8-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT
     Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)  May 12, 2006 (May 12, 2006)
                                                  ---------------------------

                          Brookdale Senior Living Inc.
                          ----------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                     001-32641                20-3068069
- --------------------------------------------------------------------------------
(State or other jurisdiction           (Commission             (IRS Employer
      of incorporation)                File Number)          Identification No.)


   330 North Wabash, Suite 1400, Chicago, Illinois                   60611
- --------------------------------------------------------------------------------
       (Address of principal executive offices)                   (Zip Code)


Registrant's telephone number, including area code (312) 977-3700
                                                   ----------------------------


- --------------------------------------------------------------------------------
         (Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ]  Written communications pursuant to Rule 425 under the Securities Act
     (17 CFR 230.425)

[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act
     (17 CFR 240.14a-12)

[ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))



SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS

Item 1.01.  Entry Into a Material Definitive Agreement

         Merger Agreement
         ----------------

         On May 12, 2006, Brookdale Senior Living Inc. (the "Company"), Beta
Merger Sub Corporation, a Delaware corporation and a wholly-owned subsidiary of
the Company ("Merger Sub"), and American Retirement Corporation, a Tennessee
corporation ("ARC"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Merger Sub will be merged with and into ARC (the
"Merger") with ARC continuing as the surviving corporation and a wholly-owned
subsidiary of the Company.

           Under the terms of the Merger Agreement, upon consummation of the
Merger, each outstanding share of common stock, par value $0.01 per share, of
ARC ("ARC Common Stock"), together with the rights issued pursuant to the Rights
Agreement, dated as of November 18, 1998, between ARC and American Stock
Transfer and Trust Company, will be converted into the right to receive $33.00
per share in cash. All of the options to purchase ARC Common Stock, whether
vested or unvested, will be cancelled and each holder of any such option will be
entitled to receive a cash payment equal to the product of (i) the excess of
$33.00 over the applicable option exercise price, and (ii) the number of shares
of ARC Common Stock for which the options had not been previously exercised.

          Consummation of the Merger is subject to the satisfaction of various
conditions, including (i) the approval of the Merger Agreement by a majority of
ARC's shareholders, (ii) the expiration or termination of any waiting period
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, and (iii) certain other closing conditions customary for transactions
of this type. The Merger Agreement contains certain termination rights and
certain provisions that require ARC to pay the Company a termination fee of up
to $45 million and/or reimburse the Company for its expenses up to $5 million
under certain specified circumstances.

         ARC has made customary representations and warranties and covenants in
the Merger Agreement, including among others (i) to cause a meeting of ARC's
shareholders to be held to consider the adoption of the Merger Agreement, and
(ii) that ARC's board of directors will recommend that ARC's shareholders adopt
the Merger Agreement and approve the Merger, in each case, subject to certain
exceptions.

         The preceding summary of certain provisions of the Merger Agreement and
the transactions contemplated thereby, including the Merger, is qualified in its
entirety by reference to the Merger Agreement and the press release attached
hereto as Exhibit 2.1 and 99.1, respectively, and incorporated herein by
reference.

         Investment Agreement and Option Agreement
         -----------------------------------------

         Simultaneously with entering into the Merger Agreement, in order to
finance the Merger, the Company entered into an Investment Agreement (the
"Investment Agreement") with RIC Coinvestment Fund LP ("RIC"), an affiliate of
our largest stockholder, Fortress Investment Group LLC. Under the terms of the
Investment Agreement, RIC committed to purchase, at and simultaneously with the
closing of the Merger (the "Closing"), up to $1.3 billion of common stock of the
Company, par value $0.01 per share ("BKD Common Stock"), at a price of $36.93
per share (the "Financing"). The issuance of these securities will be made
pursuant to an exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended.

         Prior to the Closing, the Company may reduce RIC's $1.3 billion
commitment to an amount equal to or greater than $650 million (the "Equity
Reduction"). If the Company does not reduce RIC's $1.3 billion commitment
(pursuant to an Equity Reduction) using the net proceeds received by the Company
pursuant to an offering of its equity securities that is consummated prior to
the Closing, RIC will issue to the Company, at the Closing, a one-time option
(the "Option Agreement") to purchase from RIC a number of shares of BKD Common
Stock having a value equal to the difference between (i) $1.3 billion less any
portion of the Equity Reduction and (ii) $650 million. Pursuant to the Option
Agreement, the Company shall have the right and the option (but not the
obligation) to purchase the shares at a price per share of $38.07. The option is
immediately vested upon issuance at the Closing and will expire six months and
one day after the Closing.

         To consider the terms of the Investment Agreement and the Option
Agreement, the board of directors of the Company (the "Board") established a
Special Committee of the Board (the "Special Committee"). The Special Committee
engaged Bear, Stearns & Co. Inc. ("Bear Stearns") to assist it in analyzing and
evaluating the Financing and to render an opinion to the Special Committee as to
the fairness to the Company, from a financial point of view, of the terms and
price to be paid to the Company for the BKD Common Stock issued to RIC in
connection with the Financing. The foregoing summary of Bear Stearns' opinion is
qualified in its entirety by reference to the full text of the opinion.

         The preceding summaries of certain provisions of the Investment
Agreement and the Option Agreement are qualified in their entirety by reference
to the Investment Agreement, the form of Option Agreement and the press release,
attached hereto as Exhibit 10.1, 10.2 and 99.1, respectively, and incorporated
herein by reference.

         Employment Agreements
         ---------------------

         As a condition to the Merger, the Company entered into employment
agreements, to take effect at the Closing, with W.E. Sheriff, ARC's Chief
Executive Officer, and certain other executive officers of ARC, including
Gregory B. Richard, George T. Hicks, Bryan D. Richardson, H. Todd Kaestner, and
James T. Money (each of Messrs. Richard, Hicks, Richardson, Kaestner, and Money,
an "Other ARC Officer", and together, the "Other ARC Officers"), regarding their
continued service with the Company following the consummation of the Merger. The
material terms of these agreements are described below.

         Sheriff Employment Agreement

         The material terms of Mr. Sheriff's employment agreement (the "Sheriff
Employment Agreement") are substantially similar to the material terms of the
existing employment agreement between the Company and its Chief Executive
Officer, including with respect to rights and obligations upon termination of
employment and entitlement to certain employee benefits. Under the terms of the
Sheriff Employment Agreement, Mr. Sheriff is to be employed following the
Closing as Co-Chief Executive Officer of the Company. The Sheriff Employment
Agreement has an initial term of approximately three years, at the end of which
the agreement automatically extends on an annual basis for up to two additional
one-year terms, unless notice not to renew the agreement is given by either
party 90 days prior to the expiration of its term.

