Board as in effect from
time to time.

 

“Reimbursement Approvals”:   with respect to all Third Party Payor Arrangements, any and all
certifications, provider numbers, provider agreements (including, without
limitation, Medicare Provider Agreements and Medicaid Provider Agreements),
participation agreements, accreditations (including JCAHO accreditation) and/or
any other agreements with or approvals by organizations and Governmental
Authorities.

 

“Reimbursement Obligation”:  the obligation of the Borrower to reimburse
the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters
of Credit.

 

“Reinvestment Deferred Amount”:  with respect to any Reinvestment Event, the
aggregate Net Cash Proceeds received by any Group Member in connection
therewith that, as a result of the delivery of a Reinvestment Notice, are not
applied to prepay the Term Loans and the Revolving Loans and, if applicable,
reduce the Revolving Commitments pursuant to Sections 2.11(b) and 2.11(d).

 

“Reinvestment Event”:  any Asset Sale or Recovery Event in respect
of which the Borrower has delivered a Reinvestment Notice.

 

19

 

“Reinvestment Notice”:  a written notice executed by a Responsible
Officer stating that no Event of Default has occurred and is continuing and
that the Borrower (directly or indirectly through a Subsidiary) intends and
expects to use all or a specified portion of the Net Cash Proceeds of an Asset
Sale or Recovery Event to acquire, maintain, develop, construct, improve,
upgrade or repair assets useful in the business of any Group Member (other than
Holdings).

 

“Reinvestment Prepayment Amount”:  with respect to any Reinvestment Event, the
Reinvestment Deferred Amount relating thereto less any amount expended prior to
the relevant Reinvestment Prepayment Date to acquire, maintain, develop,
construct, improve, upgrade or repair assets useful in the business of any
Group Member (other than Holdings).

 

“Reinvestment Prepayment Date”:  with respect to any Reinvestment Event, the
earlier of (a) the date occurring twelve months after such Reinvestment Event
and (b) the date on which the Borrower shall have determined not to, or shall
have otherwise ceased to, acquire, maintain, develop, construct, improve, upgrade
or repair assets useful in the business of any Group Member (other than
Holdings) with all or any portion of the relevant Reinvestment Deferred Amount.

 

“Reorganization”:  with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.

 

“Reportable Event”:  any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the thirty
day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34
or .35 of PBGC Reg. § 4043.

 

“Required Lenders”:  at any time, the holders of more than 50% of
(a) prior to the Amendment Effective Date, the Total Revolving Commitments and
(b) on the Amendment Effective Date and thereafter, the sum of (i) the aggregate
unpaid principal amount of the Term Loans then outstanding and (ii) the Total
Revolving Commitments then in effect or, if the Revolving Commitments have been
terminated, the Total Revolving Extensions of Credit then outstanding; provided,
however, that if any Lender shall be a Defaulting Lender at such time,
then there shall be excluded from the determination of Required Lenders such
Defaulting Lender’s Revolving Commitments, or after termination of the Total
Revolving Commitments, the Revolving Extensions of Credit of such Defaulting
Lender then outstanding.

 

“Requirement of Law”:  as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or legally binding
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.

 

“Responsible Officer”:  the chief executive officer, president or
chief financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.

 

“Restricted Payments”:  as defined in Section 7.6.

 

“Revolving Commitment”:  as to any Lender, the obligation of such
Lender, if any, to make Revolving Loans and participate in Swingline Loans and
Letters of Credit in an aggregate principal and/or face amount not to exceed
the amount set forth under the heading “Revolving Commitment” opposite such
Lender’s name on Schedule 1.1A or in the Assignment and Assumption
pursuant to which

 

20

 

such Lender became a party hereto, as the
same may be changed from time to time pursuant to the terms hereof.  The original amount of the Total Revolving
Commitments is $80,000,000.

 

“Revolving Commitment Period”:  the period from and including the Original
Closing Date to the Revolving Termination Date.

 

“Revolving Extensions of Credit”:  as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Revolving Loans
held by such Lender then outstanding, (b) such Lender’s Revolving Percentage of
the L/C Obligations then outstanding and (c) such Lender’s Revolving Percentage
of the aggregate principal amount of Swingline Loans then outstanding.

 

“Revolving Lender”:  each Lender that has a Revolving Commitment
or that holds any Revolving Extension of Credit.

 

“Revolving Loans”:  as defined in Section 2.4(a).

 

“Revolving Percentage”:  as to any Revolving Lender at any time, the
percentage which such Lender’s Revolving Commitment then constitutes of the
Total Revolving Commitments or, at any time after the Revolving Commitments
shall have expired or terminated, the percentage which the aggregate principal
amount of such Lender’s Revolving Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Loans then outstanding, provided,
that, in the event that the Revolving Loans are paid in full prior to the
reduction to zero of the Total Revolving Extensions of Credit, the Revolving
Percentages shall be determined in a manner designed to ensure that the other
outstanding Revolving Extensions of Credit shall be held by the Revolving
Lenders on a comparable basis.

 

“Rollover Stockholders”:  as defined in the Recapitalization
Agreement.

 

“Revolving Termination Date”:  August 15, 2007.

 

“Sale-Leaseback Transaction”:  as defined in Section 7.10.

 

“SEC”:  the Securities and Exchange Commission, any successor thereto and
any analogous Governmental Authority.

 

“Security Documents”:  the collective reference to the Guarantee
and Collateral Agreement, the Mortgages and all other security documents
hereafter delivered to the Administrative Agent granting a Lien on any property
of any Person to secure the obligations and liabilities of any Loan Party under
any Loan Document.

 

“Seller Shares”:  the Existing Common Stock, the Existing
Class B Common Stock, the Existing Series A Preferred Stock, and the Existing
Series C Preferred Stock, as such terms are defined in the Recapitalization
Agreement.

 

“Senior Subordinated Note Indenture”:  the Indenture dated August 15, 2002
entered into by the Borrower and certain of its Subsidiaries in connection with
the issuance of the Senior Subordinated Notes, together with all instruments
and other agreements entered into by the Borrower or such Subsidiaries in
connection therewith.

 

21

 

“Senior Subordinated Notes”:  the subordinated notes of the Borrower
issued pursuant to the Senior Subordinated Note Indenture and any Exchange
Notes (as defined in the Senior Subordinated Note Indenture) as contemplated
therein.

 

“Single Employer Plan”:  any Plan that is covered by Title IV of
ERISA, but that is not a Multiemployer Plan.

 

“Solvent”:  when used with respect to any Person, means that, as of any date
of determination, (a) the amount of the “present fair saleable value” of the
assets of such Person will, as of such date, exceed the amount of all “liabilities
of such Person, contingent or otherwise”, as of such date, as such quoted terms
are determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable
value of the assets of such Person will, as of such date, be greater than the
amount that will be required to pay the liability of such Person on its debts
as such debts become absolute and matured, (c) such Person will not have, as of
such date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they
mature.  For purposes of this
definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any
(x) right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured or (y) right to an equitable
remedy for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed,
secured or unsecured.

 

“Specified Change of Control”:  a “Change of Control” (or any other defined
term having a similar purpose) as defined in the Senior Subordinated Note
Indenture.

 

“Specified Swap Agreement”:  any Swap Agreement entered into by the
Borrower and any Lender or affiliate thereof in respect of interest rates,
currency exchange rates or commodity prices, so long as any such Swap Agreement
is not entered into for speculative purposes.

 

“Sponsor”:  J.P. Morgan Partners (BHCA), L.P.

 

“Stockholders Agreement”:  the Stockholders’ Agreement, dated as of
August 15, 2002, among Holdings and each of the stockholders party
thereto, as further amended and modified from time to time.

 

“Subsidiary”:  as of any date of determination, as to any
Person, a corporation, partnership, limited liability company or other entity the accounts of which would be consolidated with
those of such Person in such Person’s consolidated financial statements
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or, in the case
of general partnership interests, more than 50% of the general partnership
interests, are owned by such Person. 
Unless otherwise qualified, all references to a “Subsidiary” or to
“Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.

 

“Subsidiary Guarantor”:  each Subsidiary of the Borrower other than
any Excluded Foreign Subsidiary and any Subsidiary that is not a Group Member.

 

“Supermajority Lenders”:  at any time, the holders of more than 75% of
(a) prior to the Amendment Effective Date, the Total Revolving Commitments and
(b) on the Amendment Effective Date and thereafter, the sum of (i) the
aggregate unpaid principal amount of the Term Loans then outstanding

 

22

 

and (ii) the Total Revolving Commitments then
in effect or, if the Revolving Commitments have been terminated, the Total
Revolving Extensions of Credit then outstanding; provided, however,
that if any Lender shall be a Defaulting Lender at such time, then there shall
be excluded from the determination of Supermajority Lenders such Defaulting
Lender’s Revolving Commitments, or after termination of the Total Revolving
Commitments, the Revolving Extensions of Credit of such Defaulting Lender then
outstanding.

 

 “Swap
Agreement”:  any agreement with respect to any swap, forward, future or derivative
transaction or option or similar agreement involving, or settled by reference
to, one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any
combination of these transactions; provided that no phantom stock
or similar plan providing for payments only on account of services provided by
current or former directors, officers, employees or consultants of the Borrower
or any of its Subsidiaries shall be a “Swap Agreement”.

 

“Swingline Commitment”:  the obligation of the Swingline Lender to
make Swingline Loans pursuant to Section 2.6 in an aggregate principal
amount at any one time outstanding not to exceed $5,000,000.

 

“Swingline Lender”:  Wachovia Bank, National Association, in its
capacity as the lender of Swingline Loans.

 

“Swingline Loans”:  as defined in Section 2.6.

 

“Swingline Participation Amount”:  as defined in Section 2.7.

 

“Syndication Agent”:  as defined in the preamble hereto.

 

“Term Lenders”:  the collective reference to the Tranche B
Term Lenders and the Incremental Term Lenders.

 

“Term Loans”:  the collective reference to the Tranche B
Term Loans and the Incremental Term Loans.

 

“Third Party Payor Arrangements”:  any and all arrangements with Medicare,
Medicaid, and any other Governmental Authority, or quasi-public agency, Blue
Cross, Blue Shield, any and all managed care plans and organizations, including
but not limited to health maintenance organizations and preferred provider
organizations, private commercial insurance companies, employee assistance
programs and/or any other third party arrangements, plans or programs for
payment or reimbursement in connection with health care services, products or
supplies.

 

“Total Revolving Commitments”:  at any time, the aggregate amount of the
Revolving Commitments then in effect.

 

“Total Revolving Extensions of Credit”:  at any time, the aggregate amount of the
Revolving Extensions of Credit of the Lenders outstanding at such time.

 

“Trademarks”:  as defined in the Guarantee and Collateral
Agreement.

 

“Tranche B Term Commitment”:  as to any Lender, the obligation of such
Lender, if any, to make a Tranche B Term Loan to the Borrower in a principal
amount not to exceed the amount set forth

 

23

 

under the heading “Tranche B Term Commitment”
opposite such Lender’s name on Schedule 1.1A.  The original aggregate amount of the Tranche B Term Commitments
is $60,000,000.

 

“Tranche B Term Lender”:  each Lender that has a Tranche B Term
Commitment or that holds a Tranche B Term Loan.

 

“Tranche B Term Loan”:  as defined in Section 2.1(a).

 

“Tranche B Term Maturity Date”:  September 3, 2009.

 

“Tranche B Term Percentage”:  as to any Tranche B Term Lender at any time,
the percentage which such Lender’s Tranche B Term Commitment then constitutes
of the aggregate Tranche B Term Commitments (or, at any time after the
Amendment Effective Date, the percentage which the aggregate principal amount
of such Lender’s Tranche B Term Loans then outstanding constitutes of the
aggregate principal amount of the Tranche B Term Loans then outstanding).

 

“Transferee”:  any Assignee or Participant.

 

“Type”:  as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.

 

“United States”:  the United States of America.

 

“Wholly Owned Subsidiary”:  as to any Person, any other Person, all of
the Capital Stock of which (other than directors’ qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.

 

1.2                                 Other Definitional Provisions.(a)  Unless
otherwise specified therein, all terms defined in this Agreement shall have the
defined meanings when used in the other Loan Documents or any certificate or
other document made or delivered pursuant hereto or thereto.

 

(b)                                 As
used herein and in the other Loan Documents, and any certificate or other
document made or delivered pursuant hereto or thereto, (i) accounting terms
relating to any Group Member not defined in Section 1.1 and accounting
terms partly defined in Section 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP, (ii) the words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”, (iii) the word “incur” shall be construed to mean incur, create,
issue, assume, become liable in respect of or suffer to exist (and the words
“incurred” and “incurrence” shall have correlative meanings), (iv) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, Capital Stock, securities, revenues, accounts, leasehold
interests and contract rights, and (v) references to agreements or other
Contractual Obligations shall, unless otherwise specified, be deemed to refer
to such agreements or Contractual Obligations as amended, supplemented,
restated or otherwise modified from time to time.

 

(c)                                  The
words “hereof”, “herein” and “hereunder” and words of similar import, when used
in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, Schedule and Exhibit
references are to this Agreement unless otherwise specified.

 

(d)                                 The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

 

24

 

SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS

 

2.1                                 Term Commitments.(a)  Subject to the terms and conditions hereof,
(i) each Tranche B Term Lender severally agrees to make one or more term loans
(each, a “Tranche B Term Loan”) to the Borrower (A) on the Amendment
Effective Date in an amount equal to but not to exceed the amount of the
Tranche B Term Commitment of such Lender and (B) from time to time to the
extent provided in Section 2.1(b), and (ii) each Incremental Term Lender
severally agrees to make one or more term loans (each, an “Incremental Term
Loan”) to the Borrower to the extent provided in Section 2.1(b).  The Term Loans may from time to time be
Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to
the Administrative Agent in accordance with Sections 2.2 and 2.12.

 

(b)                                 The
Borrower and any one or more Lenders (including New Lenders) may from time to
time agree that without the consent of the other Lenders hereunder (w) such
Lenders shall make Revolving Commitments or shall increase the amount of their
Revolving Commitments, (x) such Lenders shall make Tranche B Term Loans or
shall increase the amount of their Tranche B Term Loans, (y) such Lenders shall
make Incremental Term Loans or shall increase the amount of their Incremental
Term Loans or (z) such Lenders may effect any combination of the foregoing
clauses (w), (x) and (y).  The Borrower
shall effect the same by executing and delivering to the Administrative Agent
an Incremental Facility Activation Notice specifying (i) the details with
respect to the Facility or Facilities involved, (ii) the applicable
Incremental Facility Closing Date, (iii) in the case of Incremental Term
Loans, (A) the applicable Incremental Term Maturity Date, (B) the
amortization schedule for such Incremental Term Loans, and (C) the
Applicable Margin for such Incremental Term Loans; provided that, (1) no
Default or Event of Default has
occurred and is continuing or would result after giving effect to the increase
of Revolving Commitments or the making or increase of the Term Loans or the
application of the proceeds therefrom, (2) after giving pro  forma
effect to any Revolving Loans actually made pursuant to such increased
Revolving Commitments or the making or increase of the Term Loans, the
repayment of Indebtedness with the proceeds therefrom, and any Permitted
Acquisition consummated in connection therewith, (x) the Borrower would be able
to borrow at least $5,000,000 of Revolving Loans and no Default or Event of
Default would result therefrom, and (y) the Borrower and its Subsidiaries are
in compliance with the covenants contained in Section 7.1 as of the last
day of and for the most recent four consecutive fiscal quarters of the Borrower
for which financial statements have been delivered pursuant to Section 6.1
(as demonstrated by delivery to the Administrative Agent of a certificate to
such effect showing such calculation in reasonable detail), (3) in the case of
Incremental Term Loans, in the event that Incremental Term Loans are issued
that have an Applicable Margin (which, for such purposes only, shall be deemed
to include all original issue discount payable to all Lenders providing such
Incremental Term Loans, amortized over the actual life of such Incremental Term
Loans) greater than 0.25% above the Applicable Margin then in effect for the
Tranche B Term Loans (which, for such purposes only, shall be deemed to include
all original issue discount paid to the relevant Lenders, amortized over the
actual life of such Tranche B Term Loans), the Applicable Margin for the
Tranche B Term Loans shall, as of the applicable Incremental Facility Closing
Date, automatically be adjusted (without any further action acquired under this
Agreement) to be 0.25% less than the Applicable Margin for such Incremental
Term Loans, (4) other than with respect to amortization, maturity date and pricing,
such Incremental Term Loans shall have the same terms and conditions as those
applicable to Tranche B Term Loans, (5) without the consent of the
Supermajority Lenders, the aggregate amount of increases of Revolving
Commitments, borrowings of incremental Tranche B Term Loans and borrowings of
Incremental Term Loans pursuant to this Section 2.1(b) shall not exceed
$40,000,000, and (6) unless otherwise consented to by the Supermajority
Lenders, each increase in Revolving Commitments and each borrowing of
incremental Tranche B Term Loans or Incremental Term Loans pursuant to this
Section 2.1(b) shall be in a minimum amount of at least $20,000,000.  No Lender shall have any obligation to
participate in any increase described in this paragraph unless it agrees in
writing to do so in its sole discretion.

 

25

 

(c)                                  Any
additional bank, financial institution or other entity that, with the consent
of the Borrower and the Administrative Agent (which consent shall not be
unreasonably withheld), elects to become a “Lender” under this Agreement in
connection with any transaction described in Section 2.1(b) shall execute
a New Lender Supplement (each, a “New Lender Supplement”), substantially
in the form of Exhibit H-1, whereupon such bank, financial institution or other
entity (a “New Lender”) shall become a Lender for all purposes and shall
be bound by and entitled to the benefits of this Agreement.

 

(d)                                 Any
incremental Revolving Commitments and incremental Tranche B Term Loans shall be
governed by this Agreement and the other Loan Documents.  The terms and conditions applicable to any
Incremental Term Loan Facility shall be set forth in the applicable Incremental
Facility Activation Notice which shall become a part hereof when executed and
delivered by the Borrower, the Lenders providing such Incremental Term Loan
Facility and the Administrative Agent and after giving effect thereto, any
Incremental Term Loan Facility shall be governed by this Agreement and the
other Loan Documents.

 

(e)                                  On
each Incremental Facility Closing Date, the Borrower shall borrow (i) Revolving
Loans under the increased Revolving Commitments, (ii) incremental Tranche B
Term Loans and (iii) Incremental Term Loans, in each case from each Lender participating
in the relevant increase (A) if ABR Loans under the relevant Facility are
outstanding on the relevant Incremental Facility Closing Date, in an amount of
ABR Loans that will result in each such participating Lender having ABR Loans
outstanding in a principal amount equal to its Revolving Percentage, Tranche B
Term Percentage or Incremental Term Percentage, as applicable, of the aggregate
outstanding principal amount of ABR Loans and (B) if Eurodollar Loans under the
relevant Facility are outstanding on the relevant Incremental Facility Closing
Date, in an amount of Eurodollar Loans on such date (if a Eurodollar Tranche is
being continued for another Interest Period on such date) and/or such later
date on which a Eurodollar Tranche outstanding on the Incremental Facility
Closing Date is continued for another Interest Period that will result, in each
case, in each such participating Lender having Eurodollar Loans made by it
included in such extended Eurodollar Tranche in a principal amount equal to its
Revolving Percentage, Tranche B Term Percentage or Incremental Term Percentage,
as applicable, of the aggregate outstanding principal amount of Eurodollar
Loans included in such Eurodollar Tranche.

 

2.2                                 Procedure for Term Loan Borrowings. The
Borrower shall give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 11:00 A.M., Charlotte
time, (a) not less than three Business Days prior to the Amendment Effective
Date (or, in the case of any Term Loan to be made after the Amendment Effective
Date pursuant to Section 2.1(b), the requested Borrowing Date), in the
case of Eurodollar Loans, or (b) one Business Day prior to the Amendment
Effective Date (or, in the case of any Term Loan to be made after the Amendment
Effective Date pursuant to Section 2.1(b), the requested Borrowing Date),
in the case of ABR Loans), requesting that the relevant Term Lenders make the
relevant Term Loans on such date and specifying (i) the amount and Type of Term
Loans to be borrowed and (ii) in the case of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Period therefor.  Upon receipt
of such notice the Administrative Agent shall promptly notify each Term Lender
thereof.  Each relevant Term Lender will
make the amount of its Term Loan available to the Administrative Agent for the
account of the Borrower at the Funding Office prior to 12:00 Noon, Charlotte
time, on the relevant Borrowing Date in funds immediately available to the
Administrative Agent.  Such borrowing
will then be made available to the Borrower by the Administrative Agent
crediting the account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Administrative Agent by such
Term Lenders and in like funds as received by the Administrative Agent.

 

26

 

2.3                                 Repayment of Term Loans.(a)  The Tranche B Term Loan of each Tranche B
Term Lender shall mature in 23 consecutive quarterly installments and a final
installment on the Tranche B Term Maturity Date, each of which shall be in an
amount equal to such Lender’s Tranche B Term Percentage multiplied by the
amount set forth below opposite such installment:

 

	
  Installment

  	
   

  	
  Principal Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2003

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  December 31,
  2003

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  March 31,
  2004

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  June 30,
  2004

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  September 30,
  2004

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  December 31,
  2004

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  March 31,
  2005

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  June 30,
  2005

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  September 30,
  2005

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  December 31,
  2005

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  September 30,
  2007

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  March 31,
  2008

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  June 30,
  2008

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  September 30,
  2008

  	
   

  	
  $

  	
  14,250,000

  	
   

  
	
  December 31,
  2008

  	
   

  	
  $

  	
  14,250,000

  	
   

  
	
  March 31,
  2009

  	
   

  	
  $

  	
  14,250,000

  	
   

  
	
  Tranche B
  Term Maturity Date

  	
   

  	
  $

  	
  14,250,000

  	
   

  

 

(b)                                 The
Incremental Term Loans of each Incremental Term Lender shall mature in
consecutive installments as specified in the Incremental Facility Activation
Notice pursuant to which such Incremental Term Loans were made; provided
that no Incremental Term Maturity Date shall occur prior to the Tranche B Term
Maturity Date.

 

27

 

2.4                                 Revolving Commitments.(a)  Subject
to the terms and conditions hereof, each Revolving Lender severally agrees to
make revolving credit loans (“Revolving Loans”) to the Borrower from
time to time during the Revolving Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Lender’s Revolving
Percentage of the sum of (i) the L/C Obligations then outstanding and (ii) the
aggregate principal amount of the Swingline Loans then outstanding (except to
the extent that such Revolving Loans are to be applied to repay outstanding
Swingline Loans), does not exceed the amount of such Lender’s Revolving
Commitment.  During the Revolving
Commitment Period the Borrower may use the Revolving Commitments by borrowing,
prepaying the Revolving Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.  The Revolving Loans may from time to time be Eurodollar Loans or
ABR Loans, as determined by the Borrower and notified to the Administrative
Agent in accordance with Sections 2.5 and 2.12.  Revolving Loans outstanding under the Existing Credit Agreement
on the Amendment Effective Date and not repaid on such date shall continue
thereafter hereunder with the same respective Interest Periods.

 

(b)                                 The
Borrower shall repay all outstanding Revolving Loans on the Revolving
Termination Date.

 

2.5                                 Procedure for Revolving Loan
Borrowing.The Borrower may borrow under the Revolving Commitments
during the Revolving Commitment Period on any Business Day, provided
that the Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 11:00 A.M.,
Charlotte time, (a) three Business Days prior to the requested Borrowing Date,
in the case of Eurodollar Loans, or (b) one Business Day prior to the requested
Borrowing Date, in the case of ABR Loans), specifying (i) the amount and Type
of Revolving Loans to be borrowed, (ii) the requested Borrowing Date and (iii)
in the case of Eurodollar Loans, the respective amounts of each such Type of
Loan and the respective lengths of the initial Interest Period therefor.  Each borrowing under the Revolving
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$1,000,000 or a whole multiple thereof (or, if the then aggregate Available
Revolving Commitments are less than $1,000,000, such lesser amount) and (y) in
the case of Eurodollar Loans, $2,000,000 or a whole multiple of $500,000 in
excess thereof; provided, that the Swingline Lender may request, on
behalf of the Borrower, borrowings under the Revolving Commitments that are ABR
Loans in other amounts pursuant to Section 2.7.  Upon receipt of any such notice from the Borrower pursuant to the
first sentence of this Section 2.5, the Administrative Agent shall
promptly notify each Revolving Lender thereof. 
Subject to Section 2.1(e), each Revolving Lender will make the
amount of its pro  rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the Funding Office
prior to 2:00 P.M., Charlotte time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent.  Such borrowing will then be made available
to the Borrower by the Administrative Agent crediting the account of the
Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Revolving Lenders and in like
funds as received by the Administrative Agent.

 

2.6                                 Swingline Commitment.(a)  Subject
to the terms and conditions hereof, the Swingline Lender agrees to make a
portion of the credit otherwise available to the Borrower under the Revolving
Commitments from time to time during the Revolving Commitment Period by making
swing line loans (“Swingline Loans”) to the Borrower; provided
that (i) the aggregate principal amount of Swingline Loans outstanding at any
time shall not exceed the Swingline Commitment then in effect (notwithstanding
that the Swingline Loans outstanding at any time, when aggregated with the
Swingline Lender’s other outstanding Revolving Loans, may exceed the Swingline
Commitment then in effect) and (ii) the Borrower shall not request, and the
Swingline Lender shall not make, any Swingline Loan if, after giving effect to
the making of such Swingline Loan, the aggregate amount of the Available
Revolving Commitments would be less than zero. 
During the Revolving Commitment Period, the Borrower may use

 

28

 

the Swingline Commitment by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof.  Swingline Loans shall be ABR Loans
only.  Swingline Loans outstanding under
the Existing Credit Agreement on the Amendment Effective Date and not repaid on
such date shall continue thereafter hereunder.