         Mr. Sheriff's base salary under the employment agreement is $200,000
per year. Mr. Sheriff is also eligible to receive a discretionary bonus in an
amount to be determined by the Board in its sole discretion, with a target bonus
in the first year following the effective date of the Merger (the "Effective
Date") of $200,000, payable in a combination of 50% cash and 50% vested shares
of BKD Common Stock.

         As a condition to entering into the employment agreement, Mr. Sheriff
has agreed to invest $9,508,073 in BKD Common Stock at a price of $38.07 per
share, which shares shall be subject to an 18-month holding period. Mr. Sheriff
will also be granted a number of restricted shares of BKD Common Stock equal to
the number of shares Mr. Sheriff acquires pursuant to this obligation. Eighty
percent (80%) of these restricted shares will vest upon the attainment of
performance goals and 20% of these shares will vest based upon continued
employment with the Company.

         The preceding summary of certain provisions of the Sheriff Employment
Agreement is qualified in its entirety by reference to the Sheriff Employment
Agreement, attached hereto as Exhibit 10.3, and incorporated herein by
reference.

         Other Employment Agreements

         The material terms of the employment agreements with each of the Other
ARC Officers (the "Other Employment Agreements") are substantially similar to
the material terms of the existing employment agreements between the Company and
its current executive officers (other than its Chief Executive Officer),
including with respect to rights and obligations upon termination of employment
and entitlement to certain employee benefits, and are substantially similar to
the material terms of each Other Employment Agreement, with the following
material differences:

Other ARC Officer         Amount Required          Base Salary      Target Bonus
- -----------------         ---------------          -----------      ------------
                           to Re-Invest
                           ------------
                         in BKD Common Stock
                         -------------------

Gregory B. Richard            $1,116,878             $200,000         $150,000
George T. Hicks               $1,982,460             $175,000         $150,000
Bryan D. Richardson           $1,751,898             $175,000         $150,000
H. Todd Kaestner              $2,000,000             $175,000         $150,000
James T. Money                $1,750,000             $175,000         $125,000

         Under the terms of the Other Employment Agreements, each Other ARC
Officer is to be employed following the Closing as an Executive Vice President
of the Company. The Other Employment Agreements have an initial term of
approximately three years, at the end of which the agreements automatically
extend on an annual basis for up to two additional one-year terms, unless notice
not to renew the agreement is given by either party 90 days prior to the
expiration of its term.

         Pursuant to the Other Employment Agreements, target bonuses for the
first year following the Effective Date will be paid 50% in cash and 50% in
vested shares of BKD Common Stock, based on achievement of certain performance
standards as determined by the Board in its sole discretion.

         As a condition to entering into the Other Employment Agreements, each
Other ARC Officer has agreed to invest an amount specified in his respective
agreement in BKD Common Stock at a price of $38.07 per share, which shares will
be subject to an 18-month holding period. Each Other ARC Officer will also be
granted a number of restricted shares of BKD Common Stock equal to the number of
shares that such Other ARC Officer acquires pursuant to this obligation. Seventy
percent (70%) of these restricted shares will vest upon the attainment of
performance goals and 30% of these shares will vest based upon continued
employment with the Company.

         The preceding summary of certain provisions of the Other Employment
Agreements is qualified in its entirety by reference to the form of employment
agreement, attached hereto as Exhibit 10.4, and incorporated herein by
reference.

SECTION 3 - SECURITIES AND TRADING MARKETS

Item 3.02.  Unregistered Sales Of Equity Securities

         The description of the Investment Agreement set forth in Item 1.01 of
this report is incorporated herein by reference.

SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS

Item 9.01.  Financial Statements and Exhibits

(c)      Exhibits

2.1      Agreement and Plan of Merger, dated as of May 12, 2006, by and among
         Brookdale Senior Living Inc., Beta Merger Sub Corporation, and American
         Retirement Corporation*

10.1     Investment Agreement, dated as of May 12, 2006, by and among Brookdale
         Senior Living Inc. and RIC Coinvestment Fund LP*

10.2     Form of Option Agreement, by and among Brookdale Senior Living Inc. and
         RIC Coinvestment Fund LP

10.3     Employment Agreement, dated May 12,  2006, by and between Brookdale
         Senior Living Inc. and W.E. Sheriff*

10.4     Form of Employment Agreement*

99.1     Press Release, dated May 12, 2006

*        Schedules and exhibits omitted pursuant to Item 601(b)(2) of Reg. S-K.
         The Company agrees to furnish supplementally a copy of any omitted
         schedule to the Commission upon request.





                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                  By:  /s/ Deborah C. Paskin
                                       ------------------------
                                       Deborah C. Paskin
                                       Executive Vice President, General Counsel
                                       and Secretary

Date: May 12, 2006



                                  EXHIBIT INDEX

Exhibit Number      Exhibit
- --------------      ------------------------------------------------------------

2.1                 Agreement and Plan of Merger, dated as of May 12, 2006, by
                    and among Brookdale Senior Living Inc., Beta Merger Sub
                    Corporation, and American Retirement Corporation*

10.1                Investment Agreement, dated as of May 12, 2006, by and among
                    Brookdale Senior Living Inc. and RIC Coinvestment Fund LP*

10.2                Form of Option Agreement, by and among Brookdale Senior
                    Living Inc. and RIC Coinvestment Fund LP

10.3                Employment Agreement, dated May 12, 2006, by and between
                    Brookdale Senior Living Inc. and W.E. Sheriff*

10.4                Form of Employment Agreement*

99.1                Press Release, dated May 12, 2006

*                   Schedules and exhibits omitted pursuant to Item 601(b)(2) of
                    Reg. S-K. The Company agrees to furnish supplementally a
                    copy of any omitted schedule to the Commission upon request.

EX-2

                                                                     Exhbit 2.1
                                                                     ----------


                                                                EXECUTION COPY




   __________________________________________________________________________

                          AGREEMENT AND PLAN OF MERGER
                            DATED AS OF MAY 12, 2006
                                  BY AND AMONG
                      BROOKDALE SENIOR LIVING INCORPORATED,
                           BETA MERGER SUB CORPORATION
                                       AND
                         AMERICAN RETIREMENT CORPORATION


   __________________________________________________________________________







                                               TABLE OF CONTENTS

                                                                                                              
ARTICLE I. THE MERGER.............................................................................................1
         Section 1.01      The Merger.............................................................................1
         Section 1.02      Closing ...............................................................................1
         Section 1.03      Effective Time.........................................................................2
         Section 1.04      Effects of the Merger..................................................................2
         Section 1.05      Charter; Bylaws........................................................................2
         Section 1.06      Directors..............................................................................2
         Section 1.07      Officers ..............................................................................2

ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT ENTITIES; EXCHANGE OF
                  CERTIFICATES; COMPANY STOCK OPTIONS.............................................................2
         Section 2.01      Effect on Capital Stock................................................................2
         Section 2.02      Surrender and Payment..................................................................3
         Section 2.03      Company Stock Options..................................................................6

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................6
         Section 3.01      Organization, Standing and Corporate Power.............................................7
         Section 3.02      Subsidiaries...........................................................................7
         Section 3.03      Capital Structure......................................................................7
         Section 3.04      Authority; Noncontravention............................................................8
         Section 3.05      Governmental Approvals................................................................10
         Section 3.06      Company SEC Documents; No Undisclosed Liabilities.....................................10
         Section 3.07      Information Supplied..................................................................11
         Section 3.08      Absence of Certain Changes or Events..................................................11
         Section 3.09      Litigation............................................................................12
         Section 3.10      Contracts.............................................................................12
         Section 3.11      Compliance with Laws..................................................................14
         Section 3.12      Employee Benefit Plans................................................................15
         Section 3.13      Taxes.................................................................................18
         Section 3.14      Intellectual Property; Software.......................................................20
         Section 3.15      Real Property.........................................................................22
         Section 3.16      Environmental Matters.................................................................25
         Section 3.17      Transactions with Related Parties.....................................................26
         Section 3.18      Brokers and Other Advisors............................................................27
         Section 3.19      Opinion of Financial Advisor..........................................................27
         Section 3.20      Residence Agreements..................................................................27
         Section 3.21      Insurance.............................................................................27
         Section 3.22      Labor Matters.........................................................................27
         Section 3.23      Licensing Surveys.....................................................................28
         Section 3.24      Resident Records......................................................................28
         Section 3.25      Third Party Payor Reimbursement.......................................................29
         Section 3.26      State Takeover Statutes; Company Rights Plan..........................................29

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..............................................29
         Section 4.01      Organization, Standing and Corporate Power............................................29
         Section 4.02      Capital Structure of Merger Sub.......................................................30
         Section 4.03      Authority; Noncontravention...........................................................30
         Section 4.04      Governmental Approvals................................................................31
         Section 4.05      Information Supplied..................................................................31
         Section 4.06      Litigation............................................................................31
         Section 4.07      No Business Activities................................................................31
         Section 4.08      Brokers and Other Advisors............................................................31
         Section 4.09      Financing.............................................................................32

ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS.............................................................32
         Section 5.01      Conduct of Business...................................................................32
         Section 5.02      No Solicitation by the Company........................................................35

ARTICLE VI. ADDITIONAL AGREEMENTS................................................................................37
         Section 6.01      Preparation of the Proxy Statement; Shareholder Meetings..............................37
         Section 6.02      Access to Information; Confidentiality................................................38
         Section 6.03      Reasonable Best Efforts...............................................................39
         Section 6.04      Indemnification, Exculpation and Insurance............................................39
         Section 6.05      Fees and Expenses.....................................................................40
         Section 6.06      Public Announcements..................................................................40
         Section 6.07      Shareholder Litigation................................................................40
         Section 6.08      Employee Matters......................................................................41
         Section 6.09      Employment Agreements.................................................................42
         Section 6.10      Standstill Agreements, Confidentiality Agreements, Anti-takeover
                                    Provisions...................................................................42
         Section 6.11      Cooperation...........................................................................42
         Section 6.12      Financing.............................................................................42
         Section 6.13      Hedging Agreements....................................................................42

ARTICLE VII. CONDITIONS PRECEDENT................................................................................43
         Section 7.01      Conditions to Each Party's Obligation to Effect the Merger............................43
         Section 7.02      Conditions to Obligations of Parent and Merger Sub....................................43
         Section 7.03      Conditions to Obligation of the Company...............................................44
         Section 7.04      Frustration of Closing Conditions.....................................................45

ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER..................................................................45
         Section 8.01      Termination...........................................................................45
         Section 8.02      Termination Fee and Shareholder Termination Fee.......................................46
         Section 8.03      Effect of Termination.................................................................47
         Section 8.04      Amendment.............................................................................47
         Section 8.05      Extension; Waiver.....................................................................48
         Section 8.06      Procedure for Termination or Amendment................................................48

ARTICLE IX. GENERAL PROVISIONS...................................................................................48
         Section 9.01      Nonsurvival of Representations and Warranties.........................................48
         Section 9.02      Notices ............................................................................. 48
         Section 9.03      Definitions...........................................................................49
         Section 9.04      Interpretation........................................................................50
         Section 9.05      Counterparts..........................................................................50
         Section 9.06      Entire Agreement; No Third-Party Beneficiaries........................................50
         Section 9.07      Governing Law.........................................................................50
         Section 9.08      Assignment............................................................................51
         Section 9.09      Specific Enforcement; Consent to Jurisdiction.........................................51


EXHIBITS

Exhibits A-1 and A-2 - Forms of New Employment Agreements
Exhibit B - Closing Consents
Exhibits C-1, C-2 and C-3 - Forms of Optionee Investment Agreement With Corresponding Grant






                                            TABLE OF DEFINED TERMS


                                                                            
Adverse Notice.................37        Delaware Secretary of State.....2        Parent..........................1
Affected Employees.............41        DGCL............................1        Parent Articles................30
Affiliate......................49        Dissenting Shares...............5        Parent Board...................30
Agreement.......................1        Effective Time..................2        Parent Bylaws..................30
Articles of Merger..............2        Employees......................15        Patents........................20
Certificate of Merger...........2        Environmental Laws.............26        Paying Agent....................3
Certificates....................3        Environmental Liabilities......26        Payment Fund....................3
Closing.........................1        Equity Financing...............32        Permits........................14
Closing Date....................1        ERISA..........................15        Permitted Liens................49
COBRA..........................17        Exchange Act...................10        person.........................49
Code............................5        Filed Company SEC Documents....11        Policies.......................27
Company.........................1        Financing......................42        Proxy Statement................11
Company Adverse Recommendation           Financing Commitment...........32        Release........................26
Change ........................36        GAAP...........................11        Representatives................35
Company Board...................7        Government Programs............29        Residence Agreement............27
Company Bylaws..................7        Governmental Authority.........10        Resident.......................27
Company Charter.................7        Hazardous Material.............26        Restraints.....................43
Company Common Stock............2        HSR Act........................10        RIC............................32
Company Disclosure Letter.......7        Indemnified Parties............39        Sarbanes-Oxley.................15
Company Facilities.............22        Intellectual Property..........20        SEC............................10
Company Intellectual Property..20        IP Licenses....................20        Securities Act.................10
Company Material Adverse Effect.9        IRS............................18        Security Interest..............23
Company Plans..................15        Knowledge......................49        SERP...........................41
Company Preferred Stock.........7        Laws...........................14        Shareholder Termination Fee....46
Company Rights..................3        Lease..........................22        Software.......................20
Company Rights Plan.............3        Licensing Surveys..............28        Subsidiary.....................49
Company SEC Documents..........10        Liens...........................7        Superior Proposal..............36
Company Shareholder Approval....8        Medicaid.......................29        Surviving Corporation...........1
Company Shareholders Meeting...38        Medicare.......................29        Takeover Proposal..............36
Company Stock Options...........6        Merger..........................1        tax returns....................20
Company Stock Plans.............6        Merger Consideration............3        taxes..........................20
Confidentiality Agreement......38        Merger Sub......................1        TBCA............................1
Contract........................9        Merger Sub Interests...........30        Tennessee Secretary of State....2
Copyrights.....................20        Necessary Consents.............10        Termination Date...............45
Covered Employees...............1        New Employment Agreements.......1        Termination Fee................46
New Optionee Agreements.........6        NYSE...........................15        Trade Secrets..................20
                                         Owned Real Property............24        Trademarks.....................20
                                                                                  WARN Act.......................28