 

(b)                                 The
Borrower shall repay to the Swingline Lender the then unpaid principal amount
of each Swingline Loan on the earlier of the Revolving Termination Date and the
first date after such Swingline Loan is made that is the 15th or last day of a
calendar month and is at least two Business Days after such Swingline Loan is
made; provided that on each date that a Revolving Loan is borrowed, the
Borrower shall repay all Swingline Loans then outstanding.

 

2.7                                 Procedure for Swingline Borrowing;
Refunding of Swingline Loans.(a)  Whenever the Borrower
desires that the Swingline Lender make Swingline Loans it shall give the
Swingline Lender irrevocable telephonic notice confirmed promptly in writing
(which telephonic notice must be received by the Swingline Lender not later
than 1:00 P.M., Charlotte time, on the proposed Borrowing Date), specifying (i)
the amount to be borrowed and (ii) the requested Borrowing Date (which shall be
a Business Day during the Revolving Commitment Period).  Each borrowing under the Swingline
Commitment shall be in an amount equal to $250,000 or a whole multiple of
$50,000 in excess thereof.  Not later
than 3:00 P.M., Charlotte time, on the Borrowing Date specified in a notice in
respect of Swingline Loans, the Swingline Lender shall make available to the
Administrative Agent at the Funding Office an amount in immediately available
funds equal to the amount of the Swingline Loan to be made by the Swingline
Lender.  The Administrative Agent shall
make the proceeds of such Swingline Loan available to the Borrower on such
Borrowing Date by depositing such proceeds in the account of the Borrower with
the Administrative Agent on such Borrowing Date in immediately available funds.

 

(b)                                 The
Swingline Lender, at any time and from time to time in its sole and absolute
discretion may, on behalf of the Borrower (which hereby irrevocably directs the
Swingline Lender to act on its behalf), on one Business Day’s notice given by
the Swingline Lender no later than 12:00 Noon, Charlotte time, request each
Revolving Lender to make, and each Revolving Lender hereby agrees to make, a
Revolving Loan, in an amount equal to such Lender’s Revolving Percentage of the
aggregate amount of the Swingline Loans (the “Refunded Swingline Loans”)
outstanding on the date of such notice, to repay the Swingline Lender.  Each Revolving Lender shall make the amount
of such Revolving Loan available to the Administrative Agent at the Funding
Office in immediately available funds, not later than 2:00 P.M., Charlotte
time, one Business Day after the date of such notice.  The proceeds of such Revolving Loans shall be immediately made
available by the Administrative Agent to the Swingline Lender for application
by the Swingline Lender to the repayment of the Refunded Swingline Loans.  The Borrower irrevocably authorizes the
Swingline Lender to charge the Borrower’s accounts with the Administrative
Agent (up to the amount available in each such account) in order to immediately
pay the amount of such Refunded Swingline Loans to the extent amounts received
from the Revolving Lenders are not sufficient to repay in full such Refunded
Swingline Loans.

 

(c)                                  If
prior to the time a Revolving Loan would have otherwise been made pursuant to
Section 2.7(b), one of the events described in Section 8(f) shall
have occurred and be continuing with respect to the Borrower or if for any
other reason, as determined by the Swingline Lender in its sole discretion,
Revolving Loans may not be made as contemplated by Section 2.7(b), each
Revolving Lender shall, on the date such Revolving Loan was to have been made
pursuant to the notice referred to in Section 2.7(b), purchase for cash an
undivided participating interest in the then outstanding Swingline Loans by
paying to the Swingline Lender an amount (the “Swingline Participation
Amount”) equal to (i) such Revolving Lender’s Revolving Percentage times
(ii) the sum of the aggregate principal amount of Swingline Loans then
outstanding that were to have been repaid with such Revolving Loans.

 

29

 

(d)                                 Whenever,
at any time after the Swingline Lender has received from any Revolving Lender
such Revolving Lender’s Swingline Participation Amount, the Swingline Lender
receives any payment on account of the Swingline Loans, the Swingline Lender
will distribute to such Revolving Lender its Swingline Participation Amount
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Revolving Lender’s participating interest was
outstanding and funded and, in the case of principal and interest payments, to
reflect such Revolving Lender’s pro  rata portion of such payment
if such payment is not sufficient to pay the principal of and interest on all
Swingline Loans then due); provided, however, that in the event
that such payment received by the Swingline Lender is required to be returned,
such Revolving Lender will return to the Swingline Lender any portion thereof
previously distributed to it by the Swingline Lender.

 

(e)                                  Each
Revolving Lender’s obligation to make the Loans referred to in
Section 2.7(b) and to purchase participating interests pursuant to
Section 2.7(c) shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any setoff, counterclaim,
recoupment, defense or other right that such Revolving Lender or the Borrower
may have against the Swingline Lender, the Borrower or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a Default or an Event
of Default or the failure to satisfy any of the other conditions specified in
Section 5; (iii) any adverse change in the condition (financial or
otherwise) of the Borrower; (iv) any breach of this Agreement or any other Loan
Document by the Borrower, any other Loan Party or any other Lender; or (v) any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.

 

2.8                                 Commitment Fees, etc.(a)  The
Borrower agrees to pay to the Administrative Agent for the account of each
Revolving Lender a commitment fee for the period from and including the
Original Closing Date to the last day of the Revolving Commitment Period,
computed at the Commitment Fee Rate on the average daily amount of the
Available Revolving Commitment of such Lender during the period for which
payment is made, payable quarterly in arrears on each Fee Payment Date,
commencing on the first such date to occur after the Original Closing Date; provided,
that no Defaulting Lender shall be entitled to accrue or receive any such
commitment fee for so long as such Lender is a Defaulting Lender.

 

(b)                                 The
Borrower agrees to pay to the Administrative Agent the fees in the amounts and
on the dates previously agreed to in writing by the Borrower and the
Administrative Agent.

 

2.9                                 Termination or Reduction of
Revolving Commitments.The Borrower shall have the right, upon not less
than three Business Days’ notice to the Administrative Agent, to terminate the
Revolving Commitments or, from time to time, to reduce the amount of the
Revolving Commitments; provided that no such termination or reduction of
Revolving Commitments shall be permitted if, after giving effect thereto and to
any prepayments of the Revolving Loans and Swingline Loans made on the
effective date thereof, the Total Revolving Extensions of Credit would exceed
the Total Revolving Commitments.  Any such
reduction shall be in an amount equal to $1,000,000, or a whole multiple
thereof, and shall reduce permanently the Revolving Commitments then in effect.

 

2.10                           Optional Prepayments.The Borrower may at
any time and from time to time prepay the Loans (either the Revolving Loans,
the Term Loans or both), in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent no later than 11:00
A.M., Charlotte time, three Business Days prior thereto, in the case of Eurodollar
Loans, and no later than 11:00 A.M., Charlotte time, one Business Day prior
thereto, in the case of ABR Loans, which notice shall specify the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans or ABR
Loans; provided, that if a Eurodollar Loan is prepaid on any day other
than the last day of the Interest Period applicable thereto, the Borrower shall
also pay any amounts owing pursuant to Section 2.20.  Upon

 

30

 

receipt of any such notice the Administrative Agent
shall promptly notify each relevant Lender thereof.  If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, together with (except
in the case of Revolving Loans that are ABR Loans and Swingline Loans) accrued
interest to such date on the amount prepaid. 
Partial prepayments of Term Loans and Revolving Loans shall be in an
aggregate principal amount of $1,000,000 or a whole multiple thereof.  Partial prepayments of Swingline Loans shall
be in an aggregate principal amount of $100,000 or a whole multiple
thereof.  Any Revolving Loans or
Swingline Loans prepaid hereunder may be reborrowed.

 

2.11                           Mandatory Prepayments and
Commitment Reductions.(a)  If any Indebtedness shall be
incurred by any Group Member (excluding any Indebtedness incurred in accordance
with Section 7.2 or permitted by the Required Lenders pursuant to
Section 10.1 (except as may be otherwise agreed to by the Required Lenders
in connection with their approval of such Indebtedness pursuant to
Section 10.1)), an amount equal to 100% of the Net Cash Proceeds thereof
shall be applied on the date of such incurrence toward the prepayment of the
Loans and, if applicable, the reduction of the Revolving Commitments as set
forth in Section 2.11(d).

 

(b)                                 If
on any date any Group Member shall receive Net Cash Proceeds from any Asset
Sale or Recovery Event then, unless a Reinvestment Notice shall be delivered in
respect thereof, such Net Cash Proceeds shall be applied on such date toward
the prepayment of the Loans and, if applicable, the reduction of the Revolving
Commitments as set forth in Section 2.11(d); provided, that,
notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount
equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Loans and, if
applicable, the reduction of the Revolving Commitments as set forth in
Section 2.11(d).

 

(c)                                  If,
for any fiscal year of the Borrower commencing with the fiscal year ending
December 31, 2004, there shall be Excess Cash Flow, the Borrower shall, on
the relevant Excess Cash Flow Application Date, apply the Prepayment Percentage
of such Excess Cash Flow toward the prepayment of the Loans and, if applicable,
the reduction of the Revolving Commitments as set forth in
Section 2.11(d).  Each such
prepayment and reduction of Revolving Commitments, if applicable, shall be made
on a date (an “Excess Cash Flow Application Date”) no later than five
Business Days after the earlier of (i) the date on which the financial
statements of the Borrower referred to in Section 6.1(a), for the fiscal
year with respect to which such prepayment and, if applicable, reduction in
Revolving Commitments is made, are required to be delivered to the Lenders and
(ii) the date such financial statements are actually delivered.

 

(d)                                 Amounts
to be applied in connection with prepayments and Revolving Commitment
reductions pursuant to this Section 2.11 and Section 7.5(a)(v) shall
be applied, (i) first, to the prepayment of the Term Loans in accordance
with Section 2.17(b) until all Term Loans have been paid in full, provided
that, notwithstanding the foregoing (x) an aggregate amount of Net Cash
Proceeds from Asset Sales and Recovery Events not to exceed $20,000,000 and (y)
an aggregate amount of Excess Cash Flow not to exceed $20,000,000 that would
otherwise be applied toward the prepayment of the Term Loans may be applied to
prepay outstanding Revolving Loans without reduction of the Revolving
Commitments, and, (ii) second, to the permanent reduction of Revolving
Commitments as set forth in this Section 2.11(d).  Any such reduction of the Revolving
Commitments shall be accompanied by prepayment of the Revolving Loans and/or
Swingline Loans to the extent, if any, that the Total Revolving Extensions of
Credit exceed the amount of the Total Revolving Commitments as so reduced, provided
that, in the case of any such permanent reduction of the Revolving Commitments,
if the aggregate principal amount of Revolving Loans and Swingline Loans then
outstanding is less than the amount by which the Total Revolving Extensions of
Credit exceeds the amount of Total Revolving Commitments as so reduced (because
L/C Obligations constitute a portion thereof), the Borrower shall, if an Event
of

 

31

 

Default shall
have occurred and be continuing, to the extent of the balance of such excess,
replace outstanding Letters of Credit and/or deposit an amount in cash in a
cash collateral account established with the Administrative Agent for the
benefit of the Lenders on terms and conditions satisfactory to the
Administrative Agent.  The application
of any prepayment pursuant to this Section 2.11 or Section 7.5(a)(v)
shall be made, first, to ABR Loans and, second, to Eurodollar
Loans.  Each prepayment of the Loans
under this Section 2.11 or Section 7.5(a)(v) (except in the case of
Revolving Loans that are ABR Loans and Swingline Loans) shall be accompanied by
accrued interest to the date of such prepayment on the amount prepaid.   Unless required as a result of the
permanent reduction of Revolving Commitments, any Revolving Loans prepaid
hereunder may be reborrowed.

 

2.12                           Conversion and Continuation
Options.(a)  The Borrower may elect from time to time to
convert Eurodollar Loans to ABR Loans by giving the Administrative Agent prior
irrevocable notice of such election no later than 11:00 A.M., Charlotte time,
on the Business Day preceding the proposed conversion date, provided
that any such conversion of Eurodollar Loans may only be made on the last day
of an Interest Period with respect thereto. 
The Borrower may elect from time to time to convert ABR Loans to
Eurodollar Loans by giving the Administrative Agent prior irrevocable notice of
such election no later than 11:00 A.M., Charlotte time, on the third Business
Day preceding the proposed conversion date (which notice shall specify the
length of the initial Interest Period therefor), provided that no ABR
Loan under a particular Facility may be converted into a Eurodollar Loan when
any Event of Default has occurred and is continuing and the Administrative
Agent or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such conversions.  Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.

 

(b)                                 Any
Eurodollar Loan may be continued as such upon the expiration of the then current
Interest Period with respect thereto by the Borrower giving irrevocable notice
to the Administrative Agent, in accordance with the applicable provisions of
the term “Interest Period” set forth in Section 1.1, of the length of the
next Interest Period to be applicable to such Loans, provided that no
Eurodollar Loan under a particular Facility may be continued as such when any
Event of Default has occurred and is continuing and the Administrative Agent
has or the Majority Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such continuations,
and provided, further, that if the Borrower shall fail to give
any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans
shall be automatically converted to ABR Loans on the last day of such then
expiring Interest Period.  Upon receipt
of any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.

 

2.13                           Limitations on Eurodollar Tranches.Notwithstanding
anything to the contrary in this Agreement, all borrowings, conversions and
continuations of Eurodollar Loans and all selections of Interest Periods shall
be in such amounts and be made pursuant to such elections so that, (a) after
giving effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $2,000,000 or a whole
multiple of $500,000 in excess thereof and (b) no more than eight Eurodollar
Tranches shall be outstanding at any one time.

 

2.14                           Interest Rates and Payment Dates.(a)  Each
Eurodollar Loan shall bear interest for each day during each Interest Period
with respect thereto at a rate per annum equal to the Eurodollar Rate determined
for such day plus the Applicable Margin.

 

(b)                                 Each
ABR Loan shall bear interest at a rate per annum equal to the ABR plus the
Applicable Margin.

 

32

 

(c)                                  (i)
If all or a portion of the principal amount of any Loan or Reimbursement
Obligation shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), all outstanding Loans and Reimbursement Obligations
(whether or not overdue) shall bear interest at a rate per annum equal to (x)
in the case of the Loans, the rate that would otherwise be applicable thereto
pursuant to the foregoing provisions of this Section plus 2% or (y)
in the case of Reimbursement Obligations, the rate applicable to ABR Loans
under the Revolving Facility plus 2%, and (ii) if all or a portion of
any interest payable on any Loan or Reimbursement Obligation or any commitment
fee or other amount payable hereunder shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise), such overdue amount shall
bear interest at a rate per annum equal to the rate then applicable to ABR
Loans under the relevant Facility plus 2% (or in the case of any such
other amounts that do not relate to a particular Facility, the rate then
applicable to ABR Loans under the Revolving Facility plus 2%), in each
case, with respect to clauses (i) and (ii) above, from the date of such
non-payment until such amount is paid in full (as well after as before
judgment).

 

(d)                                 Interest
shall be payable in arrears on each Interest Payment Date, provided that
interest accruing pursuant to paragraph (c) of this Section shall be
payable from time to time on demand.

 

2.15                           Computation of Interest and Fees.(a)  Interest
and fees payable pursuant hereto shall be calculated on the basis of a 360-day
year for the actual days elapsed, except that, with respect to ABR Loans the
rate of interest on which is calculated on the basis of the Prime Rate, the
interest thereon shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed.  The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of each determination of a Eurodollar Rate.  Any change in the interest rate on a Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on the day on which such
change becomes effective.  The
Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of the effective date and the amount of each such change in
interest rate.

 

(b)                                 Each
determination of an interest rate by the Administrative Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error. 
The Administrative Agent shall, at the request of the Borrower, deliver
to the Borrower a statement showing the quotations used by the Administrative
Agent in determining any interest rate pursuant to Section 2.14(a).

 

2.16                           Inability to Determine Interest
Rate.If prior to the first day of any Interest Period:

 

(a)                                  the
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, or

 

(b)                                 the
Administrative Agent shall have received notice from the Majority Facility
Lenders in respect of the relevant Facility that the Eurodollar Rate determined
or to be determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such Lenders) of
making or maintaining their affected Loans during such Interest Period,

 

the Administrative Agent shall give telecopy
or telephonic notice thereof to the Borrower and the relevant Lenders as soon
as practicable thereafter.  If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such

 

33

 

Interest Period shall be made as ABR Loans,
(y) any Loans under the relevant Facility that were to have been converted
on the first day of such Interest Period to Eurodollar Loans shall be continued
as ABR Loans and (z) any outstanding Eurodollar Loans under the relevant
Facility shall be converted, on the last day of the then-current Interest
Period, to ABR Loans.  Until such notice
has been withdrawn by the Administrative Agent, no further Eurodollar Loans
under the relevant Facility shall be made or continued as such, nor shall the
Borrower have the right to convert Loans under the relevant Facility to
Eurodollar Loans.

 

2.17                           Pro Rata Treatment and Payments.(a)  Each
borrowing by the Borrower from the Lenders hereunder, each payment by the
Borrower on account of any commitment fee and any reduction of the Commitments
of the Lenders shall be made pro  rata according to the respective
Tranche B Term Percentages, Incremental Term Percentages or Revolving
Percentages, as the case may be, of the relevant Lenders.

 

(b)                                 Each
scheduled payment by the Borrower on account of principal of and interest on
the Term Loans of any Facility shall be made pro  rata according
to the respective outstanding principal amounts of the Term Loans of such
Facility then held by the relevant Term Lenders, and each prepayment by the
Borrower pursuant to Section 2.10 or 2.11 on account of principal of and
interest on the Term Loans shall be made pro  rata according to
the respective outstanding principal amounts of the Term Loans then held by the
Term Lenders.  The amount of each
principal prepayment of the Term Loans shall be applied to reduce the then
remaining installments of the Term Loans, pro  rata based upon the
then remaining principal amounts thereof; provided that any prepayments
in respect of the principal of and interest on the Term Loans made by the
Borrower pursuant to Section 2.10 shall be applied in forward
chronological order of scheduled installments in accordance with the then
outstanding amounts thereof.  Amounts
prepaid on account of the Term Loans may not be reborrowed.

 

(c)                                  Each
payment (including each prepayment) by the Borrower on account of principal of
and interest on the Revolving Loans shall be made pro  rata
according to the respective outstanding principal amounts of the Revolving
Loans then held by the Revolving Lenders.

 

(d)                                 All
payments (including prepayments) to be made by the Borrower hereunder, whether
on account of principal, interest, fees or otherwise, shall be made without
setoff or counterclaim and shall be made prior to 1:00 P.M., Charlotte time, on
the due date thereof to the Administrative Agent, for the account of the
Lenders, at the Funding Office, in Dollars and in immediately available
funds.  The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received.  If any payment hereunder
(other than payments on the Eurodollar Loans) becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next
succeeding Business Day.  If any payment
on a Eurodollar Loan becomes due and payable on a day other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day
unless the result of such extension would be to extend such payment into
another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.  In
the case of any extension of any payment of principal pursuant to the preceding
two sentences, interest thereon shall be payable at the then applicable rate
during such extension.

 

(e)                                  Unless
the Administrative Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make the amount that would
constitute its share of such borrowing available to the Administrative Agent,
the Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount.  If such amount is not made
available to the Administrative Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Administrative Agent, on demand,
such amount with interest thereon, at a rate equal to the greater of (i) the
Federal Funds Effective Rate and (ii) a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation, for
the

 

34

 

period until
such Lender makes such amount immediately available to the Administrative
Agent.  A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this paragraph shall be conclusive in the absence of manifest error.  If such Lender’s share of such borrowing is
not made available to the Administrative Agent by such Lender within three
Business Days after such Borrowing Date, the Administrative Agent shall also be
entitled to recover such amount with interest thereon at the rate per annum
applicable to ABR Loans under the relevant Facility, on demand, from the
Borrower.

 

(f)                                    Unless
the Administrative Agent shall have been notified in writing by the Borrower
prior to the date of any payment due to be made by the Borrower hereunder that
the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro  rata
shares of a corresponding amount.  If
such payment is not made to the Administrative Agent by the Borrower within
three Business Days after such due date, the Administrative Agent shall be
entitled to recover, on demand, from each Lender to which any amount which was
made available pursuant to the preceding sentence, such amount with interest
thereon at the rate per annum equal to the daily average Federal Funds
Effective Rate.  Nothing herein shall be
deemed to limit the rights of the Administrative Agent or any Lender against
the Borrower.

 

2.18                           Requirements of Law.(a)  If the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the Original Closing Date:

 

(i)                                     shall
subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, any Letter of Credit, any Application or any Eurodollar Loan made by
it, or change the basis of taxation of payments to such Lender in respect
thereof (except for Non-Excluded Taxes covered by Section 2.19 and changes
in the rate of tax on the overall net income of such Lender);

 

(ii)                                  shall
impose, modify or hold applicable any reserve, special deposit, compulsory loan
or similar requirement against assets held by, deposits or other liabilities in
or for the account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender that is not otherwise
included in the determination of the Eurodollar Rate; or

 

(iii)                               shall
impose on such Lender any other condition;

 

and the result of any of the foregoing is to
increase the cost to such Lender, by an amount that such Lender deems to be
material, of making, converting into, continuing or maintaining Eurodollar
Loans or issuing or participating in Letters of Credit, or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, the Borrower
shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable.  If any Lender becomes
entitled to claim any additional amounts pursuant to this paragraph, it shall
promptly notify the Borrower (with a copy to the Administrative Agent) of the
event by reason of which it has become so entitled.

 

(b)                                 If
any Lender shall have determined that the adoption of or any change in any
Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive

 

35

 

regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the Original Closing Date shall have the effect of
reducing the rate of return on such Lender’s or such corporation’s capital as a
consequence of its obligations hereunder or under or in respect of any Letter
of Credit to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender’s or such corporation’s policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the Borrower (with a copy to
the Administrative Agent) of a written request therefor, the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such corporation for such reduction.

 

(c)                                  A
certificate as to any additional amounts payable pursuant to this
Section submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest
error.  Notwithstanding anything to the
contrary in this Section, the Borrower shall not be required to compensate a
Lender pursuant to this Section for any amounts incurred more than six
months prior to the date that such Lender notifies the Borrower of such
Lender’s intention to claim compensation therefor; provided that, if the
circumstances giving rise to such claim have a retroactive effect, then such
six-month period shall be extended to include the period of such retroactive
effect.  The obligations of the Borrower
pursuant to this Section shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.

 

2.19                           Taxes.(a)  All payments made by the Borrower
under this Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes, branch profits and similar
franchise taxes, imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than
any such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document).  If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded
Taxes”) or Other Taxes are required to be withheld from any amounts payable
to the Administrative Agent or any Lender hereunder, the amounts so payable to
the Administrative Agent or such Lender shall be increased to the extent
necessary to yield to the Administrative Agent or such Lender (after payment of
all Non-Excluded Taxes and Other Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement, provided,
however, that the Borrower shall not be required to increase any such
amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that
are attributable to such Lender’s failure to comply with the requirements of
paragraph (d) or (e) of this Section or (ii) that are United States
withholding taxes imposed on amounts payable to such Lender at the time such
Lender becomes a party to this Agreement (or, in the case of any Participant,
on or before the date such Participant purchases the related participation),
except to the extent that such Lender’s assignor (if any) was entitled, at the
time of assignment, to receive additional amounts from the Borrower with
respect to such Non-Excluded Taxes pursuant to this paragraph.

 

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

 

(c)                                  Whenever
any Non-Excluded Taxes or Other Taxes are payable by the Borrower, the Borrower
shall promptly send to the Administrative Agent for its own account or for the
account of the relevant Lender, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment
thereof.  If the Borrower fails to pay
any Non-Excluded Taxes or Other

 

36

 

Taxes when due
to the appropriate taxing authority or fails to remit to the Administrative
Agent the required receipts or other required documentary evidence, the
Borrower shall indemnify the Administrative Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure.

 

(d)                                 Each
Lender (or Transferee) that is not a “U.S. Person” as defined in
Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver
to the Borrower and the Administrative Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest”, a statement substantially in the form of
Exhibit G and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan
Documents.  Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation).  In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered
by such Non-U.S. Lender.  Each Non-U.S.
Lender shall promptly notify the Borrower at any time it determines that it is
no longer in a position to provide any previously delivered certificate to the
Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). 
Notwithstanding any other provision of this paragraph, a Non-U.S. Lender
shall not be required to deliver any form pursuant to this paragraph that such
Non-U.S. Lender is not legally able to deliver.

 

(e)                                  A
Lender that is entitled to an exemption from or reduction of non-U.S.
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 or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender
is legally entitled to complete, execute and deliver such documentation and in
such Lender’s judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.

 

(f)                                    If the Administrative Agent or any Lender
determines, in its sole discretion, that it has received a refund of any
Non-Excluded 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 2.19, it shall pay over such refund to the
Borrower (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower under this Section 2.19 with respect to the
Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender 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 or such Lender, 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 or
such Lender in the event the Administrative Agent or such Lender is required to
repay such refund to such Governmental Authority. This paragraph shall not be
construed to require the Administrative Agent or any Lender to make available
its tax returns (or any other information relating to its taxes which it deems
confidential) to the Borrower or any other Person.