                          AGREEMENT AND PLAN OF MERGER

         This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May
12, 2006, is by and among Brookdale Senior Living Incorporated, a Delaware
corporation ("Parent"), Beta Merger Sub Corporation, a Delaware corporation and
a direct wholly owned subsidiary of Parent ("Merger Sub"), and American
Retirement Corporation, a Tennessee corporation (the "Company").

                              W I T N E S S E T H:

         WHEREAS, the respective Boards of Directors of Parent, the Company and
Merger Sub have approved and declared advisable this Agreement and the merger of
Merger Sub with and into the Company (the "Merger"), upon the terms and subject
to the conditions set forth in this Agreement;

         WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and

         WHEREAS, concurrently with the execution of this Agreement, Parent is
entering into (A) an employment agreement in the form attached as Exhibit A-1
hereto with the individual set forth on such Exhibit A-1 and (B) employment
agreements in the form attached as Exhibit A-2 hereto with the individuals set
forth on such Exhibit A-2 (such employment agreements referred to in clauses (A)
and (B), collectively, the "New Employment Agreements," and such individuals set
forth on Exhibit A-1 and Exhibit A-2 hereto, the "Covered Employees") in order
to provide for the continued service and employment of such persons.

         NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:

                                   ARTICLE I.
                                   The Merger

         Section 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the Tennessee Business
Corporation Act (the "TBCA") and the General Corporation Law of the State of
Delaware (the "DGCL"), Merger Sub shall be merged with and into the Company at
the Effective Time. Following the Effective Time, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Merger Sub in accordance
with the TBCA and the DGCL.

         Section 1.02. Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., New York City time, on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VII
(other than those conditions that by their terms are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions at such
time), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times
Square, New York, NY 10036, unless another date or place is agreed to in writing
by the parties hereto.

         Section 1.03. Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall cause
the Merger to be consummated by filing articles of merger (the "Articles of
Merger") with the Secretary of State of the State of Tennessee (the "Tennessee
Secretary of State") and a certificate of merger (the "Certificate of Merger")
with the Secretary of State of the State of Delaware (the "Delaware Secretary of
State"), each executed in accordance with the relevant provisions of the TBCA
and the DGCL, respectively, and, as soon as practicable on or after the Closing
Date, shall make all other filings or recordings required under the TBCA and the
DGCL. The Merger shall become effective at such time as the Articles of Merger
and Certificate of Merger are duly filed with the Tennessee Secretary of State
and the Delaware Secretary of State, respectively, or at such other time as
Parent and the Company shall agree and shall specify in the Articles of Merger
and the Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").

         Section 1.04. Effects of the Merger. The Merger shall have the effects
set forth in this Agreement and in the applicable provisions of the TBCA and the
DGCL.

         Section 1.05. Charter; Bylaws.

              (a) The Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, and as modified to the extent required
by the TBCA, shall be the Charter of the Surviving Corporation until thereafter
changed or amended as provided therein or by the TBCA or other applicable Law
(as defined herein).

              (b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, and as modified to the extent required by the TBCA, shall be
the Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable Law; provided, however, that the Bylaws of the
Surviving Corporation shall be amended as necessary to comply with the
obligations of the Surviving Corporation set forth in Section 6.04 hereof.

         Section 1.06. Directors. The directors of Merger Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly designated, as the case may be.

         Section 1.07. Officers. The officers of Merger Sub immediately prior to
the Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

                                  ARTICLE II.
     Effect of the Merger on the Capital Stock of the Constituent Entities;
                Exchange of Certificates; Company Stock Options

         Section 2.01. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of common stock, par value $0.01 per share, of the Company ("Company
Common Stock") or of any shares of common stock of Merger Sub:

              (a) Common Stock of Merger Sub. The issued and outstanding common
stock, par value $.01 per share, of Merger Sub shall remain outstanding and
shall constitute the only issued and outstanding capital stock of the Surviving
Corporation.

              (b) Conversion of Company Common Stock. Subject to Section
2.02(e), each issued and outstanding share of Company Common Stock (other than
as provided in Section 2.02(j) with respect to shares as to which appraisal
rights have been perfected), together with the rights (the "Company Rights")
issued pursuant to the Rights Agreement, dated as of November 18, 1998, between
the Company and American Stock Transfer and Trust Company, as rights agent (the
"Company Rights Plan"), shall be converted into the right to receive $33.00 in
cash (the "Merger Consideration") without interest.

         Section 2.02. Surrender and Payment.

              (a) Paying Agent. Prior to the Effective Time, Parent shall
appoint a bank or trust company reasonably acceptable to the Company to act as
the paying agent for the payment of the Merger Consideration to the holders of
shares of Company Common Stock entitled thereto (the "Paying Agent").
Immediately following the Effective Time, Parent shall deposit, or cause to be
deposited, with the Paying Agent funds in an amount sufficient to make the
payments contemplated by Section 2.01(b) in accordance with the procedures set
forth in this Section 2.02 (such funds, the "Payment Fund"). In the event the
Payment Fund shall be insufficient to make all such payments, Parent shall
promptly deposit, or cause to be deposited, additional funds with the Paying
Agent in an amount which is equal to the deficiency in the amount of funds
required to make such payments. The Payment Fund shall be invested by the Paying
Agent as directed by Parent or the Surviving Corporation, in their sole
discretion, pending payment thereof by the Paying Agent to the holders of the
shares of Company Common Stock entitled thereto. Earnings from such investments
shall be the sole and exclusive property of Parent and the Surviving
Corporation, and no part of such earnings shall accrue to the benefit of the
holders of the shares of Company Common Stock.

              (b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Surviving Corporation shall cause the Paying Agent to
mail to each holder of record of an outstanding share of Company Common Stock
immediately prior to the Effective Time (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates formerly representing shares of Company Common Stock immediately
prior to the Effective Time (the "Certificates") shall pass, only upon proper
delivery of such Certificates to the Paying Agent and which shall be in the form
and shall have such other provisions as the Surviving Corporation or Paying
Agent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the payment of the Merger
Consideration to be made to the holder thereof pursuant to Section 2.01. Upon
surrender of a Certificate for cancellation to the Paying Agent, together with a
letter of transmittal duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be reasonably required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive promptly in exchange therefor the Merger Consideration for each share
of Company Common Stock formerly represented by such Certificate and such
Certificate so surrendered shall be forthwith cancelled. The Paying Agent shall
accept such Certificates upon compliance with such reasonable terms and
conditions as the Paying Agent may impose to effect an orderly exchange thereof
in accordance with normal exchange practices. No interest shall be paid or
accrued for the benefit of holders of the shares of Company Common Stock or on
the consideration payable upon the surrender of the Certificate formerly
representing such shares of Company Common Stock.

              (c) No Further Ownership Rights; Closing of the Company's Transfer
Books. All cash paid upon the surrender of a Certificate in accordance with the
terms of this Article II shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock formerly
represented by such Certificate. At the Effective Time, the stock transfer books
of the Company shall be closed and thereafter there shall be no further
registration of transfers of shares of Company Common Stock theretofore
outstanding on the records of the Company. If Certificates are presented to the
Company for transfer following the Effective Time, they shall be canceled
against delivery of the Merger Consideration for each share of Company Common
Stock formerly represented by such Certificate.

              (d) Termination of Payment Fund. Any portion of the Payment Fund
and any interest received with respect thereto that remains undistributed to the
holders of the Certificates for six (6) months after the Effective Time shall be
delivered to the Surviving Corporation. Any holders of Certificates who have not
complied with this Section 2.02 prior to the end of such six (6) month period
shall thereafter look, only as general creditors thereof, to the Surviving
Corporation (subject to Section 2.02 (e)) for payment of the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented by such Certificates.

              (e) No Liability. None of Parent, Merger Sub, the Surviving
Corporation, any of their respective Affiliates or the Paying Agent shall be
liable to any person in respect of any cash held in the Payment Fund delivered
to a public official pursuant to the requirements of any applicable abandoned
property, escheat or other similar Law. If any Certificate shall not have been
surrendered prior to three (3) years after the Effective Time (or immediately
prior to such earlier date on which any cash in respect of the shares of Company
Common Stock formerly represented by such Certificate would otherwise escheat to
or become the property of any Governmental Authority), any such cash in respect
of such shares shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.

              (f) Transfer Taxes. If payment is to be made in respect of any
Certificate to a person other than the person in whose name the Certificate is
registered, it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such payment shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of the applicable
consideration to a person other than the registered holder of the Certificate so
surrendered, or shall establish to the reasonable satisfaction of the Paying
Agent that such tax either has been paid or is not applicable.

              (g) Withholding Rights. Each of the Surviving Corporation, Parent
and the Paying Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of a
Certificate or Company Stock Option (as defined herein) such amounts as are
required to be deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code") (including,
without limitation, under Section 1445 of the Code), Treasury Regulations
promulgated under the Code or any provisions of applicable state, local or
foreign tax Law. To the extent that amounts are so deducted and withheld by the
Surviving Corporation, Parent or the Paying Agent, such deducted and withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Certificate or Company Stock Option, as applicable, in
respect of which such deduction and withholding was made by the Surviving
Corporation, Parent or the Paying Agent.

              (h) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to which the holder thereof is entitled
pursuant to this Agreement.

              (i) Adjustments to Prevent Dilution. If prior to the Effective
Time, (i) solely as a result of a reclassification, stock split (including a
reverse stock split), stock dividend or stock distribution which in any such
event is made on a pro rata basis to all holders of Company Common Stock there
is a change in the number of shares of Company Common Stock outstanding or
issuable upon the conversion, exchange or exercise of securities or rights
convertible or exchangeable or exercisable for shares of Company Common Stock or
(ii) the Company makes a cash dividend on a pro rata basis to all holders of
Company Common Stock, then the Merger Consideration shall be correspondingly
adjusted to provide the holders of the applicable shares of Company Common Stock
the same economic effect contemplated by this Agreement prior to such event.

              (j) Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, any shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and held by a shareholder
who has properly exercised such shareholder's appraisal rights available under
the TBCA (the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, unless and until
such shareholder shall have failed to perfect, or shall have effectively
withdrawn or lost such shareholder's right to appraisal under the TBCA.
Dissenting Shares shall be treated in accordance with the applicable provisions
of the TBCA. If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right to appraisal, such shareholder's shares
of Company Common Stock shall thereupon be converted into and become
exchangeable only for the right to receive, as of the Effective Time, the Merger
Consideration for each share of Company Common Stock formerly represented by the
Certificates held by such shareholder without any interest thereon. The Company
shall give Parent prompt notice of any notices or demands for appraisal of any
shares of Company Common Stock, attempted withdrawals of such notices or demands
and any other instruments served pursuant to the TBCA and received by the
Company relating to rights to be paid the "fair value" of Dissenting Shares, as
provided in the TBCA, and Parent and Merger Sub shall have the right to direct
all negotiations and proceedings with respect to any such demands or notices.
The Company shall not, except with the prior written consent of Parent, make any
payment with respect to any notices or demands for appraisals, offer to settle
or settle any demands or approve any withdrawal of any such notices or demands.

         Section 2.03. Company Stock Options.

              (a) All stock options (the "Company Stock Options") outstanding
immediately prior to the Effective Time granted under the Company's 2006 Stock
Incentive Plan, 1997 Stock Incentive Plan or Associate Stock Purchase Plan,
whether vested or unvested (collectively, the "Company Stock Plans"), shall, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holder thereof, be cancelled as of immediately prior to the
Effective Time and be converted into and become the right to receive a lump sum
payment in cash equal to the product of (1) the excess, if any, of (A) the
Merger Consideration over (B) the per share exercise price of such Company Stock
Option and (2) the number of shares of Company Common Stock for which such
Company Stock Option shall not have been previously exercised. Effective as of
the date of this Agreement, the Company shall amend the Company's Associate
Stock Purchase Plan to provide that (i) the "Option Period" (as defined in the
plan) which includes the date of this Agreement shall terminate at the earlier
of June 30, 2006 or the Effective Time, and (ii) no Option Period shall commence
during the period between the date of this Agreement and the earlier of the
Closing Date or the date on which this Agreement is terminated. Any payments to
be made pursuant to this Section 2.03(a) shall be reduced by any tax withholding
required by Law.