 

(g)                                 The
agreements in this Section shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.

 

37

 

2.20                           Indemnity.The Borrower agrees to indemnify each
Lender for, and to hold each Lender harmless from, any loss or expense that
such Lender may sustain or incur as a consequence of (a) default by the
Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after the Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (b) default by the Borrower
in making any prepayment of or conversion from Eurodollar Loans after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day that
is not the last day of an Interest Period with respect thereto.  Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest that would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of such Interest Period (or, in the case of
a failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein (excluding, however, the Applicable
Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) that would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market.  A certificate as to any amounts payable pursuant to this Section submitted
to the Borrower by any Lender shall be conclusive in the absence of manifest
error.  This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.

 

2.21                           Change of Lending Office.Each Lender
agrees that, upon the occurrence of any event giving rise to the operation of
Section 2.18 or 2.19(a) with respect to such Lender, it will, if requested
by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any
Loans affected by such event with the object of avoiding the consequences of
such event; provided, that such designation is made on terms that, in
the sole judgment of such Lender, cause such Lender and its lending office(s)
to suffer no economic, legal or regulatory disadvantage, and provided, further,
that nothing in this Section shall affect or postpone any of the
obligations of the Borrower or the rights of any Lender pursuant to
Section 2.18 or 2.19(a).

 

2.22                           Replacement of Lenders.The Borrower
shall be permitted to replace any Lender that (a) requests reimbursement for
amounts owing pursuant to Section 2.18 or 2.19(a) or (b) is a Defaulting
Lender, with a replacement financial institution; provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to any such replacement, such Lender shall have taken no action
under Section 2.21 so as to eliminate the continued need for payment of
amounts owing pursuant to Section 2.18 or 2.19(a), (iv) the replacement
financial institution shall purchase, at par, all Loans and other amounts owing
to such replaced Lender on or prior to the date of replacement, (v) the Borrower
shall be liable to such replaced Lender under Section 2.20 if any
Eurodollar Loan owing to such replaced Lender shall be purchased other than on
the last day of the Interest Period relating thereto, (vi) the replacement
financial institution, if not already a Lender, shall be reasonably
satisfactory to the Administrative Agent, (vii) the replaced Lender shall be
obligated to make such replacement in accordance with the provisions of
Section 10.6 (provided that the Borrower shall be obligated to pay
the registration and processing fee referred to therein), (viii) until such
time as such replacement shall be consummated, the Borrower shall pay all
additional amounts (if any) required pursuant to Section 2.18 or 2.19(a),
as the case may be, and (ix) any such replacement shall not be deemed to
be a waiver of any rights that the Borrower, the Administrative Agent or any
other Lender shall have against the replaced Lender.

 

38

 

SECTION 3.  LETTERS
OF CREDIT

 

3.1                                 L/C Commitment.(a)  Subject to the
terms and conditions hereof, the Issuing Lender, in reliance on the agreements
of the other Revolving Lenders set forth in Section 3.4(a), agrees to
issue letters of credit (“Letters of Credit”) for the account of the
Borrower on any Business Day during the Revolving Commitment Period in such
form as may be approved from time to time by the Issuing Lender; provided
that the Issuing Lender shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (i) the L/C Obligations would exceed
the L/C Commitment or (ii) the aggregate amount of the Available Revolving
Commitments would be less than zero. 
Each Letter of Credit shall (A) be denominated in Dollars and (B) expire
no later than the earlier of (x) the first anniversary of its date of issuance
and (y) the date that is five Business Days prior to the Revolving Termination
Date, provided that any Letter of Credit with a one-year term may
provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the date referred to in clause (y) above).  The Letters of Credit outstanding on the
Amendment Effective Date under the Existing Credit Agreement shall be deemed to
be Letters of Credit for all purposes of this Agreement and the other Loan
Documents.

 

(b)                                 The
Issuing Lender shall not at any time be obligated to issue any Letter of Credit
if such issuance would conflict with, or cause the Issuing Lender or any L/C
Participant to exceed any limits imposed by, any applicable Requirement of Law.

 

3.2                                 Procedure for Issuance of Letter of
Credit.The Borrower may from time to time request that the Issuing
Lender issue a Letter of Credit by delivering to the Issuing Lender at its
address for notices specified herein an Application therefor, completed to the
satisfaction of the Issuing Lender, and such other certificates, documents and
other papers and information as the Issuing Lender may request.  Upon receipt of any Application, the Issuing
Lender will process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Lender be required to
issue any Letter of Credit earlier than three Business Days after its receipt
of the Application therefor and all such other certificates, documents and
other papers and information relating thereto) by issuing the original of such
Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by
the Issuing Lender and the Borrower. 
The Issuing Lender shall furnish a copy of such Letter of Credit to the
Borrower promptly following the issuance thereof.  The Issuing Lender shall promptly furnish to the Administrative
Agent, which shall in turn promptly furnish to the Lenders, notice of the
issuance of each Letter of Credit (including the amount thereof).

 

3.3                                 Fees and Other Charges.(a)  The
Borrower will pay a fee on all outstanding Letters of Credit at a per annum
rate equal to the Applicable Margin then in effect with respect to Eurodollar
Loans under the Revolving Facility, shared ratably among the Revolving Lenders
and payable quarterly in arrears on each Fee Payment Date after the issuance
date.  In addition, if requested by the
Issuing Lender, the Borrower shall pay to the Issuing Lender for its own
account a fronting fee not to exceed 1/4 of one percent per annum on the
undrawn and unexpired amount of each Letter of Credit, payable quarterly in
arrears on each Fee Payment Date after the issuance date.

 

(b)                                 In
addition to the foregoing fees, the Borrower shall pay or reimburse the Issuing
Lender for such normal and customary costs and expenses as are incurred or
charged by the Issuing Lender in issuing, negotiating, effecting payment under,
amending or otherwise administering any Letter of Credit.

 

39

 

3.4                                 L/C Participations.(a)  The
Issuing Lender irrevocably agrees to grant and hereby grants to each L/C
Participant, and, to induce the Issuing Lender to issue Letters of Credit, each
L/C Participant irrevocably agrees to accept and purchase and hereby accepts
and purchases from the Issuing Lender, on the terms and conditions set forth
below, for such L/C Participant’s own account and risk an undivided interest
equal to such L/C Participant’s Revolving Percentage in the Issuing Lender’s
obligations and rights under and in respect of each Letter of Credit and the
amount of each draft paid by the Issuing Lender thereunder.  Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Lender that, if a draft is paid under any
Letter of Credit for which the Issuing Lender is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C Participant
shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for
notices specified herein an amount equal to such L/C Participant’s Revolving
Percentage of the amount of such draft, or any part thereof, that is not so
reimbursed.

 

(b)                                 If
any amount required to be paid by any L/C Participant to the Issuing Lender
pursuant to Section 3.4(a) in respect of any unreimbursed portion of any
payment made by the Issuing Lender under any Letter of Credit is paid to the
Issuing Lender within three Business Days after the date such payment is due,
such L/C Participant shall pay to the Issuing Lender on demand an amount equal
to the product of (i) such amount, times (ii) the daily average Federal Funds
Effective Rate during the period from and including the date such payment is
required to the date on which such payment is immediately available to the
Issuing Lender, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360.  If any such amount required to be paid by
any L/C Participant pursuant to Section 3.4(a) is not made available to
the Issuing Lender by such L/C Participant within three Business Days after the
date such payment is due, the Issuing Lender shall be entitled to recover from
such L/C Participant, on demand, such amount with interest thereon calculated
from such due date at the rate per annum applicable to ABR Loans.  A certificate of the Issuing Lender submitted
to any L/C Participant with respect to any amounts owing under this
Section shall be conclusive in the absence of manifest error.

 

(c)                                  Whenever,
at any time after the Issuing Lender has made payment under any Letter of
Credit and has received from any L/C Participant its pro  rata
share of such payment in accordance with Section 3.4(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Lender), or any payment of interest on account thereof, the
Issuing Lender will distribute to such L/C Participant its pro  rata
share thereof; provided, however, that in the event that any such
payment received by the Issuing Lender shall be required to be returned by the
Issuing Lender, such L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing Lender to it.

 

3.5                                 Reimbursement Obligation of the
Borrower.If any draft is paid under any Letter of Credit, the
Borrower shall reimburse the Issuing Lender for the amount of (a) the draft so
paid and (b) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Lender in connection with such payment, not later than 1:00 p.m.,
Charlotte time, on (i) the Business Day following the date that the Borrower
receives notice of such draft, if such notice is received on such day prior to
10:00 A.M., Charlotte time, or (ii) if clause (i) above does not apply, the
second Business Day immediately following the day that the Borrower receives
such notice.  Each such payment shall be
made to the Issuing Lender at its address for notices referred to herein in
Dollars and in immediately available funds. 
Interest shall be payable on any such amounts from the date on which the
relevant draft is paid until payment in full at the rate set forth in (x) until
the Business Day next succeeding the date of the relevant notice,
Section 2.14(b) and (y) thereafter, Section 2.14(c).

 

40

 

3.6                                 Obligations Absolute.The Borrower’s
obligations under this Section 3 shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment that the Borrower may have or have had against the Issuing
Lender, any beneficiary of a Letter of Credit or any other Person.  The Borrower also agrees with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrower’s
Reimbursement Obligations under Section 3.5 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee.  The Issuing Lender shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions found by a final decision of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Issuing Lender. 
The Borrower agrees that any action taken or omitted by the Issuing
Lender under or in connection with any Letter of Credit or the related drafts
or documents, if done in the absence of gross negligence or willful misconduct
and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Lender to the Borrower.

 

3.7                                 Letter of Credit Payments.If any
draft shall be presented for payment under any Letter of Credit, the Issuing
Lender shall promptly notify the Borrower of the date and amount thereof.  The responsibility of the Issuing Lender to
the Borrower in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.

 

3.8                                 Applications.To the extent that any
provision of any Application related to any Letter of Credit is inconsistent
with the provisions of this Section 3, the provisions of this
Section 3 shall apply.

 

SECTION 4.  REPRESENTATIONS
AND WARRANTIES

 

To induce the Administrative Agent and the
Lenders to enter into this Agreement and to make the Loans and issue or
participate in the Letters of Credit, from and after the Amendment Effective
Date, Holdings and the Borrower hereby jointly and severally represent and
warrant to the Administrative Agent and each Lender (provided that the
representations and warranties set forth in Section 4.28 shall be made
solely for the benefit of the Administrative Agent and the Revolving Lenders)
that:

 

4.1                                 Financial Condition.

 

(a)                                  (i)  The audited consolidated balance sheet of
Holdings as at December 31, 2002, and the related consolidated statements
of income and of cash flows for the fiscal year ended on such date, reported on
by and accompanied by an unqualified report from PricewaterhouseCoopers LLP,
present fairly the consolidated financial condition of Holdings as at such
date, and the consolidated results of its operations and its consolidated cash
flows for the fiscal year then ended, (ii) the unaudited consolidated balance
sheet of Holdings as at March 31, 2003, and the related unaudited
consolidated statements of income and cash flows for the three-month period
ended on such date, present fairly the consolidated financial condition of
Holdings as at such date, and the consolidated results of its operations and
its consolidated cash flows for the three-month period then ended (subject to
normal year-end audit adjustments) and (iii) all such financial statements,
including any related schedules and notes thereto,

 

41

 

have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by the aforementioned firm of accountants and
disclosed therein and, in the case of clause (ii), except for the absence of
footnotes).  As of the Amendment
Effective Date, no Group Member has any material Guarantee Obligations,
contingent liabilities and liabilities for taxes, or any long-term leases or
unusual forward or long-term commitments, including any interest rate or
foreign currency swap or exchange transaction or other obligation in respect of
derivatives, that are not reflected in the financial statements referred to in
this paragraph, any financial statements for any periods after March 31,
2003 delivered prior to the Amendment Effective Date or the Confidential Information
Memorandum dated June 26, 2003 relating to the syndication of the Tranche
B Term Loans (it being understood that “material” shall be construed in the
context of all Group Members taken as a whole).  During the period from December 31, 2002 to and including the
date hereof, there has been no Disposition by any Group Member of any material
part of the business or property of the Group Members taken as a whole.

 

4.2                                 No Change.Since December 31, 2002, there has
been no development or event that has had or is reasonably expected to have a
Material Adverse Effect.

 

4.3                                 Existence; Compliance with Law.Each
Group Member (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has the power and
authority, and the legal right, to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification except to the extent that the failure to be so qualified could
not reasonably be expected to have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law (including, without limitation,
Certificate of Need Regulations and any requirement to timely file reports,
data and other information with any relevant Governmental Authority) except to
the extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

4.4                                 Power; Authorization; Enforceable
Obligations.Each Loan Party has the power and authority to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to obtain extensions of credit hereunder.  Each Loan Party has taken all necessary
organizational action to authorize the execution, delivery and performance of
the Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the extensions of credit on the terms and conditions of this
Agreement.  No material consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
extensions of credit hereunder or with the execution, delivery, performance,
validity or enforceability of this Agreement or any of the Loan Documents,
except (i) consents, authorizations, filings and notices described in
Schedule 4.4, which consents, authorizations, filings and notices have
been obtained or made and are in full force and effect, and (ii) the filings
referred to in Section 4.19.  Each
Loan Document has been duly executed and delivered on behalf of each Loan Party
party thereto.  This Agreement
constitutes, and each other Loan Document upon execution will constitute, a
legal, valid and binding obligation of each Loan Party party thereto,
enforceable against each such Loan Party in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

4.5                                 No Legal Bar.The execution, delivery and
performance of this Agreement and the other Loan Documents, the issuance of
Letters of Credit, the borrowings hereunder and the use of the proceeds thereof
will not violate any Health Care Permit, Reimbursement Approval, Requirement of
Law or any Contractual Obligation of any Group Member in any material respect
and will not result in, or require, the creation or imposition of any Lien on
any of their respective properties or revenues pursuant

 

42

 

to any Requirement of Law or any such Contractual
Obligation (other than the Liens created by the Security Documents).  No Requirement of Law or Contractual
Obligation applicable to the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.

 

4.6                                 Litigation.Except as set forth in
Schedule 4.6, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
Holdings or the Borrower, threatened by or against any Group Member or against
any of their respective properties or revenues (a) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby, or
(b) that could reasonably be expected to have a Material Adverse Effect.

 

4.7                                 No Default.No Group Member is in default under or
with respect to any of its Contractual Obligations in any respect that could
reasonably be expected to have a Material Adverse Effect.  As of the Amendment Effective Date, no
Default or Event of Default (as each is defined in the Existing Credit
Agreement) has occurred and is continuing under the Existing Credit Agreement.  No Default or Event of Default has occurred
and is continuing.

 

4.8                                 Ownership of Property; Liens.Each
Group Member has title in fee simple to, or a valid leasehold interest in, all
its material real property, and good title to, or a valid leasehold interest
in, all its other material property, in each case, except for minor defects
which do not materially interfere with the conduct of the business of such
Group Member, and none of such property is subject to any Lien except as
permitted by Section 7.3.

 

4.9                                 Intellectual Property.Except as, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect,
or as set forth on Schedule 4.9, (a) each Group Member owns, or is
licensed or otherwise has the right to use, all Intellectual Property necessary
for the conduct of its business as currently conducted, (b) no material claim
has been asserted and is pending by any Person challenging or questioning the
use of any Intellectual Property or the validity or effectiveness of any
Intellectual Property, nor does Holdings or the Borrower know of any valid
basis for any such claim, and (c) the use of Intellectual Property by each
Group Member does not infringe on the rights of any Person in any material
respect.

 

4.10                           Taxes.Each Group Member has filed or caused to be
filed all Federal, material state and other material tax returns that are
required (which, for the avoidance of doubt, does not include tax returns for
which a filing extension has been received) to be filed and has paid all taxes
shown to be due and payable on said returns or on any material assessments made
against it or any of its property and all other material taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the relevant Group
Member); no tax Lien has been filed, and, to the knowledge of Holdings and the
Borrower, no claim is being asserted, with respect to any such tax, fee or
other charge.

 

4.11                           Federal Regulations.No part of the
proceeds of any Loans, and no other extensions of credit hereunder, will be
used for “buying” or “carrying” any “margin stock” within the respective meanings
of each of the quoted terms under Regulation U as now and from time to time
hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board.  If requested
by any Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable,
referred to in Regulation U.

 

43

 

4.12                           Labor Matters.Except as, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect:  (a) there are no strikes or other labor
disputes against any Group Member pending or, to the knowledge of Holdings or
the Borrower, threatened; (b) hours worked by and payment made to employees of
each Group Member have not been in violation of the Fair Labor Standards Act or
any other applicable Requirement of Law dealing with such matters; and (c) all
payments due from any Group Member on account of employee health and welfare
insurance have been paid or accrued as a liability on the books of the relevant
Group Member.

 

4.13                           ERISA.Except as could not reasonably be expected
to have a Material Adverse Effect:  (a)
neither a Reportable Event nor an “accumulated funding deficiency” (within the
meaning of Section 412 of the Code or Section 302 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code, (b) no termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period,
(c) the present value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits by a material amount, (d) neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result
in liability under ERISA, and neither the Borrower nor any Commonly Controlled
Entity would become subject to any liability under ERISA if the Borrower or any
such Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made, and (e) no such Multiemployer
Plan is in Reorganization or Insolvent.

 

4.14                           Investment Company Act; Other
Regulations.No Loan Party is an “investment company”, or a company
“controlled” by an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended.  No
Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.

 

4.15                           Subsidiaries.Except as disclosed to the
Administrative Agent by the Borrower in writing from time to time after the
Amendment Effective Date, (a) Schedule 4.15 sets forth the name and
jurisdiction of incorporation of each Subsidiary and, as to each such
Subsidiary, the percentage of each class of Capital Stock owned by any Loan
Party and (b) there are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees or directors and directors’ qualifying shares) of any nature relating
to any Capital Stock of the Borrower or any Subsidiary, except as created by
the Loan Documents.

 

4.16                           Use of Proceeds.The proceeds of the Revolving
Loans, Swingline Loans, the Letters of Credit and of any Incremental Term Loan
shall be used to finance the working capital needs and general corporate
purposes (including certain acquisitions permitted pursuant to Section 7.8
of this Agreement) of the Borrower and its Subsidiaries in the ordinary course
of business.  The proceeds of the
Tranche B Term Loans received on the Amendment Effective Date shall be used to
repay outstanding Revolving Loans under the Existing Credit Agreement (but not
to reduce the Revolving Commitments), to pay fees and expenses related to the
Tranche B Term Loans and to the extent there are remaining proceeds, for
general corporate purposes.

 

4.17                           Environmental Matters.Except as, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect:

 

44

 

(a)                                  the
facilities and properties owned, leased or operated by any Group Member (the “Properties”)
do not contain, and, to the knowledge of Holdings and the Borrower, have not
previously contained, any Materials of Environmental Concern in amounts or
concentrations or under circumstances that constitute or constituted a
violation of any Environmental Law;

 

(b)                                 no
Group Member has received or is aware of any written notice of violation,
alleged violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Properties or the business operated by any Group Member (the “Business”),
nor does Holdings or the Borrower have knowledge or reason to believe that any
such notice will be received or is being threatened;

 

(c)                                  Materials
of Environmental Concern have not been transported or disposed of from the
Properties in violation of, or in a manner or to a location that could
reasonably be expected to give rise to liability under, any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated, stored
or disposed of at, on or under any of the Properties in violation of, or in a
manner that could reasonably be expected to give rise to liability under, any
applicable Environmental Law;

 

(d)                                 no
judicial proceeding or governmental or administrative action is pending or, to
the knowledge of Holdings and the Borrower, threatened, under any Environmental
Law to which any Group Member is or, to the knowledge of Holdings and the
Borrower, will be named as a party with respect to the Properties or the
Business, nor are there, to the knowledge of Holdings and the Borrower, any consent
decrees or other decrees, consent orders, administrative orders or other orders
outstanding under any Environmental Law with respect to the Properties or the
Business;

 

(e)                                  there
has been no release or threat of release of Materials of Environmental Concern
at or from the Properties, or arising from or related to the operations of any
Group Member in connection with the Properties or otherwise in connection with
the Business, in violation of or in amounts or in a manner that could
reasonably be expected to give rise to liability under Environmental Laws;

 

(f)                                    the
Properties and all operations at the Properties are in compliance, and have in
the last five years been in compliance, with all applicable Environmental Laws;
and

 

(g)                                 no
Group Member has contractually assumed any liability of any other Person under
Environmental Laws.

 

This Section 4.17 contains the sole
representations and warranties of Holdings and the Borrower concerning
environmental matters.

 

4.18                           Accuracy of Information, etc.The
information (other than projections and pro  forma financial
information) contained in this Agreement, any other Loan Document or any other
document, certificate or written statement furnished by or on behalf of any
Loan Party to the Administrative Agent or the Lenders, or any of them, as
modified and supplemented by other information so furnished, taken as a whole,
did not contain as of the date so furnished any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
herein or therein not materially misleading in light of the circumstances under
which the statements in such information were made.  The projections and pro  forma financial information
contained in the materials referenced above are based upon good faith estimates
and assumptions believed by management of the Borrower to be reasonable at the
time made, it being recognized by the Lenders that such financial information
as it relates to future events is not to be viewed as fact and that actual
results during the period or periods covered by such financial information may
differ from the projected results set forth therein by a material

 

45

 

amount.  There
is no fact known to any Loan Party (including, without limitation, proposed
laws or rules in respect of healthcare regulations that are generally
considered to be reasonably likely to be passed or adopted) that could
reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Administrative Agent
and the Lenders for use in connection with the transactions contemplated hereby
and by the other Loan Documents.

 

4.19                           Security Documents.(a)  The
Guarantee and Collateral Agreement is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and proceeds
thereof (except as expressly provided in the Guarantee and Collateral
Agreement).  In the case of the Pledged
Stock described in the Guarantee and Collateral Agreement, stock certificates
representing such Pledged Stock having been delivered to the Administrative
Agent, and in the case of the other Collateral described in the Guarantee and
Collateral Agreement, financing statements and other filings specified on
Schedule 4.19(a) in appropriate form having been filed in the offices
specified on Schedule 4.19(a), the Guarantee and Collateral Agreement
constitutes a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in such Collateral and the proceeds
thereof, as security for the Obligations (as defined in the Guarantee and
Collateral Agreement), in each case prior and superior in right to any other
Person (except, in the case of Collateral other than Pledged Stock, Liens
permitted by Section 7.3).

 

(b)                                 Each
of the Mortgages is effective to create in favor of the Administrative Agent,
for the benefit of the Lenders, a legal, valid and enforceable Lien on the
Mortgaged Properties described therein and proceeds thereof, and when the
Mortgages are filed in the offices specified on Schedule 4.19(b), each
such Mortgage shall constitute a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in the Mortgaged
Properties and the proceeds thereof, as security for the Obligations (as
defined in the relevant Mortgage), in each case prior and superior in right to
any other Person.  Schedule 1.1B
lists, as of the Amendment Effective Date, each parcel of owned real property
located in the United States and held by the Borrower or any of its Subsidiaries
that has a value, in the reasonable opinion of the Borrower, in excess of
$300,000.

 

4.20                           Solvency.The Loan Parties, taken as a whole,
after giving effect to the incurrence of all Indebtedness and obligations being
incurred in connection herewith are and will be and will continue to be, Solvent.

 

4.21                           Senior Indebtedness.The Obligations
constitute “Senior Indebtedness” and “Designated Senior Indebtedness” of the
Borrower under and as defined in the Senior Subordinated Note Indenture.  The obligations of each Subsidiary Guarantor
under the Guarantee and Collateral Agreement constitute “Guarantor Senior
Indebtedness” of such Subsidiary Guarantor under and as defined in the Senior
Subordinated Note Indenture.

 

4.22                           Regulation H.No Mortgage encumbers improved
real property that is located in an area that has been identified by the
Secretary of Housing and Urban Development as an area having special flood
hazards and in which flood insurance has been made available under the National
Flood Insurance Act of 1968.

 

4.23                           Certain Documents.The Borrower has
delivered to the Administrative Agent a complete and correct copy of the Senior
Subordinated Note Indenture including any amendments, supplements or
modifications with respect thereto.

 

4.24                           Inspections and Investigations.Except
as could not reasonably be expected to have a Material Adverse Effect, (a)
neither the Borrower’s nor any Subsidiary’s right to receive

 

46

 

reimbursements pursuant to any government program or
private program has been terminated or otherwise adversely affected as a result
of any investigation or action, whether by any Governmental Authority or other
third party; (b) neither the Borrower nor any Subsidiary has, during the past
three years, been the subject of any inspection, investigation, survey, audit,
monitoring, or other form of review by any Governmental Authority based upon
any alleged improper activity on the part of such Person, nor has the Borrower
or any Subsidiary received any notice of deficiency during the past three years
in connection with the operations of its business; (c) there are not any
outstanding deficiencies or work orders of any Governmental Authority having
jurisdiction over the Borrower or any Subsidiary, or requiring conformity to
any applicable agreement with any Governmental Authority or Requirement of Law;
and (d) there is not any notice of any claim, requirement, or demand of any
licensing or certifying agency or other third party supervising or having
authority over the Borrower or any Subsidiary to rework or redesign any part
thereof or to provide additional furniture, fixtures, equipment, appliances, or
inventory so as to conform to or comply with any existing Requirement of Law.