              (b) Except as may be otherwise provided in this Section 2.03, the
Company shall cause all rights, stock options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other securities of the Company or any of its Subsidiaries, or any securities or
obligations convertible or exchangeable into or exercisable for, or giving any
person a right to subscribe for or acquire, any securities of the Company or any
of its Subsidiaries, to be cancelled prior to the Effective Time without any
payment being made therefor.

              (c) Prior to the Effective Time, the Company shall use its
reasonable best efforts to cause all employee-holders of outstanding options
under its 2006 Stock Incentive Plan, 1997 Stock Incentive Plan or Associate
Stock Purchase Plan who are not Covered Employees to enter into an optionee
agreement in one of the forms set forth on Exhibit C hereto (the "New Optionee
Agreements"), and shall take (or cause to be taken) all actions that are
necessary or appropriate to give effect to the transactions contemplated by
Sections 2.03 (a) and (b) and to give effect to relevant provisions of the New
Employment Agreements and the New Optionee Agreements. The form of New Optionee
Agreement to be offered to each such optionee shall be determined by Parent.

                                  ARTICLE III.
                  Representations and Warranties of the Company

         Except as set forth in the disclosure letter (with specific reference
to the Section or Subsection of this Agreement to which the information stated
in such disclosure relates; provided that any fact or condition disclosed in any
section of such disclosure letter in such a way as to make its relevance to a
representation or representations made elsewhere in this Agreement or
information called for by another section of such disclosure letter reasonably
apparent shall be deemed to be an exception to such representation or
representations or to be disclosed on such other section of such disclosure
letter notwithstanding the omission of a reference or cross reference thereto)
delivered by the Company to Parent prior to the execution of this Agreement (the
"Company Disclosure Letter"), the Company represents and warrants to Parent and
Merger Sub as follows:

         Section 3.01. Organization, Standing and Corporate Power. The Company
and each of its Subsidiaries is an entity duly organized, validly existing and
in good standing under the Laws of the jurisdiction in which it is formed and
has all requisite power and authority to carry on its business as now being
conducted. The Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually or
in the aggregate, has not resulted in, and would not reasonably be expected to
result in, a Company Material Adverse Effect (as defined herein). The Company
has, prior to the date hereof, made available to Parent complete and correct
copies of its Charter (the "Company Charter") and Bylaws (the "Company Bylaws")
and the charter and bylaws (or comparable organizational documents) of each of
its Subsidiaries, in each case as amended to the date of this Agreement. The
Company has made available to Parent and its representatives correct and
complete copies of the minutes of all meetings of shareholders, the board of
directors of the Company (the "Company Board") and each committee of the Company
Board and the board of directors of each of its Subsidiaries held since December
31, 2001.

         Section 3.02. Subsidiaries. Section 3.02 of the Company Disclosure
Letter lists all the Subsidiaries of the Company and, for each such Subsidiary,
the state of formation and each jurisdiction in which such Subsidiary is
qualified or licensed to do business. Except for Permitted Liens and as set
forth on Section 3.02 of the Company Disclosure Letter, all the outstanding
shares of capital stock of, or other equity interests in, each such Subsidiary
have been validly issued and are fully paid and nonassessable and are owned
directly or indirectly by the Company free and clear of all pledges, claims,
liens, charges, encumbrances or security interests of any kind or nature
whatsoever (collectively, "Liens"), and free of any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other equity interests.
Except for the capital stock or other equity or voting interests of its
Subsidiaries and those equity interests described on Section 3.02 of the Company
Disclosure Letter, the Company does not own, directly or indirectly, any capital
stock or other equity or voting interests in any person.

         Section 3.03. Capital Structure.

              (a) The authorized capital stock of the Company consists of
200,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, no par value ("Company Preferred Stock"), of which 2,000,000 shares are
reserved for issuance in accordance with the Company Rights Plan pursuant to the
terms thereof. At the close of business on May 11, 2006, (i) 35,317,405 shares
of Company Common Stock were issued and outstanding (none of which were owned by
the Company (as treasury stock or otherwise)), (ii) 3,352,896 shares of Company
Common Stock were reserved for issuance pursuant to the Company Stock Plans (of
which 1,905,461 shares of Company Common Stock were subject to outstanding
Company Stock Options) and (iii) no shares of Company Preferred Stock were
issued or outstanding.

              (b) The Company has delivered to Parent a correct and complete
list, as of the close of business on May 11, 2006, of all outstanding Company
Stock Options and other rights to purchase or receive shares of Company Common
Stock granted under the Company Stock Plans or otherwise, the number of shares
of Company Common Stock subject thereto, whether or not a stock option is an
incentive stock option, expiration dates and exercise prices thereof, in each
case broken down as to each plan, agreement or other arrangement and as to each
individual holder. Except as set forth above in this Section 3.03, at the close
of business on May 11, 2006 no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding.
Except as set forth above in this Section 3.03, there are no outstanding stock
appreciation rights, rights to receive shares of Company Common Stock on a
deferred basis or other rights that are linked to the value of Company Common
Stock granted under the Company Stock Plans or otherwise. All outstanding shares
of capital stock of the Company are, and all shares which may be issued pursuant
to the Company Stock Plans will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.

              (c) Except as set forth above in this Section 3.03, there are no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote. Except as
set forth above in this Section 3.03, (i) there are not issued, reserved for
issuance or outstanding (A) any securities of the Company or any of its
Subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company or any of its Subsidiaries or
(B) any warrants, calls, options or other rights to acquire from the Company or
any of its Subsidiaries, or any obligation of the Company or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or voting
securities of the Company or any of its Subsidiaries and (ii) there are not any
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Neither the Company
nor any of its Subsidiaries is a party to any voting agreement with respect to
the voting of any such securities.

         Section 3.04. Authority; Noncontravention.

              (a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to the adoption of this Agreement and the
Merger by the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock (the "Company Shareholder Approval"), to
consummate the Merger and the other transactions contemplated by this Agreement.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the Merger and the other transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby, subject, in the case of the Merger, to receipt
of the Company Shareholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by each of the other parties hereto, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms (subject to applicable bankruptcy, solvency, fraudulent transfer,
reorganization, moratorium and other Laws affecting creditors' rights generally
from time to time in effect and by general principles of equity). As of the date
hereof, the Company Board, at a meeting duly called and held at which all the
directors of the Company were present in person or by telephone, duly and
unanimously adopted resolutions (i) declaring that this Agreement, the Merger
and the other transactions contemplated by this Agreement are advisable and in
the best interests of the Company and the Company's shareholders, (ii) approving
and adopting this Agreement, the Merger and the other transactions contemplated
by this Agreement, (iii) directing that the adoption of this Agreement be
submitted to a vote at a meeting of the shareholders of the Company and (iv)
recommending that the shareholders of the Company adopt this Agreement.

              (b) The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of the Company or any of its Subsidiaries under, (i)
the Company Charter or the Company Bylaws or the comparable organizational
documents of any of its Subsidiaries, (ii) except as set forth on Section
3.04(b) of the Company Disclosure Letter, any loan or credit agreement, bond,
debenture, note, mortgage, indenture, lease or other contract, agreement,
obligation, commitment, arrangement, understanding, instrument, permit or
license (each, a "Contract"), to which the Company or any of its Subsidiaries is
a party or any of their respective properties or other assets is subject or
(iii) subject to the governmental filings and other matters referred to in
Section 3.05, any Law applicable to the Company or any of its Subsidiaries or
their respective properties or other assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, breaches, defaults, rights,
losses or Liens that individually or in the aggregate (A) have not had and would
not reasonably be expected to have a Company Material Adverse Effect, (B) would
not reasonably be expected to impair in any material respect the ability of the
Company to perform its obligations hereunder and (C) would not reasonably be
expected to prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.

              (c) For purposes of this Agreement, "Company Material Adverse
Effect" shall mean any change, effect, event, circumstance, occurrence or state
of facts that is materially adverse to the business, condition (financial or
otherwise), assets, liabilities or results of operations of the Company and its
Subsidiaries, taken as a whole, other than any change, effect, event,
circumstance, occurrence or state of facts relating to (i) the U.S. economy or
financial markets in general, (ii) the industry in which the Company and its
Subsidiaries operate in general, (iii) the announcement of this Agreement or the
transactions contemplated hereby (provided that the exclusion set forth in this
clause (iii) shall not apply to Section 3.04(b) hereof); (iv) the failure of the
Company to meet its publicly announced earnings guidance for any period, in and
of itself (such failure to exclude the underlying causes thereof); (v) changes
in Laws, rules or regulations; (vi) changes in accounting principles required by
GAAP (as defined herein); (vii) acts of war or terrorism; or (viii) outbreaks of
epidemics or pandemics; provided that with respect to clauses (i), (ii), (iv),
(v), (vii) and (viii), such change, effect, event, circumstance, occurrence or
state of facts (x) does not specifically relate to (or have the effect of
specifically relating to) the Company and its Subsidiaries and (y) is not more
materially adverse to the Company and its Subsidiaries than to other companies
operating in the industry in which the Company and its Subsidiaries operate.

         Section 3.05. Governmental Approvals. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental self-regulatory agency, commission or authority (each, a
"Governmental Authority") is required by or with respect to the Company or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the Merger or the
other transactions contemplated by this Agreement, except for those required
under or in relation to (a) the premerger notification and report form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), (c) the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), (d) the Certificate of Merger to be filed with the Secretary of
State of the State of Delaware and the Articles of Merger to be filed with the
Secretary of State of the State of Tennessee and appropriate documents to be
filed with the relevant authorities of other states in which the Company is
qualified to do business, (e) any Medicare or other required license-related
filings, and (f) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made individually or in the aggregate would not reasonably be expected to (x)
have a Company Material Adverse Effect, (y) impair in any material respect the
ability of the Company to perform its obligations hereunder or (z) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement. The consents, approvals, orders, authorizations, registrations,
declarations and filings set forth in (a) through (f) above or listed in Section
3.05 of the Company Disclosure Letter are referred to herein as "Necessary
Consents."

         Section 3.06. Company SEC Documents; No Undisclosed Liabilities.

              (a) Except as set forth on Section 3.06(a) of the Company
Disclosure Letter, the Company has timely filed all reports, schedules, forms,
statements and other documents (including exhibits and other information
incorporated therein) with the Securities and Exchange Commission (the "SEC")
required to be filed by the Company since December 31, 2002 (such documents, the
"Company SEC Documents"). No Subsidiary of the Company is required to file, or
files, any form, report or other document with the SEC. As of their respective
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be,
applicable to such Company SEC Documents, and none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, unless such information contained in any Company SEC Document has
been corrected by a later-filed Company SEC Document that was filed prior to the
date hereof. The financial statements of the Company included in the Company SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and to normal and
recurring year-end audit adjustments not material in amount).

              (b) Except (i) as set forth in the financial statements included
in the Company's Annual Report on Form 10-K filed prior to the date hereof for
the year ended December 31, 2005 and the Company's Quarterly Report on Form 10-Q
filed prior to the date hereof for the quarterly period ended March 31, 2006 or
on Section 3.09 of the Company Disclosure Letter or (ii) as incurred in the
ordinary course of business since March 31, 2006, neither the Company nor any of
its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that, individually or in the
aggregate, have had or would reasonably be expected to have a Company Material
Adverse Effect. Section 3.06(b) of the Company Disclosure Letter sets forth a
description of the aggregate indebtedness (including guarantees of indebtedness
of any other person) of the Company and its Subsidiaries outstanding as of March
31, 2006. Neither the Company nor any of its Subsidiaries has incurred any
indebtedness or entered into any guarantee or capital lease that is not
reflected on Section 3.06(b) of the Company Disclosure Letter, or, since March
31, 2006, modified the terms of any contract or agreement relating to any
indebtedness, guarantee or capital lease described on Section 3.06(b) of the
Company Disclosure Letter.

         Section 3.07. Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in the proxy statement relating to the Company Shareholders Meeting
(together with any amendments thereof or supplements thereto, in each case in
the form or forms mailed to the Company's shareholders, the "Proxy Statement")
will, at the date the Proxy Statement is first mailed to the shareholders of the
Company and, as may be supplemented or amended, at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Proxy Statement based on
information supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement.

         Section 3.08. Absence of Certain Changes or Events. Since the date of
the most recent audited and interim financial statements included in the Company
SEC Documents filed by the Company and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents"), except (a) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby to Parent, Merger Sub and the Company's financial and legal advisors or
(b) as disclosed in the Filed Company SEC Documents, (x) there has not been any
change, effect, event, circumstance, occurrence or state of facts that
individually or in the aggregate has had or would reasonably be expected to have
a Company Material Adverse Effect, and (y) neither the Company nor any of its
Subsidiaries has taken any action that would violate the provisions of Section
5.01 had such provisions been applicable to the Company and its Subsidiaries as
of such date.