 

4.25                           Medicare Participation.Except as
could not reasonably be expected to have a Material Adverse Effect, the
Borrower and its Subsidiaries are qualified for participation in the Medicare
and Medicaid programs, have current and valid provider contracts with the
Medicare and Medicaid programs, are in compliance with all conditions of
participation in such programs, and have received all approvals or
qualifications necessary for reimbursement.

 

4.26                           Fraud and Abuse.To the knowledge of
Holdings and the Borrower, no Group Member has engaged in any material
activities that are prohibited under federal Medicare and Medicaid statutes,
including, but not limited to, 42 U.S.C. § § 1320a-7, 1320a-7a,
1320a-7b, 1395nn and 1396b, or 31 U.S.C. § § 3729-3733, the federal
statutes regulating CHAMPUS, or the regulations promulgated thereunder pursuant
to such statutes, or any similar federal, state, or local statutes or
regulations promulgated pursuant to such statutes, including, but not limited
to the following:

 

(a)                                  knowingly
and willfully making or causing to be made a false statement or representation
of a material fact in any application for any benefit or payment;

 

(b)                                 knowingly
and willfully making or causing to be made any false statement or
representation of a material fact for use in determining rights to any benefit
or payment;

 

(c)                                  failing
to disclose knowledge by a claimant of the occurrence of any event affecting
the initial or continued right to any benefit or payment on its own behalf or
on behalf of another, with intent to secure such benefit or payment
fraudulently; and

 

(d)                                 knowingly
and willfully soliciting or receiving any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind, or offering to pay such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare, Medicaid, or other applicable third party payors, or (ii) in return
for purchasing, leasing, or ordering or arranging for or recommending the
purchasing, leasing or order of any good, facility, service, or item for which
payment may be made in whole or in part by Medicare, Medicaid, or other
applicable third party payors.

 

4.27                           HIPAA Compliance.To the extent that and
for so long as (a) any Group Member is a “covered entity” within the meaning of
HIPAA or (b) any Group Member and/or its business and operations are subject to
or covered by the so-called “Administrative Simplification” provisions of
HIPAA, except as could not reasonably be expected to have a Material Adverse
Effect, such Group Member, (i) has undertaken all necessary surveys, audits,
inventories, reviews, analyses and/or

 

47

 

 

assessments (including any necessary risk assessments) of all areas of
its business and operations required by HIPAA; (ii) has developed a detailed
plan and time line for becoming HIPAA Compliant (as defined below) (a “HIPAA
Compliance Plan”); and (iii) has implemented those provisions of such HIPAA
Compliance Plan in all material respects necessary to ensure that such Group
Member is or becomes HIPAA Compliant.  
For purposes hereof, “HIPAA Compliant” shall mean that such Group Member
(x) is or will be in material 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 (each such date, a “HIPAA Compliance Date”) and (y) is not,
as of any date following any such HIPAA Compliance Date, the subject of any
civil or criminal penalty, process, claim, action or proceeding, or any
administrative or other regulatory review, survey, process or proceeding (other
than routine surveys or reviews conducted by any government health plan or
other accreditation entity).

 

4.28                           Prior Representations and Warranties.As
of the Amendment Effective Date, the representations and warranties set forth
in Sections 4.1, 4.2, 4.4, 4.18, 4.20, 4.23 and 4.24 of the Existing Credit
Agreement are true and correct in all material respects, as if made on and as
of such date.  

 

SECTION 5.  CONDITIONS PRECEDENT

 

5.1                                 Conditions to Effectiveness of Amended
and Restated Credit Agreement.In addition to the conditions set
forth in Section 5.2, each of the effectiveness of this Agreement to amend
and restate the Existing Credit Agreement and the agreement of each
Tranche B Term Lender to make the Tranche B Term Loan requested to be made
by it is subject to the prior or concurrent satisfaction, or waiver of the
following conditions precedent:

 

(a)                                  Credit Agreement.  The Administrative Agent shall have received
(i) this Agreement, executed and delivered by the Agents, Holdings, the
Borrower, all Existing Lenders and all Tranche B Term Lenders and (ii) an
acknowledgment and consent, executed and delivered by each Subsidiary
Guarantor, acknowledging receipt of this Agreement, consenting to the
transactions contemplated hereby and confirming that its obligations under each
Loan Document to which it is a party shall remain in full force and effect.

 

(b)                                 Financial
Statements; Projections.  The
Lenders shall have received, or shall have been provided or offered access to,
(i) unaudited interim consolidated financial statements of Holdings for each
quarterly period that has ended after the Original Closing Date and 45 or more
days prior to the Amendment Effective Date, and such financial statements and
the unaudited consolidated financial statements for the same period of the
prior fiscal year shall not reflect any material adverse change in the
consolidated financial condition of Holdings, as reflected in the financial
statements or projections previously furnished to the Lenders and (ii) recent
projections with respect to fiscal years 2003 through and including 2009 of the
Borrower and its Subsidiaries.

 

(c)                                  Approvals.  All material governmental and third party
approvals necessary in connection with the Tranche B Term Facility shall have
been obtained and be in full force and effect without any action being taken or
threatened by any competent authority that would restrain, prevent or otherwise
impose material adverse conditions on the financing contemplated hereby.

 

(d)                                 Fees.  The Lenders and the Administrative Agent
shall have received all fees required to be paid, and all expenses required to
be paid for which invoices have been presented (including the reasonable fees
and expenses of legal counsel), on or before the Amendment Effective Date.  All such amounts will be paid with proceeds
of Tranche B Term Loans made on 

 

48

 

the Amendment Effective Date and will be reflected in the funding
instructions given by the Borrower to the Administrative Agent on or before the
Amendment Effective Date.

 

(e)                                  Officer’s
Certificate; Closing Certificates. 
The Administrative Agent shall have received (i) a certificate of a
Responsible Officer of each of Holdings and the Borrower, dated the Amendment
Effective Date, substantially in the form of Exhibit C, with appropriate
insertions and attachments, (ii) a long form good standing certificate for each
Loan Party from its jurisdiction of incorporation, and (iii) a certificate of a
Responsible Officer of the Borrower, certifying that the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
will not violate the terms of any other instrument governing Indebtedness of
Holdings, the Borrower and its Subsidiaries (including, without limitation, the
Senior Subordinated Note Indenture), and accompanied by calculations in
reasonable detail evidencing compliance with the Senior Subordinated Note
Indenture.

 

(f)                                    Legal Opinion.  The Administrative Agent shall have received
an executed legal opinion of O’Melveny & Myers LLP, counsel to the Borrower
and the other Loan Parties, substantially in the form of Exhibit E.

 

(g)                                 Filings,
Registration and Recordings.  Each
document (including any Uniform Commercial Code financing statement) required
by the Security Documents or under law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Lenders (including
the Tranche B Term Lenders), a perfected Lien on the Collateral described
therein, prior and superior in right to any other Person (other than with
respect to Liens expressly permitted by Section 7.3), shall have been
filed, registered or recorded on or prior to the Amendment Effective Date or
any amendments thereto required in connection with the transactions
contemplated hereby shall have been delivered to the Administrative Agent in
proper form for filing, registration or recordation.

 

(h)                                 Solvency
Certificate.  The Administrative
Agent shall have received a solvency certificate of the Borrower, dated the
Amendment Effective Date, substantially in the form of Exhibit G.

 

(i)                                     Insurance.  The Administrative Agent shall have received
(and the Lenders shall have received final forms of) insurance certificates
satisfying the requirements of Section 6.5.

 

5.2                                 Conditions to Each Extension of
Credit.The agreement of each Lender to make any extension of credit
requested to be made by it on any date (including its initial extension of
credit) is subject to the satisfaction of the following conditions precedent:

 

(a)                                  Representations
and Warranties.  Each of the
representations and warranties made by any Loan Party in or pursuant to the
Loan Documents shall be true and correct in all material respects on and as of
such date as if made on and as of such date except to the extent such
representations and warranties expressly relate to an earlier date in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date.

 

(b)                                 No Default.  No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.

 

49

 

(c)                                  Other Documents.  In the case of any extension of credit made
on an Incremental Facility Closing Date, the Administrative Agent shall have
received such documents and information as it may reasonably request.

 

Each borrowing by and issuance of a Letter of Credit on behalf of the
Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date of such extension of credit that the conditions
contained in this Section 5.2 have been satisfied.

 

SECTION 6.  AFFIRMATIVE COVENANTS

 

From and after the Amendment Effective Date,
Holdings and the Borrower hereby jointly and severally agree that, so long as
any Commitments remain in effect, any Letter of Credit remains outstanding or
any Loan or other amount (other than any contingent or unliquidated obligations
or liabilities) is owing to any Lender or the Administrative Agent hereunder,
each of Holdings and the Borrower shall and shall cause each of its
Subsidiaries to:

 

6.1                                 Financial Statements.Furnish to the
Administrative Agent and each Lender:

 

(a)                                  as soon as available,
but in any event within 90 days after the end of each fiscal year of the
Borrower, a copy of the audited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such year and the related
audited consolidated statements of income and of cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, reported on without a “going concern” or like qualification or exception,
or qualification arising out of the scope of the audit, by
PricewaterhouseCoopers LLP, or other independent certified public accountants
of nationally recognized standing, reasonably satisfactory to the
Administrative Agent; and

 

(b)                                 as soon as available,
but in any event not later than 45 days after the end of each of the first
three quarterly periods of each fiscal year of the Borrower, the unaudited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at the end of such quarter and the related unaudited consolidated statements of
income and of cash flows for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth in each case in comparative form
the figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments and except for the absence of footnotes).

 

All such
financial statements shall be prepared in reasonable detail and in accordance
with GAAP (except, in the case of unaudited financial statements, for the
absence of footnotes) applied (except as approved by such accountants or
officer, as the case may be, and disclosed in reasonable detail therein)
consistently throughout the periods reflected therein and with prior periods.

 

6.2                                 Certificates; Other Information.Furnish
to the Administrative Agent and each Lender (or, in the case of clause (f), to
the relevant Lender):

 

(a)                                  concurrently with the
delivery of the financial statements referred to in Section 6.1(a), a
certificate of the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except as
specified in such certificate;

 

(b)                                 concurrently with the
delivery of any financial statements pursuant to Section 6.1, (i) a
certificate of a Responsible Officer stating that such Responsible Officer has
obtained no 

 

50

 

knowledge of any Default or Event of Default except as specified in
such certificate, (ii) a Compliance Certificate containing all information and
calculations necessary for determining compliance by the Borrower with the
provisions of Section 7.1, and (iii) to the extent not previously
disclosed to the Administrative Agent, a description of any change in the
jurisdiction of organization of any Loan Party;

 

(c)                                  as soon as available,
and in any event no later than 45 days after the end of each fiscal year of the
Borrower, a detailed consolidated budget for the following fiscal year prepared
on a quarterly basis (including a projected consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of the following fiscal year, the
related consolidated statements of projected cash flow, projected changes in
financial position and projected income and a description of the underlying
assumptions applicable thereto), and, as soon as available, significant revisions,
if any, of such budget and projections with respect to such fiscal year
(collectively, the “Projections”), which Projections shall in each case
be accompanied by a certificate of a Responsible Officer stating that such
Projections are based on estimates, information and assumptions believed to be
reasonable when made;

 

(d)                                 within five Business
Days after the same are sent, copies of all financial statements and reports
that Holdings or the Borrower sends to the holders of any class of its debt securities
or public equity securities and, within ten days after the same are filed,
copies of all financial statements and reports that Holdings or the Borrower
may make to, or file with, the SEC;

 

(e)                                  within five Business
Days (i) after obtaining knowledge thereof, the occurrence of any event that
would (with the giving of notice, the passage of time, or both) be a violation
of any Health Care Permit necessary for the lawful conduct of the business or
operations of any Group Member, including, without limitation, the ownership
and operation of its Health Care Facilities, (ii) after receipt thereof, any
notice of any violation of any Requirements of Law which would (with the giving
of notice, the passage of time, or both) cause any of the Health Care Permits referred
to in clause (i) to be modified, rescinded or revoked, (iii) after receipt
thereof, any notice, summons, citation or other proceeding seeking to adversely
modify in any material respect, revoke, or suspend any Medicare Provider
Agreement, Medicaid Provider Agreement, Medicare certification or Medicaid
certification applicable to any of the Health Care Facilities of any Group
Member, or (iv) after obtaining knowledge thereof, any revocation or
involuntary termination of any Medicare Provider Agreement, Medicaid Provider
Agreement, Medicare certification or Medicaid certification applicable to any
of the Health Care Facilities of any Group Member, in each case, which could
reasonably be expected to have a Material Adverse Effect;

 

(f)                                    promptly, such additional
financial and other information as any Lender may from time to time reasonably
request; and

 

(g)                                 any accountants’
management letters received by any Group Member.

 

6.3                                 Payment of Obligations.Pay, discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all its obligations of whatever nature, except where the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the relevant Group Member except to
the extent that failure to pay, discharge or otherwise satisfy such obligations
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.

 

51

 

6.4                                 Maintenance of Existence; Compliance.(a)  (i)  Preserve, renew and keep in full force and
effect its organizational existence and (ii) take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business (including, without limitation, all Health Care
Permits and Reimbursement Approvals reasonably necessary for the lawful conduct
of its business or operations where now conducted and as planned to be
conducted, including the ownership and operation of its Health Care Facilities,
pursuant to all Requirements of Law), except, in each case, as otherwise
permitted by Section 7.4 and except, in the case of clause (ii) above, to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; (b) ensure that all Health Care Facilities owned,
leased, managed or operated by any Group Member are entitled to participate in,
and receive payment under, the appropriate Medicare, Medicaid and related
reimbursement programs, and any similar state or local government-sponsored
program, to the extent any Group Member has decided to participate in any such
program, and to receive reimbursement from private and commercial payers and
health maintenance organizations to the extent applicable thereto, except where
a failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) comply with all Contractual Obligations and Requirements of Law
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

6.5                                 Maintenance of Property; Insurance.(a)  Keep
all property useful and necessary in its business in reasonable working order
and condition, ordinary wear and tear excepted, (b) if requested by the
Lenders, maintain with financially sound and reputable insurance companies key
man life insurance on certain officers of the Borrower and (c) maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business. All such insurance shall
(i) provide that no cancellation, material reduction in amount or material
change in coverage thereof shall be effective until at least 30 days after
receipt by the Administrative Agent of written notice thereof, (ii) name the
Administrative Agent as insured party or loss payee, and (iii) be reasonably
satisfactory in all other respects to the Administrative Agent.  The Borrower shall deliver to the
Administrative Agent and the Lenders a report of a reputable insurance broker
with respect to such insurance substantially concurrently with each delivery of
the Borrower’s financial statements referred to in Section 6.1(a) and such
supplemental reports with respect thereto as the Administrative Agent may from
time to time reasonably request.

 

6.6                                 Inspection of Property; Books and
Records; Discussions.(a) 
Keep proper books of records and account in which full, true and correct
entries in all material respects are made of all dealings and transactions in
relation to its business and activities and (b) upon reasonable prior notice,
permit representatives of any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired (so long as such
visits and inspections do not disrupt the business and operations of the Group
Members) and to discuss the business, operations, properties and financial and
other condition of the Group Members with officers and senior management of the
Group Members and with their independent certified public accountants  (and the
Borrower shall be provided the opportunity to participate in any discussions
with such independent certified public accountants).

 

6.7                                 Notices.Promptly give notice to the Administrative
Agent and each Lender of:

 

(a)                                  the occurrence of any
Default or Event of Default;

 

(b)                                 any (i) default or
event of default under any Contractual Obligation of any Group Member or (ii)
litigation, investigation or proceeding that may exist at any time between any

 

52

 

Group Member and any Governmental Authority, that in either case, could
reasonably be expected to have a Material Adverse Effect;

 

(c)                                  any litigation or
proceeding affecting any Group Member (i) in which the amount involved is
$1,000,000 or more and not covered by insurance, (ii) in which injunctive or
similar relief is sought or (iii) which relates to any Loan Document;

 

(d)                                 the following events,
as soon as practicable after a Responsible Officer knows or has reason to know
thereof:  (i) the occurrence of any
Reportable Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan
or any withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or the Borrower or any Commonly Controlled Entity
or any Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan; and

 

(e)                                  any development or
event that has had or could reasonably be expected to have a Material Adverse
Effect.

 

Each notice
pursuant to this Section 6.7 shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the relevant Group Member proposes to take with respect
thereto.

 

6.8                                 Environmental Laws.(a)  Except
as could not reasonably be expected to have a Material Adverse Effect, (i)
comply with, and ensure compliance by all tenants and subtenants, if any, with,
all applicable Environmental Laws, and (ii) obtain and comply with and maintain,
and ensure that all tenants and subtenants obtain and comply with and maintain,
any and all licenses, approvals, notifications, registrations or permits
required by applicable Environmental Laws.

 

(b)                                 Except
as could not reasonably be expected to have a Material Adverse Effect, conduct
and complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions required under Environmental Laws and
promptly comply with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws.

 

6.9                                 Additional Collateral, etc.(a)  With
respect to any property acquired after the Amendment Effective Date by any
Group Member (other than (x) any property described in paragraph (b), (c), (d)
or (e) below, (y) any property subject to a Lien expressly permitted by
Section 7.3(g) or (l), and (z) property acquired by any Excluded Foreign
Subsidiary) as to which the Administrative Agent, for the benefit of the
Lenders, does not have a perfected Lien, promptly (i) execute and deliver to
the Administrative Agent such amendments to the Guarantee and Collateral
Agreement or such other documents as the Administrative Agent reasonably deems
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a security interest in such property and (ii) take all actions
necessary or reasonably advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in such
property, including the filing of Uniform Commercial Code financing statements
in such jurisdictions as may be required by the Guarantee and Collateral
Agreement or by law or as may be reasonably requested by the Administrative
Agent.

 

(b)                                 With
respect to any fee interest in any real property having a value (together with
improvements thereof) of at least $300,000 acquired after the Amendment
Effective Date by any Group Member (other than (x) any such real property
subject to a Lien expressly permitted by Section 7.3(g) or (l) and (y)
real property acquired by any Excluded Foreign Subsidiary), promptly (i)
execute and deliver a

 

53

 

first priority
Mortgage, in favor of the Administrative Agent, for the benefit of the Lenders,
covering such real property, (ii) if requested by the Administrative Agent,
provide the Lenders with (A) title and extended coverage insurance covering
such real property in an amount at least equal to the purchase price of such
real property (or such other amount as shall be reasonably specified by the
Administrative Agent) as well as a current ALTA survey thereof, together with a
surveyor’s certificate and (B) any consents or estoppels reasonably deemed
necessary or advisable by the Administrative Agent in connection with such
Mortgage, each of the foregoing in form and substance reasonably satisfactory
to the Administrative Agent and (iii) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.

 

(c)                                  With
respect to any new Subsidiary (other than an Excluded Foreign Subsidiary)
created or acquired after the Amendment Effective Date by any Group Member
(which, for the purposes of this paragraph (c), shall include any existing
Subsidiary that ceases to be an Excluded Foreign Subsidiary), promptly (i)
execute and deliver to the Administrative Agent such amendments to the Guarantee
and Collateral Agreement as the Administrative Agent deems necessary or
advisable to grant to the Administrative Agent, for the benefit of the Lenders,
a perfected first priority security interest in the Capital Stock of such new
Subsidiary that is owned by any Group Member, (ii) deliver to the
Administrative Agent the certificates (if any) representing such Capital Stock,
together with (if applicable) undated stock powers, in blank, executed and
delivered by a duly authorized officer of the relevant Group Member, (iii)
cause such new Subsidiary (A) to become a party to the Guarantee and
Collateral Agreement, (B) to take such actions necessary or advisable to grant
to the Administrative Agent for the benefit of the Lenders a perfected first
priority security interest in the Collateral described in the Guarantee and
Collateral Agreement with respect to such new Subsidiary, including the filing
of Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Collateral Agreement or by law or as may be
requested by the Administrative Agent and (C) to deliver to the Administrative
Agent a certificate of such Subsidiary, substantially in the form of Exhibit C,
with appropriate insertions and attachments, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.

 

(d)                                 With
respect to any new Excluded Foreign Subsidiary created or acquired after the
Amendment Effective Date by any Group Member (other than by any Group Member
that is an Excluded Foreign Subsidiary), promptly (i) execute and deliver to
the Administrative Agent such amendments to the Guarantee and Collateral
Agreement as the Administrative Agent deems necessary or advisable to grant to
the Administrative Agent, for the benefit of the Lenders, a perfected first
priority security interest in the Capital Stock of such new Subsidiary that is
owned by any such Group Member (provided that in no event shall more
than 65% of the total outstanding voting Capital Stock of any such new
Subsidiary be required to be so pledged), (ii) deliver to the Administrative
Agent the certificates (if any) representing such Capital Stock, together with
(if applicable) undated stock powers, in blank, executed and delivered by a
duly authorized officer of the relevant Group Member, and take such other
action as may be necessary or, in the reasonable opinion of the Administrative
Agent, desirable to perfect the Administrative Agent’s security interest
therein, (iii) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent, and (iv) deliver to the
Administrative Agent an updated Schedule 4.15.

 

(e)                                  Notwithstanding
any of the foregoing provisions, the Administrative Agent may, in its sole
discretion, waive the requirements of paragraphs (a) through (d) of this
Section 6.9 with respect to any property acquired after the Amendment
Effective Date by any Group Member if the

 

54

 

Administrative
Agent determines that the costs of obtaining a security interest in such
property are excessive in relation to the value of such property.

 

6.10                           Matters Relating to Collateral.(a)  Promptly following (but in any event no
later than 20 Business Days after the occurrence thereof) the date upon which
any Loan Party changes its jurisdiction of organization or changes its name,
notify the Administrative Agent of such change and deliver to the
Administrative Agent all additional executed financing statements and other
documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for
herein.

 

(b)                                 Promptly
deliver to the Administrative Agent a copy of each material demand, notice or
document received by any Loan Party that questions or calls into doubt the
validity or enforceability of more than the greater of (x) $4,000,000 in net
amount of outstanding Receivables and (y) 10% of the aggregate net amount of
the then outstanding Receivables.

 

(c)                                  Except
as could not reasonably be expected to have a Material Adverse Effect, each
Loan Party shall not (a) grant any extension of the time of payment of any
Receivable, (b) compromise or settle any Receivable for less than the full
amount thereof, (c) release, wholly or partially, any Person liable for the
payment of any Receivable, (d) allow any credit or discount whatsoever on any
Receivable or (e) amend, supplement or modify any Receivable in any manner that
could adversely affect the value thereof.

 

(d)                                 Except
as could not reasonably be expected to have a Material Adverse Effect, each
Loan Party (either itself or through licensees) will (i) continue to use each
material Trademark on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) use such Trademark with the
appropriate notice of registration and all other notices and legends required
by applicable Requirements of Law, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this Agreement, and (v)
not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become invalidated or
impaired in any way.

 

(e)                                  Except
as could not reasonably be expected to have a Material Adverse Effect, each
Loan Party (either itself or through licensees) will not do any act, or omit to
do any act, whereby any material Patent may become forfeited, abandoned or
dedicated to the public.

 

(f)                                    Except
as could not reasonably be expected to have a Material Adverse Effect, each
Loan Party (either itself or through licensees) (i) will employ each material
Copyright and (ii) will not (and will not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become
invalidated or otherwise impaired.  No
Loan Party will (either itself or through licensees) do any act whereby
any material portion of the Copyrights may fall into the public domain.

 

(g)                                 Whenever
any Loan Party, either by itself or through any agent, employee, licensee or designee,
shall file an application for the registration of any material Intellectual
Property with the United States Patent and Trademark Office, the United States
Copyright Office, such Loan Party shall report such filing to the
Administrative Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. 
Such Loan Party shall execute and deliver, and have recorded, any and
all agreements, instruments, documents, and papers as the Administrative Agent
may reasonably

 

55

 

request to
evidence the Administrative Agent’s and the Lenders’ security interest in any
material Copyright, Patent or Trademark and the goodwill and general
intangibles of such Loan Party relating thereto or represented thereby.

 

(h)                                 Except
as could not reasonably be expected to have a Material Adverse Effect, each
Loan Party will take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain each
registration of the material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.

 

6.11                           USA PATRIOT Act Compliance.Holdings
and the Borrower shall, and shall cause each of their Subsidiaries and
Affiliates to, provide, to the extent commercially reasonable, such information
and take such actions as are reasonably requested by the Administrative Agent
or any Lenders in order to assist the Administrative Agent and the Lenders in
maintaining compliance with the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 or
similar laws, rules or regulations.

 

SECTION 7.  NEGATIVE COVENANTS

 

From and after the Amendment Effective Date,
Holdings and the Borrower hereby jointly and severally agree that, so long as
any Commitments remain in effect, any Letter of Credit remains outstanding or
any Loan or other amount (other than any contingent or unliquidated obligations
or liabilities) is owing to any Lender or the Administrative Agent hereunder,
each of Holdings and the Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:

 

7.1                                 Financial Condition Covenants.

 

(a)                                  Consolidated
Leverage Ratio.  Permit the
Consolidated Leverage Ratio as at the last day of any period of four
consecutive fiscal quarters of the Borrower ending with any fiscal quarter set
forth below to exceed the ratio set forth below opposite such fiscal quarter:

 

56

 

	
  Fiscal
  Quarters Ending

  	
   

  	
  Consolidated

  Leverage Ratio

  	
   

  
	
  June 30, 2003

  	
   

  	
  4.50

  	
   

  
	
  September 30, 2003

  	
   

  	
  4.50

  	
   

  
	
  December 30, 2003

  	
   

  	
  4.50

  	
   

  
	
  March 31, 2004

  	
   

  	
  4.25

  	
   

  
	
  June 30, 2004

  	
   

  	
  4.25

  	
   

  
	
  September 30, 2004

  	
   

  	
  4.25

  	
   

  
	
  December 31, 2004

  	
   

  	
  4.25

  	
   

  
	
  March 31, 2005

  	
   

  	
  4.25

  	
   

  
	
  June 30, 2005

  	
   

  	
  4.25

  	
   

  
	
  September 30, 2005

  	
   

  	
  4.25

  	
   

  
	
  December 31, 2005

  	
   

  	
  4.25

  	
   

  
	
  March 31, 2006

  	
   

  	
  4.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  4.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  4.00

  	
   

  
	
  December 31, 2006

  	
   

  	
  4.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  3.75

  	
   

  

 

(b)                                 Consolidated
Senior Leverage Ratio.  Permit the
Consolidated Senior Leverage Ratio for any period of four consecutive fiscal
quarters of the Borrower ending with any fiscal quarter set forth below to
exceed the ratio set forth below opposite such fiscal quarter:

 

	
  Fiscal Quarters Ending

  	
   

  	
  Consolidated
  Senior

  Leverage Ratio

  	
   

  
	
  June 30, 2003

  	
   

  	
  2.25

  	
   

  
	
  September 30, 2003

  	
   

  	
  2.25

  	
   

  
	
  December 30, 2003

  	
   

  	
  2.25

  	
   

  
	
  March 31, 2004 and thereafter

  	
   

  	
  2.00

  	
   

  

 

(c)                                  Consolidated
Fixed Charge Coverage Ratio.  Permit
the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive
fiscal quarters of the Borrower ending with any fiscal quarter set forth below
to be less than the ratio set forth below opposite such fiscal quarter:

 

	
  Fiscal Quarter Ending

  	
   

  	
  Consolidated
  Fixed

  Charge Coverage Ratio

  	
   

  
	
  June 30, 2003

  	
   

  	
  1.35

  	
   

  
	
  September 30, 2003

  	
   

  	
  1.35

  	
   

  
	
  December 31, 2003

  	
   

  	
  1.35

  	
   

  
	
  March 31, 2004

  	
   

  	
  1.45

  	
   

  
	
  June 30, 2004

  	
   

  	
  1.45

  	
   

  
	
  September 30, 2004

  	
   

  	
  1.45

  	
   

  
	
  December 31, 2004

  	
   

  	
  1.45

  	
   

  
	
  March 31, 2005

  	
   

  	
  1.45

  	
   

  
	
  June 30, 2005

  	
   

  	
  1.45

  	
   

  

 

57

 

	
  Fiscal Quarter Ending

  	
   

  	
  Consolidated
  Fixed

  Charge Coverage Ratio

  	
   

  
	
  September 30, 2005

  	
   

  	
  1.45

  	
   

  
	
  December 31, 2005

  	
   

  	
  1.45

  	
   

  
	
  March 31, 2006

  	
   

  	
  1.50

  	
   

  
	
  June 30, 2006

  	
   

  	
  1.50

  	
   

  
	
  September 30, 2006

  	
   

  	
  1.50

  	
   

  
	
  December 31, 2006

  	
   

  	
  1.50

  	
   

  
	
  March 31, 2007

  	
   

  	
  1.55

  	
   

  

 

7.2                                 Indebtedness.Create, issue, incur, assume,
become liable in respect of or suffer to exist any Indebtedness, except:

 

(a)                                  Indebtedness of any
Loan Party pursuant to any Loan Document;

 

(b)                                 Indebtedness (i) of Holdings
to the Borrower in connection with Investments permitted in
Section 7.7(f)(i), (ii) of any Loan Party (other than Holdings) to the
Borrower or any Subsidiary, and (iii) of any Subsidiary that is not a Loan
Party to (x) any Loan Party (other than Holdings) to the extent such Investment
is permitted under Section 7.7(f), and (y) any Person that is not a Loan
Party, provided that Indebtedness incurred under this clause (y) shall
not exceed $10,000,000 at any one time outstanding;

 

(c)                                  Guarantee Obligations
incurred in respect of any Indebtedness permitted hereunder;

 

(d)                                 Indebtedness
outstanding as of the Original Closing Date and listed on Schedule 7.2(d)
and any refinancings, refundings, renewals or extensions thereof (without
increasing, or shortening the maturity of, the principal amount thereof);

 

(e)                                  Indebtedness incurred
to finance the acquisition, construction, development, maintenance, upgrade or
improvement of any assets (including, without limitation, Capital Lease
Obligations and as incurred pursuant to Sale-Leaseback Transactions), which may
be secured by Liens permitted by Section 7.3(g), in an aggregate principal
amount, when aggregated with the amount of Indebtedness outstanding under
clause (ii) of Section 7.2(i) at such time, not to exceed $25,000,000 at
any one time outstanding;

 

(f)                                    (i) Indebtedness of
the Borrower in respect of the Senior Subordinated Notes in an aggregate
principal amount not to exceed $200,000,000 and (ii) Guarantee Obligations of
any Subsidiary Guarantor in respect of such Indebtedness, provided that
such Guarantee Obligations are subordinated to the same extent as the
obligations of the Borrower in respect of the Senior Subordinated Notes;

 

(g)                                 additional
subordinated Indebtedness of the Borrower that (i) has a final maturity date at
least 180 days after the later of the Tranche B Term Maturity Date and the
latest Incremental Term Maturity Date and no scheduled payments of principal
thereon prior to the later of the Tranche B Term Maturity Date and the latest
Incremental Term Maturity Date and (ii) is subject to terms (other than as to
interest rate and equity components, which shall be consistent with
transactions of a similar nature conducted at such time) substantially similar
to (or less restrictive taken as a whole to the Loan Parties than) the Senior
Subordinated Notes so long as after giving effect to the incurrence thereof,
the Borrower would be in compliance with the

 

58

 

covenants set forth in Section 7.1 after giving Pro Forma Effect
to the incurrence of such Indebtedness and the use of the proceeds thereof;

 

(h)                                 Indebtedness arising
from agreements of the Borrower or any Subsidiary providing for
indemnification, adjustment of purchase price or similar obligations incurred
or assumed in connection with Permitted Acquisitions or any Disposition
permitted under Section 7.5;

 

(i)                                     Indebtedness of
any Person that becomes a Subsidiary Guarantor in connection with a Permitted
Acquisition after the Original Closing Date and any refinancings, refundings,
renewals or extensions thereof (without increasing the principal amount
thereof) in an aggregate principal amount not to exceed $20,000,000 at any one
time outstanding; provided that such Indebtedness (i) exists at the time
such Person becomes a Subsidiary Guarantor and is not created in contemplation
of or in connection with such Person becoming a Subsidiary Guarantor and (ii)
may exceed $20,000,000 to the extent that the aggregate principal amount of
such additional Indebtedness, when aggregated with the amount of Indebtedness
outstanding under Section 7.2(e) at such time, does not exceed $25,000,000
at any one time outstanding;

 

(j)                                     Indebtedness with
respect to surety, appeal and performance bonds and similar arrangements in the
ordinary course of business; and

 

(k)                                  unsecured
Indebtedness (including, without limitation, overdraft facilities) not
otherwise permitted hereunder in an aggregate principal amount not exceeding
$5,000,000 at any time outstanding.

 

7.3                                 Liens.Create, incur, assume or suffer to exist any
Lien upon any of its property, whether now owned or hereafter acquired, except:

 

(a)                                  Liens for taxes and
other charges of a Governmental Authority not yet due or that are being
contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

 

(b)                                 carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlords’ or other
like Liens arising in the ordinary course of business that are not overdue for
a period of more than 90 days or that are being contested in good faith by
appropriate proceedings;

 

(c)                                  pledges or deposits
in connection with workers’ compensation, unemployment insurance and other
social security legislation;

 

(d)                                 deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations and arrangements  of a like nature incurred in the ordinary
course of business;

 

(e)                                  (i) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business that, in the aggregate, are not substantial in
amount and that do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries and (ii) as permitted
in the reasonable discretion of the Administrative Agent, Liens disclosed on
any title policy in respect of a Mortgaged Property and any other Lien
permitted by a Mortgage;

 

59

 

(f)                                    Liens in existence
on the Original Closing Date listed on Schedule 7.3(f), provided that
no such Lien is spread to cover any additional property after the Original
Closing Date and that the amount of obligations secured thereby is not
increased (other than in respect of assets financed by the same financing
source);

 

(g)                                 Liens securing Indebtedness
of the Borrower or any other Subsidiary incurred pursuant to
Section 7.2(e); provided that (i) such Liens shall be created not
later than six months following the acquisition, construction, development,
maintenance, upgrade or improvement of the assets financed with such
Indebtedness (provided, that such Liens may be created at any time with
respect to real property), (ii) such Liens do not at any time encumber any
assets other than the assets financed by such Indebtedness except for other
assets financed by the same financing source, and (iii) the amount of
Indebtedness secured thereby is not increased except in respect of other asset
financings from the same financing source;

 

(h)                                 Liens created pursuant
to the Security Documents;

 

(i)                                     (i) any interest
or title of a lessor under any lease entered into by the Borrower or any other
Subsidiary in the ordinary course of its business and covering only the assets
so leased, and (ii) leases and licenses of assets (including, without
limitation, intellectual property rights) in the ordinary course of business
which do not interfere in any material respect with the conduct of business;

 

(j)                                     Liens in respect
of judgments that do not constitute an Event of Default under Section 8(h)
(other than judgments in excess of $2,000,000 which have been stayed or bonded
pending appeal solely as a result of the imposition of such Liens);

 

(k)                                  Liens of a collection
bank arising in the ordinary course of business under Section 4-208 of the
Uniform Commercial Code in effect in the relevant jurisdiction;

 

(l)                                     any Lien existing
on any asset prior to the acquisition thereof by the Borrower or any Subsidiary
or on any asset of any Person that becomes a Subsidiary; provided that (i) such
Lien is not created in contemplation of, or in connection with, such
acquisition or such Person becoming a Subsidiary Guarantor and (ii) such Liens
shall not apply to any other assets except assets financed by the same
financing source);

 

(m)                               any Lien of a Group
Member (i) in favor of any Loan Party, and (ii) if such Group Member is not a
Loan Party, in favor of any other Person, provided that the aggregate
fair market value (determined as of the date such Lien is incurred) of the
assets encumbered by such Liens under this clause (ii) shall not exceed
$10,000,000 at any one time;

 

(n)                                 any Liens securing
obligations under Specified Swap Agreements (to the extent not otherwise
secured pursuant to clause (h) above) so long as such Liens are subject and
subordinate to any Liens created pursuant to the Security Documents; and

 

(o)                                 Liens not otherwise
permitted by this Section so long as neither (i) the aggregate outstanding
principal amount of the obligations secured thereby nor (ii) the aggregate fair
market value (determined as of the date such Lien is incurred) of the assets
subject thereto exceeds (as to the Borrower and all Subsidiaries) $5,000,000 at
any one time.

 

60

 

7.4                                 Fundamental Changes.Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or Dispose of all or substantially
all of its property or business, except that:

 

(a)                                  (i) any Subsidiary of
the Borrower may be merged, consolidated, amalgamated, or liquidated with or
into the Borrower (provided that the Borrower shall be the continuing or
surviving entity) or with or into any Loan Party (provided that the Loan
Party shall be the continuing or surviving entity), and (ii) any Subsidiary of
the Borrower which is not a Loan Party may be merged, consolidated or
liquidated with or into any other Subsidiary of the Borrower which is not a
Loan Party;

 

(b)                                 any Subsidiary of the
Borrower may Dispose of any or all of its assets (upon voluntary liquidation or
otherwise) (i) to any Loan Party (other than Holdings), and (ii) if such
Subsidiary is not a Loan Party, to any other Subsidiary;

 

(c)                                  any Disposition
permitted by Section 7.5;

 

(d)                                 any Investment
expressly permitted by Section 7.7 may be structured as a merger, consolidation
or amalgamation (including, without limitation, any Disposition resulting in an
Investment permitted under Section 7.7); and

 

(e)                                  any Subsidiary may
liquidate, wind-up or dissolve if the Borrower determines in good faith, and
the Administrative Agent concurs with such determination if such Subsidiary has
contributed more than 5% to Consolidated EBITDA in the immediately preceding
twelve months, that such liquidation, winding-up or dissolution is in the best
interests of the Borrower and is not adverse to the interests of the Lenders
hereunder in any material respect, provided that any remaining assets of
such Subsidiary are transferred to a Loan Party or are otherwise disposed of in
accordance with to Section 7.5.

 

7.5                                 Disposition of Property.Dispose of any
of its property, whether now owned or hereafter acquired, or, in the case of
any Subsidiary, issue or sell any shares of such Subsidiary’s Capital Stock to
any Person, except:

 

(a)                                  the Disposition of
(i) obsolete or worn out property in the ordinary course of business, (ii)
equipment which the Borrower determines in good faith is no longer useful to
the conduct of business, (iii) assets subject to a Recovery Event, (iv) assets
consisting of trade-ins and exchanges for similar assets, and (v) within twelve
months after the consummation of a Permitted Acquisition, assets acquired in
connection with such Permitted Acquisition so long as the Borrower applies the
Net Cash Proceeds of the Disposition of such assets acquired in connection with
such Permitted Acquisition to repay any outstanding Term Loans, Revolving Loans
and/or Swingline Loans in accordance with Section 2.11;

 

(b)                                 in the ordinary course
of business, (i) the sale of inventory and supplies, (ii) leases and licenses
of assets (including, without limitation, intellectual property rights) which
do not interfere in any material respect with the conduct of business, and
(iii) the Disposition of accounts receivable in connection with the compromise,
settlement or collection thereof;

 

(c)                                  Dispositions
permitted by Sections 7.4(a), (b) and (e);

 

61

 

(d)                                 the sale or issuance
of any Subsidiary’s Capital Stock (i) to the Borrower or any Loan Party, and
(ii) to the extent such sale or issuance is an Investment permitted by
Section 7.7(f), to any other Subsidiary;

 

(e)                                  the Disposition of
other property (including, without limitation, Capital Stock of Subsidiaries)
so long as the aggregate fair market value of all property Disposed of pursuant
to this paragraph (e), after giving effect to such Disposition, does not exceed
(i) in any fiscal year, 15% of the consolidated tangible assets of the Borrower
and its Subsidiaries for such fiscal year as determined immediately prior to
the time of such Disposition and (ii) at any time, 25% of the greater of (x)
consolidated tangible assets of the Borrower and its Subsidiaries as determined
immediately prior to the time of such Disposition, and (y) consolidated
tangible assets of the Borrower and its Subsidiaries at the Original Closing
Date;

 

(f)                                    the Disposition of
Investments permitted pursuant to clauses (b), (i), (j), (k) and (l) of
Section 7.7;

 

(g)                                 the Disposition of
assets in connection with Sale-Leaseback Transactions permitted by
Section 7.10;

 

(h)                                 the Disposition of
foreign assets and Dispositions by Excluded Foreign Subsidiaries; and

 

(i)                                     the Disposition of
(i) surplus property in the ordinary course of business and (ii) equipment
which the Borrower determines in good faith is uneconomic.

 

7.6                                 Restricted Payments.Declare or pay
any dividend (other than dividends payable solely in shares of Qualified
Capital Stock or equivalent equity interests) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any
Capital Stock of any Group Member, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of any Group Member
(collectively, “Restricted Payments”), except that:

 

(a)                                  any Subsidiary may
make Restricted Payments (i) to the Borrower or any other Loan Party, (ii) as
may be required by applicable law, or (iii) in the case of Excluded Foreign
Subsidiaries, to its immediate stockholders, and (iv) in the case of any
Subsidiary which is not a Loan Party, to its immediate stockholders solely on a
ratable basis in accordance with the equity interests therein;

 

(b)                                 so long as no Default
or Event of Default shall have occurred and be continuing, the Borrower may pay
dividends and distributions to Holdings to permit Holdings to, and Holdings
may, purchase Holdings’ Capital Stock or options in respect of Qualified
Capital Stock from present or former directors, officers, employees or
consultants of any Group Member in connection with the death, disability, or
termination of employment or engagement of such director, officer, employee or
consultant, provided, that the aggregate amount of payments under this
paragraph (b) after the Original Closing Date (net of any proceeds received by
Holdings after the Original Closing Date in connection with resales of any
Capital Stock or options so purchased) shall not exceed $5,000,000 in the
aggregate; provided, further, that, notwithstanding the
foregoing, additional payments may be made under this Section 7.6(b) after
the Original Closing Date so long as the Consolidated Senior Leverage Ratio,
after giving effect to any such payment, does not exceed the ratio set forth in
Section 7.1(b) for the period in which such

 

62

 

payment is made minus 0.25 and the aggregate of all such
payments made pursuant to this Section 7.6(b) does not exceed $15,000,000
in the aggregate;

 

(c)                                  the Borrower may pay
dividends to Holdings to permit Holdings to (i) pay corporate overhead expenses
incurred in the ordinary course of business not to exceed $1,000,000 in any
fiscal year and (ii) pay any taxes that are due and payable by Holdings and the
Borrower as part of a consolidated group;

 

(d)                                 the Borrower may make
Restricted Payments with Qualified Capital Stock (or equivalent equity
interests), including, without limitation, the conversion, exchange, exercise,
surrender or similar transaction of any Qualified Capital Stock or any option
or similar right in respect thereof, provided that Restricted Payments
with Qualified Capital Stock shall not be permitted to the extent such a
payment would result in a Default under Section 8(k)(iv);

 

(e)                                  so long as no Default
or Event of Default shall have occurred and be continuing or would result
therefrom, Holdings may redeem or repurchase the Permitted Investor Preferred
Stock to the extent such redemption or repurchase is made with the proceeds of
the sale or issuance of any Qualified Capital Stock of Holdings; and

 

(f)                                    so long as no
Default or Event of Default shall have occurred and be continuing, the Borrower
may pay dividends to Holdings to permit Holdings to, and Holdings may, purchase
Holdings’ Capital Stock or options from present or former directors, officers,
employees or consultants of any Group Member upon the death of such director,
officer, employee or consultant from the proceeds of any “key-man” life
insurance policies with respect to such person received by the Borrower or
Holdings.

 

7.7                                 Investments.Make any advance, loan, extension of
credit (by way of guaranty or otherwise) or capital contribution to, or
purchase any Capital Stock, bonds, notes, debentures or other debt securities
of, or any assets constituting a business unit of, or make any other investment
in, any Person (all of the foregoing, “Investments”), except:

 

(a)                                  extensions of trade
credit in the ordinary course of business;

 

(b)                                 investments in Cash
Equivalents;

 

(c)                                  (i) Guarantee Obligations
in respect of Indebtedness permitted by Section 7.2 and other Guarantee
Obligations in the ordinary course of business, and (ii) payment in respect of
such Guarantee Obligations, together with any repayment, reimbursement,
indemnification or similar right arising out of such payment;

 

(d)                                 loans and advances to
employees of any Group Member (i) in the ordinary course of business (including
for travel, entertainment and relocation expenses) in an aggregate amount for
all Group Members not to exceed $1,000,000 at any one time outstanding, and
(ii) for the purpose of acquiring Capital Stock of Holdings; provided,
that if such acquisition of Capital Stock by such employee is from a party
other than a Group Member then such loans and advances shall not exceed an
aggregate amount for all Group Members of $1,000,000 at any one time
outstanding;

 

(e)                                  Investments in assets
useful in the business of the Borrower and its Subsidiaries made by the
Borrower or any of its Subsidiaries with the proceeds of any Reinvestment
Deferred Amount;

 

63

 

(f)                                    Investments by (i)
the Borrower in Holdings to permit Holdings to make any Restricted Payment
permitted under Section 7.6, (ii) any Loan Party in any other Loan Party
(other than Holdings) and (iii) any Subsidiary which is not a Loan Party in any
other Subsidiary or Joint Venture;

 

(g)                                 the Borrower and any
Subsidiary Guarantor may make Permitted Acquisitions, and may create and make
Investments in Subsidiaries to own, directly or indirectly, the property
acquired thereby; provided that (i) any acquisition of Capital Stock
results in the issuer thereof becoming a Subsidiary, (ii) any Domestic
Subsidiary created or acquired in connection therewith shall become a
Subsidiary Guarantor and the requirements of Section 6.9 shall be
satisfied prior to or concurrently with the consummation of such Permitted
Acquisition, (iii) no Permitted Acquisition shall be consummated unless, after
giving Pro Forma Effect to such Permitted Acquisition (and the related
Indebtedness incurred or assumed), the Borrower and its Subsidiaries would be
in compliance with the covenants contained in Section 7.1 during such
period (as demonstrated by delivery to the Administrative Agent of a
certificate to such effect showing such calculation in reasonable detail), (iv)
no Default or Event of Default exists at the time thereof or would result
therefrom, (v) immediately prior to and after giving effect to any such
Permitted Acquisition, the Borrower and its Subsidiaries shall be in compliance
with the provisions of Section 7.14, (vi) each such Permitted Acquisition
shall be made on a consensual (meaning, in the case of a Person to be acquired,
approved by the majority in interest of the board of directors or analogous
governing body of such Person) basis between the Borrower and its Subsidiaries,
on the one hand, and the Person or Persons being so acquired and the seller or
sellers of such assets or such business, on the other hand and (viii)
immediately after giving effect to such Permitted Acquisition, the Borrower
shall be able to borrow at least $5,000,000 under the Total Revolving
Commitments and no Default or Event of Default would result therefrom;

 

(h)                                 Investments in
receivables and other trade payables owing to the Borrower or any of its
Subsidiaries and loans and advances made to customers and suppliers, in each
case, if created, acquired or made in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;

 

(i)                                     Investments
received in connection with (A) the bankruptcy, insolvency or reorganization of
suppliers and customers, (B) in settlement of delinquent obligations of, and
other disputes with, or judgments against customers and suppliers arising in
the ordinary course of business and (C) the Disposition of assets permitted
under Section 7.5 (other than Section 7.5(g); provided, that
the consideration for any such Disposition under Section 7.5(e) shall
consist of at least 75% cash and cash equivalents (for purposes of this clause
(i), assumption of any Indebtedness related to the assets subject to such
Disposition shall be deemed to be cash);

 

(j)                                     (i) Investments
under Swap Agreements, so long as any such Swap Agreement is not entered into
for speculative purposes, and (ii) pledges, deposits and similar arrangements
with respect to leases and utilities in the ordinary course of business or
arising out of Liens permitted under Sections 7.3(c) and (d);

 

(k)                                  Investments (i)
existing on the Original Closing Date and set forth on Schedule 7.7
attached hereto, and (ii) of any Person existing at the time such Person
becomes a Subsidiary of the Borrower or consolidates or merges with the
Borrower or any of its Subsidiaries (including, without limitation, in
connection with a Permitted Acquisition) so long as such Investments were not
made in contemplation of such Person becoming a Subsidiary or of such merger;
and

 

64

 

(l)                                     in addition to
Investments otherwise expressly permitted by this Section, Investments by the
Borrower or any of its Subsidiaries in an aggregate amount (net of all
repayments, returns, interest, distributions, income, profits and similar
amounts realized therefrom) not to exceed $10,000,000 at any time outstanding.

 

7.8                                 Optional Payments and Modifications
of Certain Debt Instruments.(a) 
Make or offer to make any optional or voluntary payment, prepayment,
repurchase or redemption of or otherwise optionally or voluntarily defease or
segregate funds with respect to the Senior Subordinated Notes; (b) amend,
modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Senior
Subordinated Notes if the effect thereof could reasonably be expected to be
adverse or disadvantageous to the Lenders in any material respect; (c) amend,
modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of any Disqualified
Capital Stock or Permitted Investor Preferred Stock if the effect thereof could
reasonably be expected to be adverse or disadvantageous to the Lenders in any
material respect; or (d) designate any Indebtedness (other than obligations of
the Loan Parties pursuant to the Loan Documents) as “Designated Senior
Indebtedness” (or any other defined term having a similar purpose) for the
purposes of the Senior Subordinated Note Indenture.

 

7.9                                 Transactions with Affiliates.Enter
into any transaction, including any purchase, sale, lease or exchange of
property, the rendering of any service or the payment of any management,
advisory or similar fees, with any Affiliate (other than any Group Member)
unless such transaction is (a) otherwise permitted under this Agreement
and (b) upon terms no less favorable to the relevant Group Member than it
would obtain in a comparable arm’s length transaction with a Person that is not
an Affiliate; provided, that notwithstanding the foregoing, Holdings and its
Subsidiaries may enter into the transactions set forth in Schedule 7.9
attached hereto.

 

7.10                           Sales and Leasebacks.Enter into any
arrangement with any Person providing for the leasing by any Loan Party of
personal property that has been or is to be sold or transferred by such Loan
Party to such Person or to any other Person to whom funds have been or are to
be advanced by such Person on the security of such property or rental
obligations of such Loan Party (a “Sale-Leaseback Transaction”) other than as
permitted pursuant to Section 7.2(e); provided that in the case of
any Sale-Leaseback Transaction resulting in an operating lease, solely for
purposes of determining whether such lease would be permitted pursuant to
Section 7.2(e) as contemplated by this Section 7.10, the present
value of the rent payments during the term of such lease shall be deemed to
constitute Capital Lease Obligations.

 

7.11                           Changes in Fiscal Periods.Permit
the fiscal year of the Borrower to end on a day other than December 31 or
change the Borrower’s method of determining fiscal quarters.

 

7.12                           Negative Pledge Clauses.Enter into
or suffer to exist or become effective any agreement that prohibits or limits
the ability of any Group Member to create, incur, assume or suffer to exist any
Lien upon any of its property or revenues, whether now owned or hereafter
acquired, other than (a) this Agreement and the other Loan Documents, (b) any
agreements governing (i) any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby together with any other
assets financed by the same financing source), (ii) any Indebtedness permitted
under Sections 7.2(f), (g) and (i), and (iii) the Permitted Investor Preferred
Stock, (c) any document governing any Lien permitted under Section 7.3 so
long as such restriction is limited to the assets subject to such Lien, (d)
customary provisions in leases, licenses, and similar arrangements in the
ordinary course of business, (e) customary provisions in agreements for the
Disposition of assets pending the consummation of such Disposition,

 

65

 

(f) as imposed by any
Requirement of Law, and (g) as relating to the assets of any Excluded Foreign
Subsidiary.

 

7.13                           Clauses Restricting Subsidiary
Distributions.Enter into or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any Subsidiary of the
Borrower to (a) make Restricted Payments in respect of any Capital Stock of
such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any
other Subsidiary of the Borrower, (b) make loans or advances to, or other
Investments in, the Borrower or any other Subsidiary of the Borrower or (c)
transfer any of its assets to the Borrower or any other Subsidiary of the
Borrower, except for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents, (ii) any
restrictions with respect to a Subsidiary imposed pursuant to an agreement that
has been entered into in connection with the Disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary, (iii) any
restrictions existing under any agreements governing (x) any Indebtedness permitted
under Section 7.2(f), (g) and (i), and (y) the Permitted Investor
Preferred Stock, (iv) as imposed by any Requirement of Law, and (v) as relating
to any Excluded Foreign Subsidiary.

 

7.14                           Lines of Business.Enter into any
business, either directly or through any Subsidiary, except for those
businesses in which the Borrower and its Subsidiaries are engaged on the date
of this Agreement or that are reasonably related, incidental or ancillary to
diagnostic imaging services (other than any businesses acquired as a result of
a Permitted Acquisition, which other businesses, if not permitted under this
Section 7.14, shall be disposed of in accordance with
Section 7.5(a)(v)).

 

7.15                           Amendments to Recapitalization
Documents.Amend, supplement or otherwise modify (pursuant to a waiver
or otherwise) the terms and conditions of the Recapitalization Documentation,
in a manner which could reasonably be expected to have a Material Adverse
Effect.

 

SECTION 8.  EVENTS OF DEFAULT

 

If any of the following events shall occur
and be continuing:

 

(a)                                  the Borrower shall
fail to pay any principal of any Loan or Reimbursement Obligation when due in
accordance with the terms hereof; or the Borrower shall fail to pay any
interest on any Loan or Reimbursement Obligation, or any other amount payable
hereunder or under any other Loan Document, within five Business Days after any
such interest or other amount becomes due in accordance with the terms hereof;
or

 

(b)                                 any representation or
warranty made or deemed made by any Loan Party herein or in any other Loan
Document or that is contained in any certificate, document or financial or
other statement furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been inaccurate in
any material respect on or as of the date made or deemed made; or

 

(c)                                  any Loan Party shall
default in the observance or performance of any agreement contained in clause
(i) or (ii) of Section 6.4(a) (with respect to Holdings and the Borrower
only), Section 6.6(b), Section 6.7(a), 6.10(a) or Section 7 of
this Agreement; or

 

(d)                                 any Loan Party shall
default in the observance or performance of any other agreement contained in
this Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue unremedied
for a

 

66

 

period of 30 days after notice to the Borrower from the Administrative
Agent or the Required Lenders; or

 

(e)                                  any Group Member
shall (i) default in making any payment of any principal of any Indebtedness
(including any Guarantee Obligation of any Group Member in respect thereof, but
excluding the Loans) on the scheduled or original due date with respect thereto
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created; or (ii) default in making any
payment of any interest on any such Indebtedness beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness was
created; or (iii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or (in the case of any such Indebtedness
constituting a Guarantee Obligation) to become payable; provided, that a
default, event or condition described in clause (i), (ii) or (iii) of this
paragraph (e) shall not at any time constitute an Event of Default unless, at
such time, one or more defaults, events or conditions of the type described in
clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be
continuing with respect to Indebtedness the outstanding principal amount of
which exceeds in the aggregate $2,000,000; or

 

(f)                                    other than in
connection with any transaction permitted under Section 7.4(e) (so long as
such transaction does not affect any other Group Member and the value of the
Subsidiary subject to such transaction, when aggregated with the value of all
other Subsidiaries liquidated, wound up or dissolved pursuant to
Section 7.4(e) does not exceed 5% of the consolidated total assets of the
Group Members), (i) any Group Member shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or any Group Member shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Group Member any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against any Group Member any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets that results
in the entry of an order for any such relief that shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) any Group Member shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) any Group Member shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or

 

(g)                                 (i) any Person shall
engage in any “prohibited transaction” (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any Plan, (ii) any “accumulated
funding deficiency” (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor of the PBGC
or a Plan shall arise on the assets of any Group Member or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to,

 

67

 

or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) any Group Member or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or exist
with respect to a Plan; and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such events or conditions, if
any, could, in the sole judgment of the Required Lenders, reasonably be expected
to have a Material Adverse Effect; or

 

(h)                                 one or more judgments
or decrees shall be entered against any Group Member involving in the aggregate
a liability (not paid or fully covered by insurance as to which the relevant
insurance company has not denied coverage) of $2,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 30 days from the entry thereof; or

 

(i)                                     any of the
Security Documents shall cease, for any reason, to be in full force and effect,
or any Loan Party or any Affiliate of any Loan Party shall so assert, or any
Lien created by any of the Security Documents shall cease to be enforceable and
of the same effect and priority purported to be created thereby; or

 

(j)                                     the guarantee
contained in Section 2 of the Guarantee and Collateral Agreement shall
cease, for any reason, to be in full force and effect or any Loan Party or any
Affiliate of any Loan Party shall so assert; or

 

(k)                                  (i)  at any time prior to the initial public
offering of Holdings, the Sponsor and its Control Investment Affiliates,
collectively, shall cease to have the power to vote or direct the voting of
securities having a majority of the ordinary voting power for the election of
directors of Holdings (determined on a fully diluted basis); (ii) at any time
after the initial public offering of Holdings, (x) the Sponsor shall cease to
be the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d) –5 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or
indirectly, of at least 20% of the outstanding common stock of Holdings having
ordinary voting power for the election of directors of Holdings, or (y) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), excluding the Sponsor and its Control Investment Affiliates,
shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 of
the Exchange Act), directly or indirectly, of more than 35% of the outstanding
common stock of Holdings having ordinary voting power for the election of
directors of Holdings and the Sponsor and its Control Investment Affiliates,
collectively, shall own beneficially and of record a lesser amount of common
stock of Holdings having ordinary voting power for the election of directors of
Holdings; (iii) the board of directors of Holdings shall cease to consist
of a majority of Continuing Directors; (iv) Holdings shall cease to own and
control, of record and beneficially, directly, 100% of each class of
outstanding Capital Stock of the Borrower free and clear of all Liens (except
Liens created by the Guarantee and Collateral Agreement); or (v) a Specified
Change of Control shall occur; or

 

(l)                                     Holdings shall (i)
conduct, transact or otherwise engage in, or commit to conduct, transact or
otherwise engage in, any business or operations other than those (x) incidental
to its ownership of the Capital Stock of the Borrower and beneficial ownership
of the other Group Members, and (y) relating to the administration of the
businesses of the Group Members taken as

 

68

 

a whole, including, without limitation the engagement of professionals,
advisors and consultants, (ii) incur, create, assume or suffer to exist any Indebtedness
or other material liabilities or financial obligations, except (v) parent
guarantees and similar arrangements of a parent company for the benefit of its
subsidiaries, (w) nonconsensual obligations imposed by operation of law
(including, without limitation, any judgments, orders, decrees, writs or
injunctions), (x) obligations pursuant to the Loan Documents to which it is a
party, (y) obligations expressly permitted or contemplated for it by
Section 7 and (z) obligations with respect to its Capital Stock, or (iii)
own, lease, manage or otherwise operate any properties or assets (including
cash (other than cash received in connection with dividends made by the
Borrower in accordance with Section 7.6 pending application in the manner
contemplated by said Section) and cash equivalents) other than the ownership of
shares of Capital Stock of the Borrower or otherwise in connection with or
incidental to any of the foregoing; or

 

(m)                               the Senior Subordinated
Notes or the guarantees thereof shall cease, for any reason, to be validly
subordinated to the Obligations or the obligations of the Subsidiary Guarantors
under the Guarantee and Collateral Agreement, as the case may be, as provided
in the Senior Subordinated Note Indenture, or any Loan Party, the trustee in
respect of the Senior Subordinated Notes or the holders of at least 25% in
aggregate principal amount of the Senior Subordinated Notes shall so assert;

 

then, and in
any such event, (A) if such event is an Event of Default specified in clause
(i) or (ii) of paragraph (f) above with respect to the Borrower, automatically
the Revolving Commitments shall immediately terminate and the Loans (with
accrued interest thereon) and all other amounts owing under this Agreement and
the other Loan Documents (including all amounts of L/C Obligations, whether or
not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) shall immediately become due and
payable, and (B) if such event is any other Event of Default, either or both of
the following actions may be taken:  (i)
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
to the Borrower declare the Revolving Commitments to be terminated forthwith,
whereupon the Revolving Commitments shall immediately terminate; and (ii) with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Loans (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents (including all
amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) to be
due and payable forthwith, whereupon the same shall immediately become due and
payable.  With respect to all Letters of
Credit with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to this paragraph, the Borrower shall at
such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of
such Letters of Credit.  Amounts held in
such cash collateral account shall be applied by the Administrative Agent to
the payment of drafts drawn under such Letters of Credit, and the unused
portion thereof after all such Letters of Credit shall have expired or been
fully drawn upon, if any, shall be applied to repay other obligations of the
Borrower hereunder and under the other Loan Documents.  After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the
other Loan Documents (other than any contingent or unliquidated obligations or
liabilities) shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower (or such other Person as may be
lawfully entitled thereto).  Except as
expressly provided above in this Section, presentment, demand, protest and all
other notices of any kind are hereby expressly waived by the Borrower.

 

69

 

SECTION 9.  THE AGENTS

 

9.1                                 Appointment.Each Lender hereby irrevocably
designates and appoints the Administrative Agent as the agent of such Lender
under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the Administrative Agent, in such capacity, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto.   Notwithstanding
any provision to the contrary elsewhere in this Agreement, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent.

 

9.2                                 Delegation of Duties.The Administrative
Agent may execute any of its duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties.  The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.

 

9.3                                 Exculpatory Provisions.Neither any
Agent nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Loan Document (except to the extent that any of the
foregoing are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from its or such Person’s own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
any Loan Party or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agents under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Loan Party a
party thereto to perform its obligations hereunder or thereunder.  The Agents shall not be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of any Loan
Party.

 

9.4                                 Reliance by Administrative Agent.The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any instrument, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including counsel to Holdings
or the Borrower), independent accountants and other experts selected by the
Administrative Agent.  The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent.  The Administrative Agent shall be fully
justified in failing or refusing to take any discretionary action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders (or, if so specified by this Agreement,
the Majority Facility Lenders or all Lenders) as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense that may be incurred by it by reason of taking or continuing
to take any such action.  The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents in
accordance

 

70

 

with a request of the
Required Lenders (or, if so specified by this Agreement, the Majority Facility
Lenders or all Lenders), and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future holders
of the Loans.

 

9.5                                 Notice of Default.The Administrative Agent
shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default unless the Administrative Agent has received notice
from a Lender, Holdings or the Borrower referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a “notice of
default”.  In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders.  The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or,
if so specified by this Agreement, the Majority Facility Lenders or all
Lenders); provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.

 

9.6                                 Non-Reliance on Agents and Other
Lenders.Each Lender expressly acknowledges that neither the Agents nor
any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates have made any representations or warranties to
it and that no act by any Agent hereafter taken, including any review of the
affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to
constitute any representation or warranty by any Agent to any Lender.  Each Lender represents to the Agents that it
has, independently and without reliance upon any Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and
their affiliates and made its own decision to make its Loans hereunder and
enter into this Agreement.  Each Lender
also represents that it will, independently and without reliance upon any Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition and creditworthiness of the Loan Parties and their
affiliates.  Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of any Loan Party or any affiliate
of a Loan Party that may come into the possession of the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.

 

9.7                                 Indemnification.The Lenders severally agree
to indemnify each Agent in its capacity as such (to the extent not reimbursed
by Holdings or the Borrower and without limiting the obligation of Holdings or
the Borrower to do so), ratably according to their respective Aggregate
Exposure Percentages in effect on the date on which indemnification is sought
under this Section (or, if indemnification is sought after the date upon
which the Commitments shall have terminated and the Loans shall have been paid
in full, ratably in accordance with such Aggregate Exposure Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever that may at any time (whether
before or after the payment of the Loans) be imposed on, incurred by or
asserted against such Agent in any way relating to or arising out of, the
Revolving Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any

 

71

 

portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from such Agent’s gross negligence or willful misconduct.  The agreements in this Section shall
survive the payment of the Loans and all other amounts payable hereunder.

 

9.8                                 Agents in Their Individual Capacities.Each
Agent and its affiliates may make loans to, accept deposits from and generally
engage in any kind of business with any Loan Party as though such Agent were not
an Agent.  With respect to its Loans
made or renewed by it and with respect to any Letter of Credit issued or
participated in by it, each Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not an Agent, and the terms “Lender” and “Lenders” shall
include each Agent in its individual capacity.

 

9.9                                 Successor Administrative Agent.The
Administrative Agent may resign as Administrative Agent upon 30 days’ notice to
the Lenders and the Borrower.  If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from
among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default under Section 8(a) or Section 8(f)
with respect to the Borrower shall have occurred and be continuing) be subject
to approval by the Borrower (which approval shall not be unreasonably withheld
or delayed), whereupon such successor agent shall succeed to the rights, powers
and duties of the Administrative Agent, and the term “Administrative Agent”
shall mean such successor agent effective upon such appointment and approval,
and the former Administrative Agent’s rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Loans. 
If no successor agent has accepted appointment as Administrative Agent
by the date that is 30 days following a retiring Administrative Agent’s notice
of resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and after consulting with the Lenders, appoint a successor
Administrative Agent, which successor agent shall (unless an Event of Default
under Section 8(a) or Section 8(f) with respect to the Borrower shall
have occurred and be continuing) be subject to approval by the Borrower (which
approval shall not be unreasonably withheld or delayed).  If no successor to the Administrative Agent
has accepted appointment as Administrative Agent by the date that is forty-five
(45) days following a retiring Administrative Agent’s notice of resignation,
the retiring Administrative Agent’s resignation shall nevertheless thereupon
become effective, and the Lenders shall assume and perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Required
Lenders appoint a successor agent as provided for above.  After any retiring Administrative Agent’s
resignation as Administrative Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement and the other Loan
Documents.

 

9.10                           Closing
Agent, Co-Documentation Agents and Syndication
Agent.JPMorgan Chase Bank and its affiliates, in their capacity as Closing
Agent shall be entitled to the protections, rights and benefits of this Section 9
to the same extent as Wachovia Bank, National Association and its affiliates in
their capacity as the Administrative Agent. 
Neither the Co-Documentation Agents nor the Syndication Agent shall have
any duties or responsibilities hereunder in its capacity as such.

 

SECTION 10.  MISCELLANEOUS

 

10.1                           Amendments and Waivers.Neither this
Agreement, any other Loan Document, nor any terms hereof or thereof may be
amended, supplemented or modified except in accordance with the provisions of
this Section 10.1.  The Required
Lenders and each Loan Party party to the relevant Loan Document may, or, with
the written consent of the Required Lenders, the Administrative Agent and each

 

72

 

Loan Party party to the relevant
Loan Document may, from time to time, (a) enter into written amendments,
supplements or modifications hereto and to the other Loan Documents for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of the Lenders or of the Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as the
Required Lenders or the Administrative Agent, as the case may be, may specify
in such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) forgive the principal amount of any Loan or extend the final scheduled
maturity date of any Loan, the scheduled date of any amortization payment in
respect of any Term Loan or the Revolving Termination Date, reduce the stated
rate of any interest or fee payable hereunder (except (x) in connection with
the waiver of applicability of any post-default increase in interest rates
(which waiver shall be effective with the consent of the Majority Facility
Lenders of each adversely affected Facility) and (y) that any amendment or
modification of defined terms used in the financial covenants in this Agreement
shall not constitute a reduction in the rate of interest or fees for purposes
of this clause (i)) or extend the scheduled date of any payment thereof, or
increase the amount or extend the expiration date of any Lender’s Revolving
Commitment, in each case without the written consent of each Lender directly
affected thereby;  (ii) eliminate or
reduce the voting rights of any Lender under this Section 10.1 without the
written consent of such Lender (other than through an increase of the
Commitments of other Lenders pursuant to Section 2.1(b) or with respect to
any Defaulting Lender); (iii) reduce any percentage specified in the definition
of Required Lenders or Supermajority Lenders, consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, release all or a material portion of
the Collateral (other than in connection with any transaction permitted
pursuant to Section 7.5) or release any significant Guarantor from its
obligations under the Guarantee and Collateral Agreement (other than in
connection with any transaction permitted pursuant to Section 7.5), in
each case without the written consent of all Lenders (other than Defaulting
Lenders); (iv) modify Section 2.1(b) without the consent of the
Supermajority Lenders; (v) amend, modify or waive any provision of
Section 2.17 without the written consent of the Majority Facility Lenders
in respect of each Facility adversely affected thereby; (vi) change the
allocation of any prepayment under this Agreement to any Facility or to the
installments of such Facility without the written consent of the Majority
Facility Lenders with respect to each relevant Facility; (vii) reduce the
percentage specified in the definition of Majority Facility Lenders with
respect to any Facility without the written consent of all Lenders under such
Facility; (viii) amend, modify or waive any provision of Section 9 without
the written consent of the Administrative Agent; (ix) amend, modify or waive
any provision of Section 2.6 or 2.7 without the written consent of the
Swingline Lender; or (x) amend, modify or waive any provision of Section 3
without the written consent of the Issuing Lender and provided, further,
that except as otherwise provided therein, the consent of the Lenders shall not
be required for any increase in Commitments pursuant to
Section 2.1(b).  Any such waiver
and any such amendment, supplement or modification shall apply equally to each
of the Lenders and shall be binding upon the Loan Parties, the Lenders, the
Administrative Agent and all future holders of the Loans.  In the case of any waiver, the Loan Parties,
the Lenders and the Administrative Agent shall be restored to their former
position and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.

 

10.2                           Notices.All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or five Business Days
after being deposited in the mail, postage prepaid; or, in the case of courier
via guaranteed next-day delivery, the next Business Day; or, in the case of
telecopy notice, when received, addressed as follows in the case of Holdings,
the Borrower and the Administrative Agent, and as set forth in an
administrative

 

73

 

questionnaire delivered
to the Administrative Agent in the case of the Lenders, or to such other
address as may be hereafter notified by the respective parties hereto:

 

	
  Holdings:

  	
   

  	
  MQ
  Associates, Inc.

  4300 North Point Parkway

  Alpharetta, Georgia 30022

  Attention: J. Kenneth Luke, President

  Telecopy: 770-246-0202

  Telephone: 770-300-0101

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy
  to:

  O’Melveny & Myers LLP

  30 Rockefeller Plaza, 41st Floor

  NY, NY 10112

  Attention: Christopher P. Giordano, Esq.

  Telecopy: 212-408-2420

  
	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  MedQuest,
  Inc.

  4300 North Point Parkway

  Alpharetta, Georgia 30022

  Attention: J. Kenneth Luke, President

  Telecopy: 770-246-0202

  Telephone: 770-300-0101

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy
  to:

  O’Melveny & Myers LLP

  30 Rockefeller Plaza, 41st Floor

  NY, NY 10112

  Attention: Christopher P. Giordano, Esq.

  Telecopy: 212-408-2420

  
	
   

  	
   

  	
   

  
	
  Administrative
  Agent:

  	
   

  	
  Wachovia
  Bank, National Association

  Syndication Agency Services

  201 South College Street, 8th Floor

  Charlotte, North Carolina  28288-0608

  Attention:  Syndication Agency
  Services

  Telecopy:  704-383-0288

  Telephone:  704-374-2698

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy
  to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wachovia
  Bank, National Association

  Healthcare Agency Management

  One Wachovia Center, 5th Floor

  301 South College Street, NC 0760

  Charlotte, North Carolina  28288-0760

  Attention:  Ms. Leanne Phillips

  Telecopy:  704-383-7611

  Telephone:  704-374-6278

  

 

74

 

provided
that any notice, request or demand to or upon the Administrative Agent or the
Lenders shall not be effective until received.

 

Notices and other communications to the
Lenders hereunder may be delivered or furnished by electronic communications
pursuant to procedures approved by the Administrative Agent; provided
that the foregoing shall not apply to notices pursuant to Section 2 unless
otherwise agreed by the Administrative Agent and the applicable Lender.  The Administrative Agent or the Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided
that approval of such procedures may be limited to particular notices or
communications.

 

10.3                           No Waiver; Cumulative Remedies.No
failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.

 

10.4                           Survival of Representations and
Warranties.All representations and warranties made hereunder, in the
other Loan Documents and in any document, certificate or statement delivered
pursuant hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the making of the Loans and other extensions of
credit hereunder.

 

10.5                           Payment of Expenses and Taxes.The
Borrower agrees (a) to pay or reimburse each Agent for all its out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to this Agreement,
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including the reasonable fees and
disbursements of counsel to each Agent and filing and recording fees and
expenses, with statements with respect to the foregoing to be submitted to the
Borrower prior to the Amendment Effective Date (in the case of amounts to be
paid on the Amendment Effective Date) and from time to time thereafter on a quarterly
basis or such other periodic basis as each Agent shall deem appropriate, (b) to
pay or reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to each Lender and of counsel
to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and
the Administrative Agent harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent and their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an “Indemnitee”) harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of any Group Member
or any of the Properties and the reasonable fees and expenses of legal

 

75

 

counsel in connection
with claims, actions or proceedings by any Indemnitee against any Loan Party
under any Loan Document (all the foregoing in this clause (d), collectively,
the “Indemnified Liabilities”), provided, that the Borrower shall have
no obligation hereunder to any Indemnitee with respect to Indemnified
Liabilities to the extent such Indemnified Liabilities resulted from the gross
negligence or willful misconduct of such Indemnitee.  All amounts due under this Section 10.5 shall be payable not
later than 10 days after written demand therefor.  Statements payable by the Borrower pursuant to this
Section 10.5 shall be submitted to J. Kenneth Luke (Telephone
No. 770-300-0101) (Telecopy No. 770-246-0202), at the address of the
Borrower set forth in Section 10.2, or to such other Person or address as
may be hereafter designated by the Borrower in a written notice to the
Administrative Agent.  The agreements in
this Section 10.5 shall survive repayment of the Loans and all other
amounts payable hereunder.

 

10.6                           Successors and Assigns;
Participations and Assignments.(a)  The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any affiliate of the Issuing Lender that
issues any Letter of Credit), except that (i) the Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of each Lender (and any attempted assignment or transfer by the
Borrower without such consent shall be null and void) and (ii) no Lender may
assign or otherwise transfer its rights or obligations hereunder except in
accordance with this Section.

 

(b)                                 (i)  Subject to the conditions set forth in
paragraph (b)(ii) below, any Lender may assign to one or more assignees (each,
an “Assignee”) all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Revolving Commitments and the
Loans at the time owing to it) with the prior written consent (such consent not
to be unreasonably withheld) of:

 

(A)                              the
Borrower, provided that no consent of the Borrower shall be required for
an assignment to a Lender, an Affiliate of a Lender, an Approved Fund (as
defined below) or, if an Event of Default has occurred and is continuing, any
other Person; and

 

(B)                                the
Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment, to a Lender, an Affiliate of a
Lender or an Approved Fund.

 

(ii)                                  Assignments
shall be subject to the following additional conditions:

 

(A)                              except
in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund or an assignment of the entire remaining amount of the assigning
Lender’s Commitments or Loans under any Facility, the amount of the Commitments
or Loans of the assigning Lender subject to each such assignment (determined as
of the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000 (or,
in the case of the Tranche B Term Facility or any Incremental Term Loan
Facility, $1,000,000) unless each of the Borrower and the Administrative Agent
otherwise consent, provided that (1) no such consent of the Borrower
shall be required if an Event of Default under Sections 8(a), (f) or (k) has
occurred and is continuing and (2) such amounts shall be aggregated in respect
of each Lender and its Affiliates or Approved Funds, if any;

 

(B)                                the
parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation
fee of $3,500;

 

(C)                                the
Assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an administrative questionnaire; and

 

76

 

(D)                               in
the case of an assignment to a CLO (as defined below), the assigning Lender
shall retain the sole right to approve any amendment, modification or waiver of
any provision of this Agreement and the other Loan Documents, provided
that the Assignment and Assumption between such Lender and such CLO may provide
that such Lender will not, without the consent of such CLO, agree to any
amendment, modification or waiver that (1) requires the consent of each Lender
directly affected thereby pursuant to the proviso to the second sentence of
Section 10.1 and (2) directly affects such CLO.

 

For the purposes of this Section 10.6,
the terms “Approved Fund” and “CLO” have the following meanings:

 

“Approved
Fund” means (a) a CLO and (b) with respect to any Lender that is a fund
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an Affiliate of such
investment advisor.

 

“CLO”
means any entity (whether a corporation, partnership, trust or otherwise) that
is engaged in making, purchasing, holding or otherwise investing in bank loans
and similar extensions of credit in the ordinary course of its business and is
administered or managed by a Lender or an Affiliate of such Lender.

 

(iii)                               Subject
to acceptance and recording thereof pursuant to paragraph (b)(iv) below,
from and after the effective date specified in each Assignment and Assumption
the Assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the 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 of
Sections 2.18, 2.19, 2.20 and 10.5). 
Any assignment or transfer by a Lender of rights or obligations under
this Agreement that does not comply with this Section 10.6 shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c)
of this Section.

 

(iv)                              The
Administrative Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Revolving Commitments of, and principal amount of the
Loans and L/C Obligations 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 Lender 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 Lender and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

 

(v)                                 Upon
its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an Assignee, the Assignee’s completed administrative
questionnaire (unless the Assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this
Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register.  No assignment shall be effective for
purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.

 

77

 

(c)                                  (i)  Any
Lender may, without the consent of the Borrower or the Administrative Agent,
sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Revolving Commitments and the
Loans owing to it); provided that (A) such Lender’s obligations
under this Agreement shall remain unchanged, (B) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations and (C) the Borrower, the Administrative Agent, the Issuing
Lender and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such agreement may provide that such Lender will not, without the consent of
the Participant, agree to any amendment, modification or waiver that (1)
requires the consent of each Lender directly affected thereby pursuant to the
proviso to the second sentence of Section 10.1 and (2) directly affects
such Participant.  Subject to paragraph
(c)(ii) of this Section, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.18, 2.19 and 2.20 to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section.  To the
extent permitted by law, each Participant also shall be entitled to the
benefits of Section 10.7(b) as though it were a Lender, provided
such Participant shall be subject to Section 10.7(a) as though it were a
Lender.

 

(ii)                                  A
Participant shall not be entitled to receive any greater payment under
Section 2.18 or 2.19 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrower’s prior
written consent.  Any Participant that
is a Non-U.S. Lender shall not be entitled to the benefits of Section 2.19
unless such Participant complies with Section 2.19(d).

 

(d)                                 Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that any such pledge or
assignment (other than to secure obligations to a Federal Reserve Bank) shall
be in connection with a bona fide pledge or assignment of a security interest
in all or a substantial portion of such Lender’s lending portfolio; provided
further that no such pledge or assignment of a security interest shall
release a Lender from any of its obligations hereunder or substitute any such
pledgee or Assignee for such Lender as a party hereto.

 

(e)                                  The
Borrower, upon receipt of written notice from the relevant Lender, agrees to
issue Notes to any Lender requiring Notes to facilitate transactions of the
type described in paragraph (d) above.

 

(f)                                    Notwithstanding
the foregoing, any Conduit Lender may assign any or all of the Loans it may
have funded hereunder to its designating Lender without the consent of the
Borrower or the Administrative Agent and without regard to the limitations set
forth in Section 10.6(b).  Each of
Holdings, the Borrower, each Lender and the Administrative Agent hereby
confirms that it will not institute against a Conduit Lender or join any other
Person in instituting against a Conduit Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any state bankruptcy or
similar law, for one year and one day after the payment in full of the latest
maturing commercial paper note issued by such Conduit Lender; provided,
however, that each Lender designating any Conduit Lender hereby agrees to
indemnify, save and hold harmless each other party hereto for any loss, cost,
damage or expense arising out of its inability to institute such a proceeding
against such Conduit Lender during such period of forbearance.

 

78

 

10.7                           Adjustments; Set-off.(a)  Except
to the extent that this Agreement expressly provides for payments to be
allocated to a particular Lender or to the Lenders, if any Lender (a
“Benefitted Lender”) shall, at any time after the Loans and other amounts
payable hereunder shall immediately become due and payable pursuant to
Section 8, receive any payment of all or part of the Obligations owing to
it, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 8(f), or otherwise), in a greater proportion than
any such payment to or collateral received by any other Lender, if any, in
respect of the Obligations owing to such other Lender, such Benefitted Lender
shall purchase for cash from the other Lenders a participating interest in such
portion of the Obligations owing to each such other Lender, or shall provide
such other Lenders with the benefits of any such collateral, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.

 

(b)                                 In
addition to any rights and remedies of the Lenders provided by law, upon the
occurrence and during the continuance of an Event of Default, each Lender shall
have the right, without prior notice to Holdings or the Borrower, any such
notice being expressly waived by Holdings and the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by
Holdings or the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise), to set off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of Holdings or the Borrower,
as the case may be.  Each Lender agrees
promptly to notify the Borrower and the Administrative Agent after any such
setoff and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such setoff and application.

 

10.8                           Counterparts.This Agreement may be executed
by one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. 
Delivery of an executed signature page of this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.  A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.

 

10.9                           Severability.Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.

 

10.10                     Integration.This Agreement and the other
Loan Documents represent the entire agreement of Holdings, the Borrower, the
Administrative Agent and the Lenders with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent or any Lender relative to the subject
matter hereof not expressly set forth or referred to herein or in the other
Loan Documents.

 

10.11                     GOVERNING LAW.THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

79

 

10.12                     Submission To Jurisdiction; Waivers.Each
of Holdings and the Borrower hereby irrevocably and unconditionally:

 

(a)                                  submits for itself
and its property in any legal action or proceeding relating to this Agreement
and the other Loan Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the United
States for the Southern District of New York, and appellate courts from
any thereof;

 

(b)                                 consents that any such
action or proceeding may be brought in such courts and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;

 

(c)                                  agrees that service
of process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to Holdings or the Borrower, as the case may be at its
address set forth in Section 10.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;

 

(d)                                 agrees that nothing
herein shall affect the right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any other jurisdiction; and

 

(e)                                  waives, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages.

 

10.13                     Acknowledgements.Each of Holdings and
the Borrower hereby acknowledges that:

 

(a)                                  it has been advised
by counsel in the negotiation, execution and delivery of this Agreement and the
other Loan Documents;

 

(b)                                 neither the
Administrative Agent nor any Lender has any fiduciary relationship with or duty
to Holdings or the Borrower arising out of or in connection with this Agreement
or any of the other Loan Documents, and the relationship between Administrative
Agent and Lenders, on one hand, and Holdings and the Borrower, on the other
hand, in connection herewith or therewith is solely that of debtor and
creditor; and

 

(c)                                  no joint venture is
created hereby or by the other Loan Documents or otherwise exists by virtue of
the transactions contemplated hereby among the Lenders or among Holdings, the
Borrower and the Lenders.

 

10.14                     Releases of Guarantees and Liens.(a)  Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
Administrative Agent is hereby irrevocably authorized by each Lender (without
requirement of notice to or consent of any Lender except as expressly required
by Section 10.1) to take any action requested by the Borrower having the
effect of releasing any Collateral or Guarantee Obligations (i) to the extent
necessary to permit consummation of any transaction not prohibited by any Loan
Document or that has been consented to in accordance with Section 10.1 or
(ii) under the circumstances described in paragraph (b) below.

 

80

 

(b)                                 At
such time as the Loans, the Reimbursement Obligations and all fees due and
owing under the Loan Documents shall have been paid in full, the Revolving
Commitments have been terminated and no Letters of Credit shall be outstanding,
the Collateral shall be released from the Liens created by the Security
Documents, and the Security Documents and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent and
each Loan Party under the Security Documents shall terminate, all without
delivery of any instrument or performance of any act by any Person.

 

10.15                     Confidentiality.Each of the Administrative
Agent and each Lender agrees to keep confidential all non-public information
provided to it by any Loan Party pursuant to this Agreement that is designated
by such Loan Party as confidential; provided that nothing herein shall prevent
the Administrative Agent or any Lender from disclosing any such information (a)
to the Administrative Agent, any other Lender or any affiliate thereof, (b)
subject to an agreement to comply with the provisions of this Section, to any
actual or prospective Transferee or any direct or indirect counterparty to any
Swap Agreement (or any professional advisor to such counterparty), (c) on a
confidential basis, to its employees, directors, agents, attorneys, accountants
and other professional advisors or those of any of its affiliates, (d) upon the
request or demand of any Governmental Authority, (e) in response to any order
of any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (f) if requested or required to do so in
connection with any litigation or similar proceeding, (g) that has been
publicly disclosed other than by the Administrative Agent, any Lender or their
respective affiliates, (h) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender’s investment
portfolio in connection with ratings issued with respect to such Lender, or (i)
in connection with the exercise of any remedy hereunder or under any other Loan
Document.  Each Lender shall have the
right to review and approve any public announcement made after the date hereof
relating to such Lender or any of its affiliates or to any matters contemplated
hereby, before any such announcement is made (such approval not to be unreasonably
withheld or delayed); provided that this paragraph shall not apply to the
extent any such disclosure may be compelled in a judicial or administrative
proceeding or as otherwise required by law (including any filings required by
the SEC). Notwithstanding anything herein to the contrary, any party to this
Agreement (and any employee, representative, or other agent of any party to
this Agreement) may disclose to any and all persons, without limitation of any
kind, the tax treatment and tax structure of the transactions contemplated by
this Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure.  However, any such information
relating to the tax treatment or tax structure is required to be kept
confidential to the extent necessary to comply with any applicable federal or
state securities laws.

 

10.16                     WAIVERS OF JURY
TRIAL.HOLDINGS,
THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

81

 

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

 

	
   

  	
  MQ
  ASSOCIATES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John K. Luke

  	
   

  
	
   

  	
   

  	
  Name: John K. Luke

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MEDQUEST,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gene Venesky

  	
   

  
	
   

  	
   

  	
  Name: 
  Gene Venesky

  
	
   

  	
   

  	
  Title: CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, as Syndication Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dawn Lee Lum

  	
   

  
	
   

  	
   

  	
  Name: 
  Dawn Lee Lum

  
	
   

  	
   

  	
  Title:  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION, as

  Administrative Agent, Co-Documentation Agent

  and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Leanne S. Phillips

  	
   

  
	
   

  	
   

  	
  Name: 
  Leanne S. Phillips

  
	
   

  	
   

  	
  Title:  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL CORPORATION,

  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  illegible

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CHASE
  LINCOLN FIRST COMMERCIAL CORP.,

  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Thomas Kozlark

  	
   

  
	
   

  	
   

  	
  Name: 
  Thomas Kozlark

  
	
   

  	
   

  	
  Title:  Vice President

  
						

 

82

 

	
   

  	
  UBS AG,
  STAMFORD BRANCH, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Wilfred V. Saint

  	
   

  
	
   

  	
   

  	
  Name: 
  Wilfred V. Saint

  
	
   

  	
   

  	
  Title:  Associate Director,

  
	
   

  	
   

  	
  Banking
  Products Services, US

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Juan Zuniga

  	
   

  
	
   

  	
   

  	
  Name: 
  Juan Zuniga

  
	
   

  	
   

  	
  Title:  Associate Director,

  
	
   

  	
   

  	
  Banking
  Products Services, US

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Foothill
  Income Trust, L.P.

  
	
   

  	
  By FIT GP,
  LLC, Its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  M.E. Stearns

  	
   

  
	
   

  	
   

  	
  Name: 
  M.E. Stearns

  
	
   

  	
   

  	
  Title:  Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KZH Cypress
  Tree-1 LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Dorian Herrera

  	
   

  
	
   

  	
   

  	
  Name: 
  Dorian Herrera

  
	
   

  	
   

  	
  Title:  Authorized Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KZH ING-2
  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Dorian Herrera

  	
   

  
	
   

  	
   

  	
  Name: 
  Dorian Herrera

  
	
   

  	
   

  	
  Title:  Authorized Agent

  
					

 

83Exhibit 10(g)

 

[BARCODE]

*01010055716200000110010E40*

 

COMMERCIAL SECURITY AGREEMENT

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call/Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $5,000,000.00

  	
   

  	
  05-21-2003

  	
   

  	
   

  	
   

  	
  11001

  	
   

  	
  402/326

  	
   

  	
  N0100567162

  	
   

  	
  RXW0Y

  	
   

  	
   

  	
   

  

 

References in the shaded area are for Lender’s use only and do not
limit the applicability of this document to any particular loan or item.

Any item above containing ***** has been omitted due to text length
limitations.

 

	
  Grantor:

  	
  The Ohio Art Company

  1 Toy St., P.O. Box 111

  Bryan, OH 43506

  	
   

  	
  Lender:

  	
  KeyBank National Association

  OH-MM-Toledo-Seagate

  3 Seagate

  Toledo, OH 43504

  

 

THIS
COMMERCIAL SECURITY AGREEMENT dated May 21, 2003, is made and executed between
The Ohio Art Company (“Grantor”) and KeyBank National Association (“Lender”).

 

GRANT
OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

 

COLLATERAL
DESCRIPTION. The word “Collateral” as used in this
Agreement means the following described property, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and whenever
located, in which Grantor is giving to Lender a security interest for the
payment of the Indebtedness and performance of all other obligations under the
Note and this Agreement:

 

All inventory, equipment, accounts (including
but not limited to all health–care–insurance receivables), chattel paper,
instruments (including but not limited to all promissory notes),
letter–of–credit rights, letters of credit, documents, deposit accounts,
investment property, money, other rights to payment and performance, and
general intangibles (including but not limited to all software and all payment
intangibles); all attachments, accessions, accessories, fittings, increases,
tools, parts, repairs, supplies, and commingled goods relating to the foregoing
property, and all additions, replacements of and substitutions for all or any
part of the foregoing property; all insurance refunds relating to the foregoing
property; all good will relating to the foregoing property; all records and
data and embedded software relating to the foregoing property, and all
equipment, inventory and software to utilize, create, maintain and process any
such records and data on electronic media; and all supporting obligations
relating to the foregoing property; all whether now existing or hereafter
arising, whether now owned or hereafter acquired or whether now or hereafter
subject to any rights in the foregoing property; and all products and proceeds
(including but not limited to all insurance payments) of or relating to the
foregoing property; whether any of the foregoing is owned now or acquired
later; all accessions, additions, replacements, and substitutions relating to
any of the foregoing; all records of any kind relating to any of the foregoing;
all proceeds relating to any of the foregoing (including insurance, general
intangibles and accounts proceeds)

 

In addition, the word
“Collateral” also includes all the following, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and whenever located:

 

(A)      All accessions, attachments,
accessories, tools, parts, supplies, replacements of and additions to any of
the collateral described herein, whether added now or later,

 

(B)        All products and produce
of any of the property described in this Collateral section.

 

(C)        All accounts, general
intangibles, instruments, rents, monies, payments, and all other rights,
arising out of a sale, lease, or other disposition of any of the property
described in this Collateral section.

 

(D)       All proceeds (including
insurance proceeds) from the sale, destruction, loss, or other disposition of
any of the property described in this Collateral section, and sums due from a
third party who has damaged or destroyed the Collateral or from that party’s
insurer, whether due to judgment, settlement or other process.

 

(E)         All records and data
relating to any of the property described in this Collateral section, whether
in the form of a writing, photograph, microfilm, microfione, or electronic
media, together with all of Grantor’s right, title, and interest in and to all
computer software required to utilize, create, maintain, and process any such
records or data on electronic media.

 

Despite any other provision of
this Agreement, Lender is not granted, and will not have, a nonpurchase money
security interest in household goods, to the extent such a security interest
would be prohibited by applicable law. In addition, if because of the type of
any Property, Lender is required to give a notice of the right to cancel under
Truth in Lending for the Indebtedness, then Lender will not have a security
interest in such Collateral unless and until such a notice is given.

 

CROSS–COLLATERALIZATION.
In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to
Lender, or any one or more of them, as well as all claims by Lender against
Grantor or any one or more of them, whether now existing or hereafter arising,
whether related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined,
absolute or contingent, liquidated or unliquidated whether Grantor may be
liable individually or jointly with others, whether obligated as guarantor,
surety, accommodation party or otherwise, and whether recovery upon such
amounts may be or hereafter may become barred by any statute of limitations,
and whether the obligation to repay such amounts may be or hereafter may become
otherwise unenforceable.

 

RIGHT
OF SETOFF. To the extent permitted by applicable law,
Lender reserves a right of setoff in all Grantor’s accounts with Lender
(whether checking, savings, or some other account). This includes all accounts
Grantor holds jointly with someone else and all accounts Grantor may open in
the future. However, this does not include any IRA or Keogh accounts, or any
trust accounts for which setoff would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all sums
owing on the Indebtedness against any and all such accounts.

 

GRANTOR’S
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

 

Perfection of Security Interest. Grantor
agrees to execute financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender’s security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender any and all
of the documents evidencing or constituting and Collateral, and Grantor will
note Lender’s interest upon any and all chattel paper if not delivered to
Lender for possession by Lender. This is a
continuing Security Agreement and will continue in effect even though all or
any part of the

 

 

Indebtedness is paid in full and even though
for a period of time Grantor may not be indebted to Lender.

 

Notices to Lender.
Grantor will promptly notify Lender in writing at Lender’s address shown above
(or such other addresses as Lender may designate from time to time) prior to
any (1) change in Grantor’s name; (2) change in Grantor’s assumed business
name(s); (3) change in the management of the Corporation Grantor; (4) change in
the authorized signer(s); (5) change in Grantor’s principal office address; (6)
change in Grantor’s state of organization; (7) conversion of Grantor to a new
or different type of business entity; or (8) change in any other aspect of
Grantor that directly or indirectly relates to any agreements between Grantor
and Lender. No change in Grantor’s name or state of organization will take
effect until after Lender has received notice.

 

No Violation. The
execution and delivery of this Agreement will not violate any law or agreement
governing Grantor or to which Grantor is a party, and its certificate or
articles of incorporation and bylaws or code of regulations do not prohibit any
term or condition of this Agreement.

 

Enforceability of Collateral.
To the extent the Collateral consists of accounts, chattel paper, or general
intangibles, as defined by the Uniform Commercial Code, the Collateral is
enforceable in accordance with its terms, is genuine, and fully complies with
all applicable laws and regulations concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as
they appear to be on the Collateral. At the time any Account becomes subject to
a security interest in favor of Lender, the Account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
previously shipped or delivered pursuant to a contract of sale, or for services
previously performed by Grantor with or for the account debtor. So long as this
Agreement remains in effect, Grantor shall not, without Lender’s prior written
consent, compromise, settle, adjust, or extend payment under or with regard to
any such Accounts. There shall be no setoffs or counterclaims against any of
the Collateral, and no agreement shall have been made under which any
deductions or discounts may be claimed concerning the Collateral except those
disclosed to Lender in writing.

 

Location of the Collateral.
Except in the ordinary course of Grantor’s business, Grantor agrees to keep the
Collateral (or to the extent the Collateral consists of intangible property
such as accounts or general intangibles, the records concerning the Collateral)
at Grantor’s address shown above or at such other locations as are acceptable
to Lender. Upon Lender’s request, Grantor will deliver to Lender in form
satisfactory to Lender a schedule of real properties and Collateral locations
relating to Grantor’s operations, including without limitation the following:
(1) all real property Grantor owns or is purchasing; (2) all real property
Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses; and (4) all other properties where Collateral is or may be
located.

 

Removal of the Collateral.
Except in the ordinary course of Grantor’s business, including the sales of
inventory, Grantor shall not remove the Collateral from its existing location
without Lender’s prior written consent. To the extent that the Collateral
consists of vehicles, or other titled property, Grantor shall not take or
permit any action which would require application for certificates of title for
the vehicles outside the State of Ohio, without Lender’s prior written consent.
Grantor shall, whenever requested, advise Lender of the exact location of the
Collateral.

 

Transactions Involving Collateral.
Except for inventory sold or accounts collected in the ordinary course of
Grantor’s business, or as otherwise provided for in this Agreement, Grantor
shall not sell, offer to sell, or otherwise transfer or dispose of the
Collateral. While Grantor is not in default under this Agreement, Grantor may
sell inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale in the
ordinary course of Grantor’s business does not include a transfer in partial or
total satisfaction of a debt of any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to any
lien, security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written consent of
Lender.  This includes security
interests even if junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition of the
Collateral (for whatever reason) shall be held in trust for Lender and shall
not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.

 

Title. Grantor
represents and warrants to Lender that Grantor holds good and marketable title
to the Collateral, free and clear of all liens and encumbrances except for the
lien of this Agreement. No financing statement covering any of the Collateral
is on file in any public office other than those which reflect the security
interest created by this Agreement or to which Lender has specifically
consented. Grantor shall defend Lender’s rights in the Collateral against the
claims and demands of all other persons.

 

Repairs and Maintenance.
Grantor agrees to keep and maintain, and to cause others to keep and maintain,
the Collateral in good order, repair and condition at all times while this
Agreement remains in effect. Grantor further agrees to pay when due all claims
for work done on, or services rendered or material furnished in connection with
the Collateral so that no lien or encumbrance may ever attach to or be filed
against the Collateral.

 

Inspection of Collateral.
Lender and Lender’s designated representatives and agents shall have the right
at all reasonable times to examine and inspect the Collateral wherever located.

 

Taxes, Assessments and Liens.
Grantor will pay when due all taxes, assessments and liens upon the Collateral,
its use or operation, upon this Agreement, upon any promissory note or notes
evidencing the indebtedness, or upon any of the other Related Documents.
Grantor may withhold any such payment or may elect or contest any lien if
Grantor is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender’s interest in the Collateral is not
jeopardized in Lender’s sole opinion. If the Collateral is subjected to a lien
which is not discharged within fifteen (15) days, Grantor shall deposit with
Lender cash, a sufficient corporate surety bond or other security satisfactory
to Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys’ fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment before
enforcement against the Collateral. Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings. Grantor
further agrees to furnish Lender with evidence that such taxes, assessments,
and governmental and other charges have been paid in full and in a timely
manner. Grantor may withhold any such payment or may elect to contest any lien
if Grantor is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender’s interest in the Collateral is not
jeopardized.

 

Compliance with Governmental Requirements. Grantor
shall comply promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral, including all
laws or regulations relating to the undue erosion of highly-erodible land or
relating to the conversion of wetlands for the production of an agricultural product
or commodity. Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including appropriate
appeals, so long as Lender’s interest in the Collateral, in Lender’s opinion,
is not jeopardized.

 

Hazardous Substances.
Grantor represents and warrants that the Collateral never has been, and never
will be so long as this Agreement remains a lien on the Collateral, used in
violation of any Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
Hazardous Substance. The representations and warranties contained herein are
based on Grantor’s due diligence in investigating the Collateral for Hazardous
Substances. Grantor hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes liable for
cleanup or other costs under any Environmental Laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This obligation to
indemnify shall survive the payment of the Indebtedness and the satisfaction of
this Agreement.

 

2

 

Maintenance of Casualty Insurance.  Grantor shall
procure and maintain all risks insurance, including without limitation fire,
theft and liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages and basis
reasonably acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days’ prior written notice to Lender and
not including any disclaimer of the insurer’s liability for failure to give
such a notice.  Each insurance policy
also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor or
any other person.  In connection with
all policies covering assets in which Lender holds or is offered a security
interest, Grantor will provide Lender with such loss payable or other
endorsements as Lender may require.  If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if Lender so chooses “single
interest insurance,” which will cover only Lender’s interest in the Collateral.

 

Application of Insurance Proceeds.  Grantor shall promptly notify Lender of any
loss or damage to the Collateral. 
Lender may make proof of loss if Grantor fails to do so within fifteen
(15) days of the casualty.  All proceeds
of any insurance on the Collateral, including accrued proceeds thereon, shall
be held by Lender as part of the Collateral. 
If Lender consents to repair or replacement of the damaged or destroyed
Collateral, Lender shall, upon satisfactory proof of expenditure, pay or
reimburse Grantor from the proceeds for the reasonable cost of repair or restoration.  If Lender does not consent to repair or
replacement of the Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the indebtedness, and shall pay the balance to Grantor.  Any proceeds which have not been disbursed
within six (6) months after their receipt and which Grantor has not committed
to the repair or restoration of the Collateral shall be used to prepay the
indebtedness.

 

Insurance Reserves.  Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due date,
amounts at least equal to the insurance premiums to be paid.  If fifteen (15) days before payment is due,
the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender.  The reserve funds
shall be held by Lender as a general deposit and shall constitute a
non-interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due.  Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for payment of the
insurance premiums required to be paid by Grantor.  The responsibility for the payment of premiums shall remain
Grantor’s sole responsibility.

 

Insurance Reports.  Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (1) the
name of the insurer; (2) the risks insured; (3) the amount of the policy; (4)
the property insured; (5) the then current value on the basis of which
insurance has been obtained and the manner of determining that value; and (6)
the expiration date of the policy.  In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.

 

Financing Statements.  Grantor authorizes Lender to file a UCC-1
financing statement, or alternatively, a copy of this Agreement to perfect
Lender’s security interest.  At Lender’s
request, Grantor additionally agrees to sign all other documents that are
necessary to perfect, protect, and continue Lender’s security interest in the
Property.  Grantor will pay all filing
fees, the transfer fees, and other fees and costs involved unless prohibited by
law or unless Lender is required by law to pay such fees and costs.  Grantor irrevocably appoints Lender to
execute financing statements and documents of title in Grantor’s name and to
execute all documents necessary to transfer title if there is a default. Lender
may file a copy of this Agreement as a financing statement.  If Grantor changes Grantor’s name or
address, or the name or address of any person granting a security interest
under this Agreement changes, Grantor will promptly notify the Lender of such
change.

 

GRANTOR’S
RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS.  Until default and except as otherwise
provided below with respect to accounts, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor’s right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender’s security interest in such Collateral.  Until otherwise notified by Lender, Grantor
may collect any of the Collateral consisting of accounts.  At any time and even though no Default
exists, Lender may exercise its rights to collect the accounts and to notify
account debtors to make payments directly to Lender for application to the
Indebtedness.  If Lender at any time has
possession of any Collateral, whether before or after Default, Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral if Lender takes such action for that purpose as Grantor shall
request or as Lender, in Lender’s sole discretion, shall deem appropriate under
the circumstances, but failure to honor any request by Grantor shall not of
itself be deemed to be a failure to exercise reasonable care.  Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
indebtedness.

 

LENDER’S
EXPENDITURES. 
If any action or proceeding is commenced that would materially affect
Lender’s interest in the Collateral or if Grantor fails to comply with any
provision of this Agreement or any Related Documents, including but not limited
to Grantor’s failure to discharge or pay when due any amounts Grantor is
required to discharge or pay under this Agreement or any Related Documents,
Lender on Grantor’s behalf may (but shall not be obligated to) take any action
that Lender deems appropriate, including but not limited to discharging or
paying all taxes, liens, security interests, encumbrances and other claims, at
any time levied or placed on the Collateral and paying all costs for insuring,
maintaining and preserving the Collateral. 
All such expenditures incurred or paid by Lender for such purposes will
then bear interest at the rate charged under the Note from the date incurred or
paid by Lender to the date of repayment by Grantor.  All such expenses will become a part of the Indebtedness and, at
Lender’s option, will (A) be payable or demand; (B) be added to the balance of
the Note and be apportioned among and be payable with any installment payments
to become due during either (1) the term of any applicable insurance policy; or
(2) the remaining term of the Note; or (C) be treated as a balloon payment
which will be due and payable at the Note’s maturity.  The Agreement also will secure payment of these amounts.  Such right shall be in addition to all other
rights and remedies to which Lender may be entitled upon Default.

 

DEFAULT.  Default will occur if payment in full is not
made immediately when due.

 

RIGHTS
AND REMEDIES ON DEFAULT.  If Default occurs under this Agreement, at any time thereafter,
Lender shall have all the rights of a secured party under the Ohio Uniform
Commercial Code.  In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:

 

Accelerate Indebtedness.  Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice of any kind to Grantor.

 

Assemble Collateral.  Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral.  Lender may require Grantor to assemble the Collateral and make it
available to Lender at a place to be designated by Lender.  Lender also shall have full power to enter
upon the property of Grantor to take possession of and remove the
Collateral.  If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.

 

Sell the Collateral.  Lender shall have full power to sell, lease,
transfer, or otherwise deal with Collateral or proceeds thereof in Lender’s own
name or that of Grantor.  Lender may
sell the Collateral at public auction or private sale.  Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market
Lender will give Grantor, and other persons as required by law, reasonable
notice of

 

3

 

the time and
place of any public sale, or the time after which any private sale or any other
disposition of the Collateral is to be made. However, no notice need be
provided to any person who, after Event of Default occurs, enters into and
authenticates an agreement waiving that person’s right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or disposition. All expenses relating
to the disposition of the Collateral, including without limitation the expenses
of retaking, holding, insuring, preparing for sale and selling the Collateral,
shall become a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of expenditure
until repaid.

 

Appoint Receiver.  Lender shall have the right to have a
receiver appointed to take possession of all or any part of the Collateral,
with the power to protect and preserve the Collateral, to operate the
Collateral preceding foreclosure or sale, and to collect the Rents from the
Collateral and apply the proceeds, over and above the cost of the receivership,
against the Indebtedness. The receiver may serve without bond if permitted by
law.  Lender’s right to the appointment
of a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall
not disqualify a person from serving as a receiver.

 

Collect Revenues, Apply Accounts.  Lender, either
itself or through a receiver, may collect the payments, rents, income and
revenues from the Collateral. Lender may at any time in Lender’s discretion
transfer any Collateral into Lender’s own name or that of Lender’s nominee and
receive the payments, rents, income, and revenues therefrom and hold the same
as security for the Indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine. Insofar as the Collateral consists
of accounts, general intangibles, insurance policies, instruments, chattel
paper, chooses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the
Collateral as Lender may determine, whether or not Indebtedness or Collateral
is then due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive open, and dispose of mail addressed to Grantor; change any
address to which mail and payments are to be sent: and endorse notes, checks,
drafts, money orders, documents of file, instruments and items pertaining to
payment, shipment, or storage of any Collateral. To facilitate collection,
Lender may notify account debtors and obligors on any Collateral to make
payments directly to Lender.

 

Obtain Deficiency.  If Lender chooses to sell any or all of
the Collateral, Lender may obtain a judgment against Grantor for any deficiency
remaining on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement. Grantor
shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.

 

Other Rights and Remedies.  Lender shall have
all the rights and remedies of a secured creditor under the provisions of the
Uniform Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and remedies it may
have available at law, in equity, or otherwise.

 

Election of Remedies.  Except as may be
prohibited by applicable law, all of Lender’s rights and remedies, whether
evidenced by this Agreement, the Related Documents, or by any other writing,
shall be cumulative and may be exercised singularly or concurrently. Election
by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an obligation
of Grantor under this Agreement, after Grantor’s failure to perform, shall not
affect Lender’s right to declare a default and exercise its remedies.

 

MISCELLANEOUS
PROVISIONS. 
The following miscellaneous provisions are a part of this Agreement:

 

Amendments.  This Agreement, together with any Related
Documents, constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. 
No alteration of or amendment to this Agreement shall be effective
unless given in writing and signed by the party or parties sought to be changed
or bound by the alteration or amendment.

 

Attorneys’ Fees;  Expenses. Grantor
agrees to pay upon demand all of Lender’s costs and expenses, including
Lender’s attorney’s fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and expenses of
such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal
expenses whether or not there is a lawsuit, including attorneys’ fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post–judgment
collection services. Grantor also shall pay all court costs and such additional
fees as may be directed by the court.

 

Caption Headings.  Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.

 

Governing Law.  This Agreement will be governed by, construed and enforced in
accordance with federal law and laws of the State of Ohio. This Agreement has
been accepted by Lender in the State of Ohio.

 

No Waiver by Lender.
Lender shall not be deemed to have waived any rights under this Agreement
unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other
provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver of any Lender’s
rights or of any of Grantor’s obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required and in all cases
such consent may be granted or withheld in the sole discretion of Lender.

 

Notices.  Any notice required to be given under this
Agreement shall be given in writing, and shall be effective when actually delivered,
when actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if mailed,
when deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near the
beginning of this Agreement. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party’s address. For notice
purposes, Grantor agrees to keep Lender informed at all times of Grantor’s
current address. Unless otherwise provided or required by law, if there is more
than one Grantor, any notice given by Lender to any Grantor is deemed to be
notice given to all Grantors.

 

Power of Attorney.  Grantor hereby appoints Lender as Grantor’s
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect, amend, or to continue the security interest granted in
this Agreement or to demand termination of filings of other secured parties.
Lender may at any time, and without further authorization from Grantor, file a
carbon, photographic or other reproduction of any financing statement or of
this Agreement for use as a financing statement. Grantor will reimburse Lender
for all expenses for the perfection and the continuation of the perfection of
Lender’s security interest in the Collateral.

 

Severability.  If a court of competent jurisdiction finds
any provision of this Agreement to be illegal, invalid, or unenforceable as to
any circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement. Unless otherwise required by
law, the illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any
other provision of this Agreement.

 

4

 

Successors and Assigns.  Subject to any limitations stated in this
Agreement on transfer of Grantor’s interest, this Agreement shall be binding
upon and inure to the benefit of the parties, their successors and
assigns.  If ownership of the Collateral
becomes vested in a person other than Grantor, Lender, without notice to
Grantor, may deal with Grantor’s successors with reference to this Agreement
and the Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Agreement or liability under the
Indebtedness.

 

Survival of Representations and Warranties.  All
representations, warranties, and agreements made by Grantor in this Agreement
shall survive the execution and delivery of this Agreement, shall be continuing
in nature, and shall remain in full force and effect until such time as
Grantor’s Indebtedness shall be paid in full.

 

Time is of the Essence.  Time is of the
essence in the performance of this Agreement.

 

Waive Jury. 
All parties to this Agreement hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by any party against any
other party.

 

DEFINITIONS.              The following
capitalized words and terms shall have the following meanings when used in this
Agreement.  Unless specifically stated
to the contrary, all references to dollar amounts shall mean amounts in lawful
money of the United States of America. 
Words and terms used in the singular shall include the plural, and the
plural shall include the singular, as the context may require.  Words and terms not otherwise defined in
this Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code:

 

Account. 
The word “Account” means a trade account,
account receivable, other receivable, or other right to payment for goods sold
or services rendered owing to Grantor (or to a third party grantor acceptable
to Lender).

 

Agreement.  The word “Agreement” means this Commercial
Security Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules attached
to this Commercial Security Agreement from time to time.

 

Borrower.  The word “Borrower” means The Ohio Art
Company, and all other persons and entities signing the Note in whatever
capacity.

 

Collateral. 
The word  “Collateral”
means all of Grantor’s right, title and interest in and to all the Collateral
as described in the Collateral Description section of this Agreement.

 

Default. 
The word “Default” means the Default set forth
in this Agreement in the section titled “Default”.

 

Environmental Laws.  The words “Environmental Laws” mean any
and all state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”),
the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
(“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., or other applicable state or federal laws, rules, or regulations accepted
pursuant thereto.

 

Event of Default.  The words “Event of Default” mean any of
the events of default set forth in this Agreement in the default section of
this Agreement.

 

Grantor. 
The word “Grantor” means the Ohio Art Company.

 

Hazardous Substances.  The words
“Hazardous Substances” mean materials that, because of their quantity,
concentration or physical, chemical, or infectious characteristics, may cause
or pose a present or potential hazard to human health or the environment when
improperly used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled.  The
words “Hazardous Substances” are used in their very broadest sense and include
without limitation any and all hazardous or toxic substances, materials or
waste as defined by or listed under the Environmental Laws.  The term “Hazardous Substances” also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.

 

Indebtedness.  The word “Indebtedness” means the
indebtedness evidenced by the Note or related Documents, including all
principal and interest together will all other indebtedness and costs and
expenses for which Grantor is responsible under this Agreement or under any of
the Related Documents.

 

Lender. 
The word “Lender” means KeyBank National
Association, its successors and assigns.

 

Note.  The word “Note” means the Note executed by
The Ohio Art Company in the principal amount of $5,000,000.00 dated May 21,
2003, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or credit
agreement.

 

Property. 
The word “Property” means all of Grantor’s
right, title and interest in and to all the Property as described in the
“Collateral Description” section of this Agreement.

 

Related Documents.  The words “Related Documents” mean all
promissory notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security deeds,
collateral mortgages, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.

 

GRANTOR
HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS.  THIS
AGREEMENT IS DATED MAY 21, 2003.

 

GRANTOR:

 

 

THE
OHIO ART COMPANY

 

	
  By:

  	
  /s/ Jerry D. Kneipp

  	
   

  
	
   

  	
  Jerry D. Kneipp, CFO & Treasurer of The Ohio Art Company

  

 

5

 

FIRST AMENDMENT

TO

COMMERCIAL SECURITY AGREEMENT

 

 

This First Amendment To Commercial Security Agreement is made as of the
21st day of May, 2003 by and between THE OHIO
ART COMPANY, an Ohio corporation, (the “Grantor”) and KEYBANK NATIONAL ASSOCIATION, a national
banking association (the “Lender”).

 

WHEREAS, the
Grantor intends to execute a certain Commercial Security Agreement dated as of
May 6, 2003 (the “Agreement”) pursuant to which the Grantor will grant to the
Lender a security interest in certain Collateral to secure the repayment by
Grantor of a certain Promissory Note of even date herewith, in the original
principal amount of Five Million Dollars ($5,000,000.00) executed in favor of Lender,
(the “Note”);

 

WHEREAS,
BORROWER desires to modify one or more terms of the Agreement and Lender is
willing to agree to and accept such modifications;

 

WHEREAS
capitalized terms not expressly defined in this Amendment shall have the
respective meanings set forth in the Agreement;

 

NOW THEREFORE,
in consideration of the mutual promises and covenants set forth herein and in
the Note, the parties agree that the Agreement is amended as follows:

 

1.                                       Setoff.  The section titled “RIGHT OF SETOFF” shall
be deleted and replaced with the following: 
“In the event of a default by Borrower (i) under this Commercial
Security Agreement, (ii) under any other agreement between Borrower and Lender,
or (iii) under any other document executed by Borrower in favor of Lender, and
to the extent permitted by applicable law, Lender reserves a right of setoff in
all Grantor’s accounts with Lender (whether checking ,savings, or some other
account.)  This includes all accounts
Grantor holds jointly with

 

 

someone else and all accounts
Grantor may open in the future. However, this does not include any IRA, Keogh
or any trust accounts for which setoff would be prohibited by law. Grantor
authorizes Lender, to the extent permitted by applicable law, to charge or
setoff all sums owing on the Indebtedness against any and all such accounts.
Nothing herein shall affect the Lender’s right to demand payment under the
Promissory Note.

 

2.                                       Enforceability
of Collateral.  The third sentence
of the section captioned “Enforceability of Collateral” shall be deleted and
replace with the following: “After Default, Grantor shall not, without Lender’s
prior written consent, compromise, settle, adjust or extend payment under or
with regard to any such Accounts. For purposes of this Agreement, the term
“Default” means the failure by Borrower to pay or perform any obligation
undertaken by Borrower in any agreement with Lender or document executed in
favor of Lender.

 

3.                                       Hazardous
Substances.  The section titled
“Hazardous Substances” shall begin with the words, “Except as otherwise
disclosed in writing,’.

 

4.                                       Insurance
Reserves.  In the section titled
“Insurance Reserves” the following words shall be inserted at the beginning of
the first sentence: “In the event that Borrower fails to obtain and/or maintain
insurance as required by this Agreement or any other Agreement between Borrower
and Lender or any other document executed by Borrower in favor of Lender.”

 

5.                                       Default.  The section titled “Default” is hereby
deleted and replaced with the following:

 

It shall be an
event of default hereunder if

 

(a)                                  Borrower
fails to make any interest payment when due or within ten (10) days thereafter;

 

(b)                                 Borrower
fails to pay any principal amount immediately upon demand by Lender;

 

2

 

(c)                                  Borrower
fails to perform any obligation undertaken by Borrower in any agreement between
Borrower and Lender or any document executed by Borrower in favor of
Lender.  (Each an “Event of Default”).

 

6.                                       Conflicting
Documents.  The terms of this
Amendment shall control in the event of a conflict between this First Amendment
(as the same may be subsequently amended by the parties from time to time), and
the Agreement.

 

IN WITNESS
WHEREOF, this FIRST AMENDMENT has been executed as of the date first written
above.

 

 

	
   

  	
  THE OHIO ART COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY: /s/
  Jerry D. Kneipp

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ITS:
  CFO/TREASURER

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KEYBANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ITS:

  	
   

  

 

3

 

[BARCODE]

*01010056716200000110010D20*

 

PROMISSORY NOTE

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call /
  Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $5,000,000.00

  	
   

  	
  05-21-2003

  	
   

  	
   

  	
   

  	
  11001

  	
   

  	
  402 / 326

  	
   

  	
  NO100567162

  	
   

  	
  RXWOY

  	
   

  	
   

  	
   

  

 

	 
	
  References in the shaded area are for Lender’s use only and do not
  limit the applicability of this document to any particular loan or item.

  Any item above containing ***** has been omitted due to text length
  limitations.

  	 

	 
	
   

  	 

	 
	
  Borrower:                         The
  Ohio Art Company

  1 Toy St., P.O. Box 111

  Bryan, OH 43506

  	
  Lender:                                     KeyBank
  National Association

  OH-MM-Toledo-Seagate

  3 Seagate

  Toledo, OH 43604

  	 

	
  Principal
  Amount:

  	
   

  	
  $5,000,000.00

  	
   

  	
  Initial Rate: 3.250%

  	
   

  	
  Date of Note:

  	
   

  	
  May 21, 2003

  
												

 

PROMISE TO PAY.  The Ohio Art Company (“Borrower”) promises to pay to KeyBank
National Association (“Lender”), or order, in lawful money of the United States
of America, on demand, the principal amount of Five Million & 00/100
Dollars ($5,000,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.

 

PAYMENT. 
Borrower will pay this loan immediately upon Lender’s demand. Payment in
full is due immediately upon Lender’s demand. Borrower will pay regular monthly
payments of all accrued unpaid interest due as of each payment date, beginning
June 1, 2003, with all subsequent interest payments to be due on the same day
of each month after that. Unless otherwise agreed or required by applicable
law, payments will be applied first to accrued unpaid interest, then to
principal, and any remaining amount to any unpaid collection costs and late
charges. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender’s address shown above or at such other place as Lender may designate
in writing.

 

VARIABLE INTEREST RATE.  The
interest rate on this Note is subject to change from time to time based on
changes in an index which is the Prime Rate announced by Lender (the “Index”).
The Index is not necessarily the lowest rate charged by Lender on its loans and
is set by Lender in its sole discretion. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower’s
request. The interest rate change will not occur more often than each day that
the Index changes. The interest rate will change automatically and
correspondingly on the date of each announced change of the Index by Lender.
Borrower understands that Lender may make loans based on other rates as well. The Index currently is 4.250% per annum. The interest
rate to be applied to the unpaid principal balance of this Note will be at a
rate of 1.000 percentage point under the Index, resulting in an initial rate of
3.250% per annum.

NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.

 

PREPAYMENT. 
Borrower agrees that all loan fees and other prepaid finance charges are
earned fully as of the date of the loan and will not be subject to refund upon
early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower’s obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked “paid in full”, “without recourse”, or
similar language. If Borrower sends such a payment, Lender may accept it
without losing any of Lender’s rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes “payment in full” of the amount
owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: KeyBank
National Association, OH-MM-Toledo-Seagate, 3 Seagate, Toledo, OH 43604.

 

LATE CHARGE.  If
a regularly scheduled interest payment is 10 days or more late, Borrower will
be charged 5.000% of the unpaid portion of
the regularly scheduled payment or $50.00, whichever is greater.  If Lender demands payment of this loan, and
Borrower does not pay the loan in full within
10 days after Lender’s demand, Borrower also will be charged either 5.000% of
the unpaid portion of the sum of the unpaid principal plus accrued unpaid
interest of $50.00, whichever is greater.

 

INTEREST AFTER DEFAULT. 
Upon default, including failure to pay upon final maturity, Lender, at
its option, may, if permitted under applicable law, increase the variable
interest rate on this Note 3.000 percentage points. The interest rate will not
exceed the maximum rate permitted by applicable law.

 

LENDER’S RIGHTS. 
Upon Lender’s demand, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.

 

ATTORNEYS’ FEES; EXPENSES. 
Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender’s attorneys’ fees and
Lender’s legal expenses, whether or not there is a lawsuit, including
attorneys’ fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.

 

JURY WAIVER. 
Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower
against the other.

 

GOVERNING LAW.  This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Ohio. This Note has
been accepted by Lender in the State of Ohio.

 

CONFESSION OF JUDGMENT. 
Borrower hereby irrevocably authorizes and empowers any attorney-at-law,
including an attorney hired by Lender, to appear in any court of record and to
confess judgment against Borrower for the unpaid amount of this Note as
evidenced by an affidavit signed by an officer of Lender setting forth the
amount then due, attorneys’ fees plus costs of suit, and to release all errors,
and waive all rights of appeal. If a copy of this Note, verified by an
affidavit, shall have been filed in the proceeding, it will not be necessary to
file the original as a warrant of attorney. Borrower waives the right to any
stay of execution and the benefit of all exemption laws now or hereafter in
effect. No single exercise of the foregoing warrant and power to confess
judgment will be deemed to exhaust the power, whether or not any such exercise
shall be held by any court to be invalid, voidable, or void; but the power will
continue undiminished and may be exercised from time to time as Lender may
elect until all amounts owing on this Note have been paid in full. Borrower
waives any conflict of interest that an attorney hired by Lender may have in
acting on behalf of Borrower in confessing judgment against Borrower while such
attorney is retained by Lender. Borrower expressly consents to such attorney
acting for Borrower in confessing judgment.

 

RIGHT OF SETOFF.  To
the extent permitted by applicable law, Lender reserves a right of setoff in all
Borrower’s accounts with Lender (whether

 

 

checking, savings, or some
other account). This includes all accounts Borrower holds jointly with someone
else and all accounts Borrower may open in the future. However, this does not
include any IRA or Keogh accounts, or any trust accounts for which setoff would
be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to change or setoff all sums owing on the indebtedness against
any and all such accounts.

 

LINE
OF CREDIT: This Note evidences a revolving line of
credit. Advances under this Note may be requested either orally or in writing
by Borrower or as provided in this paragraph. Lender may, but need not, require
that all oral requests be confirmed in writing. All communications,
instructions, or directions by telephone or otherwise to Lender are to be
directed to Lender’s office shown above. The following person currently is
authorized to request advances and authorize payments under the line of credit
until Lender receives from Borrower, at Lender’s address shown above, written
notice of revocation of his or her authority: Jerry
D. Kneipp, Treasurer of The Ohio Art Company.  Borrower agrees to be liable for all sums
either: (A) advanced in accordance with the instructions of  an authorized person or (B) credited to any
of Borrower’s accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender’s
internal records, including daily computer print-outs.

 

DEMAND
LINE OF CREDIT. Borrower understands that Lender is
authorized to make an annual (or more frequent) credit review based upon
Borrower’s current financial condition in determining whether to continue the
line of credit. Nevertheless, Lender may, at any time, with or without cause,
refuse to advance funds or extend credit under the line of credit.

 

SUCCESSOR
INTERESTS. The terms of this Note shall be binding
upon Borrower, and upon Borrower’s heirs, personal representatives, successors
and assigns, and shall inure to the benefit of Lender and its successors and
assigns.

 

GENERAL
PROVISIONS. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Borrower does not
agree or intend to pay, and Lender does not agree or intend to contract for,
charge, collect, take, reserve or receive (collectively referred to herein as
“change or collect”), any amount in the nature of interest or in the nature of
a fee for this loan, which would in any way or event (including demand,
prepayment, or acceleration) cause Lender to charge or collect more for this
loan than the maximum Lender would be permitted to charge or collect by federal
law or the law of the State of Ohio (as applicable).  Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly any for any length of time) this loan or
release any party or guarantor or collateral; or impair, fall to realize upon
or perfect Lender’s security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the modification
is made. The obligations under this Note are joint and several.

 

PRIOR
TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
NOTE, INCLUDING THE VARIABLE INTEREST RATE 
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.

 

BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

NOTICE:  FOR THIS NOTICE “YOU” MEANS THE BORROWER AND
“CREDITOR” AND “HIS” MEANS LENDER.

 

WARNING – BY SIGNING THIS PAPER YOU GIVE UP
YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY
HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON
HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.

 

BORROWER:

 

THE
OHIO ART COMPANY

 

	
  By:

  	
  /s/ Jerry D. Kneipp

  	
   

  
	
   

  	
  Jerry D. Kneipp, CFO & Treasurer of The Ohio Art Company

  

 

2

 

FIRST AMENDMENT

TO

PROMISSORY NOTE

This FIRST
AMENDMENT TO PROMISSORY NOTE is made as of the 21st day of May, 2003
by and between THE OHIO ART COMPANY,
an Ohio corporation, (the “Borrower”) and KEYBANK
NATIONAL ASSOCIATION, a national banking association (the “Lender”).

 

WHEREAS, the
Borrower intends to execute a certain Promissory Note dated as of May 6, 2003
in the original principal amount of Five Million Dollars ($5,000,000.00) in
favor of Lender, (the “Note”);

 

WHEREAS,
BORROWER desires to modify one or more terms of the Note and Lender is willing
to agree to and accept such modification;

 

WHEREAS
capitalized terms not expressly defined in this Amendment shall have the
respective meanings set forth in the Note;

 

NOW THEREFORE,
in consideration of the mutual promises and covenants set forth herein and in
the Note, the parties agree that the Note is amended as follows:

 

1.                                       Setoff.  The section titled “RIGHT OF SETOFF” shall
be deleted and replaced with the following: 
“In the event of a default by Borrower (i) under this Promissory Note,
(ii) under any other agreement between Borrower and Lender, or (iii) under any
other document executed by Borrower in favor of Lender, and to the extent
permitted by applicable law, Lender reserves a right of setoff in all Grantor’s
accounts with Lender (whether checking, savings, or some other account.)  This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.  However, this does not include any IRA,
Keogh or any trust accounts for which setoff would be prohibited by law.  Grantor authorizes Lender, to the extent
permitted by applicable law to charge or setoff all sums owing on the
Indebtedness

 

 

against any and all such
accounts.  Nothing herein shall affect
the Lender’s right to demand payment under this Promissory Note at any time.

 

2.                                       Conflicting
Documents.  The terms of this
Amendment shall control in the event of a conflict between this first Amendment
(as the same may be subsequently amended by the parties from time to time), and
the Note.

 

IN WITNESS
WHEREOF, this FIRST AMENDMENT has been executed as of the date first written
above.

 

 

	
   

  	
  THE OHIO ART COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY: 

  	
  /s/ Jerry D.
  Kneipp

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ITS:

  	
  CFO/TREASURER

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KEY BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ITS:

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