         Section 3.09. Litigation. Except as set forth on Section 3.09 of the
Company Disclosure Letter, there is no suit, action, claim, proceeding or
investigation pending or, to the Knowledge of the Company, threatened, against
the Company or any of its Subsidiaries that (x) individually involves an amount
in controversy in excess of $500,000, or (y) in the aggregate has had or would
reasonably be expected to have a Company Material Adverse Effect or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Authority or arbitrator outstanding against, or, to the
Knowledge of the Company, investigation by any Governmental Authority involving
the Company or any of its Subsidiaries that individually or in the aggregate has
had or would reasonably be expected to have a Company Material Adverse Effect or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.

         Section 3.10. Contracts.

              (a) Neither the Company nor any of its Subsidiaries is a party to,
and none of their respective properties or other assets is subject to, any
Contract that is of a nature required to be filed as an exhibit to a report or
filing under the Securities Act or the Exchange Act, other than any Contract
that is filed as an exhibit to the Filed Company SEC Documents.

              (b) Section 3.10(b) of the Company Disclosure Letter sets forth a
correct and complete list as of the date of this Agreement, and the Company has,
prior to the date hereof, made available to Parent correct and complete copies
(including all amendments, modifications, extensions, renewals or guaranties)
of:

                  (i) all Contracts of the Company or any of its Subsidiaries
(A) involving payments by or to the Company or any of its Subsidiaries of more
than $750,000 on an annual basis or (B) involving payments by or to the Company
or any of its Subsidiaries of more than $100,000 on an annual basis and which
may not be terminated by the Company without cause within one year without
penalty;

                  (ii) all Contracts to which the Company or any of its
Subsidiaries is a party, or by which the Company, any of its Subsidiaries or any
of its Affiliates is bound, that contain a covenant restricting the ability of
the Company or any of its Subsidiaries (or which, following the consummation of
the Merger, would restrict the ability of Parent or any of its Subsidiaries,
including the Surviving Corporation and its Subsidiaries) to compete in any
business or with any person or in any geographic area or which prohibits the
Company or any of its Subsidiaries from soliciting suppliers anywhere in the
world;

                  (iii) all Contracts of the Company or any of its Subsidiaries
with any Affiliate of the Company (other than any of its Subsidiaries) in which
the amount involved exceeds $60,000 on an annual basis;

                  (iv) any (A) Contract to which the Company or any of its
Subsidiaries is a party granting any license to Intellectual Property, and (B)
other license (other than real estate) involving payments by the Company or any
of its Subsidiaries of more than $750,000 on an annual basis;

                  (v) all confidentiality agreements (other than in the ordinary
course of business), agreements by the Company not to acquire assets or
securities of a third party or agreements by a third party not to acquire assets
or securities of the Company;

                  (vi) any Contract involving payments by or to the Company or
any of its Subsidiaries, of more than $750,000 on an annual basis that requires
consent of or notice to a third party in the event of or with respect to the
Merger, including in order to avoid a breach or termination of or loss of
benefit under any such Contract;

                  (vii) all joint venture, partnership or other similar
agreements involving co-investment with a third party to which the Company or
any of its Subsidiaries is a party;

                  (viii) any Contract with a Governmental Authority;

                  (ix) all material outsourcing Contracts;

                  (x) all Contracts with investment bankers, financial advisors,
attorneys, accountants or other advisors retained by the Company or any of its
Subsidiaries involving payments by or to the Company or any of its Subsidiaries
of more than $750,000 on an annual basis;

                  (xi) all Contracts providing for the indemnification by the
Company or any of its Subsidiaries of any person, except for any such Contract
that (i) is not material to the Company or any of its Subsidiaries and (ii) was
entered into in the ordinary course of business;

                  (xii) all Contracts pursuant to which any indebtedness of the
Company or any of its Subsidiaries is outstanding or may be incurred and all
guarantees of or by the Company or any of its Subsidiaries of any indebtedness
of any other person (other than the Company or any of its Subsidiaries) (except
for such indebtedness or guarantees the aggregate principal amount of which does
not exceed $750,000 on an annual basis and excluding trade payables arising in
the ordinary course of business); and

                  (xiii) all Contracts listed on Section 3.21 of the Company
Disclosure Letter.

              (c) (i) None of the Company or any of its Subsidiaries (x) is, or
has received written notice or has Knowledge that any other party to any of its
Contracts is, in violation or breach of or default (with or without notice or
lapse of time or both) under, or (y) has waived or failed to enforce any rights
or benefits under any Contract to which it is a party or any of its properties
or other assets is subject, and (ii) to the Knowledge of the Company, there has
occurred no event giving to others any right of termination, amendment or
cancellation of (with or without notice or lapse of time or both) any such
Contract except for violations, breaches, defaults, waivers or failures to
enforce rights or benefits covered by clauses (i) or (ii) above that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.

         Section 3.11. Compliance with Laws.

              (a) Except as set forth on Section 3.11 of the Company Disclosure
Letter, the Company and each of its Subsidiaries has been since December 31,
2003 and is in compliance in all material respects with all statutes, laws,
ordinances, rules, regulations, judgments, orders and decrees of any
Governmental Authority (collectively, "Laws") applicable to it, its properties
or other assets or its business or operations. Except as set forth on Section
3.11 of the Company Disclosure Letter, none of the Company or any of its
Subsidiaries has received, since December 31, 2003, a written notice or other
written communication alleging or relating to a possible material violation of
any Laws applicable to its businesses or operations. The Company and its
Subsidiaries have in effect all material permits, licenses, registrations,
variances, exemptions, authorizations, operating certificates, franchises,
orders, approvals, and similar rights issued by or obtained from all
Governmental Authorities (collectively, "Permits") necessary to carry on their
businesses as now conducted, and there has occurred no material violation of,
material default (with or without notice or lapse of time or both) under, or
event giving to others any right of termination, amendment or cancellation of,
with or without notice or lapse of time or both, any Permit. There is no event
which has occurred that, to the Knowledge of the Company, would reasonably be
expected to result in the revocation, cancellation, non-renewal or adverse
modification of any such Permit that individually or in the aggregate would
reasonably be expected to have a Company Material Adverse Effect. Assuming all
Closing Consents listed on Exhibit B hereto are made or obtained, the Merger, in
and of itself, would not cause the revocation or cancellation of any such
Permit.

              (b) Since December 31, 2003, (i) neither the Company nor any of
its Subsidiaries nor, to the Knowledge of the Company, any third party service
provider acting on behalf of the Company or any of its Subsidiaries, has
received, nor otherwise has any Knowledge of, any written notice from any
Governmental Authority that (x) alleges any material noncompliance (or that the
Company or any of its Subsidiaries or any such third party service provider is
under investigation or the subject of an inquiry by any such Governmental
Authority for such alleged material noncompliance) with any applicable material
Law, or (y) would be reasonably likely to result in a material fine, assessment
or cease and desist order, or the suspension, revocation or material limitation
or restriction of any Permit; and (ii) neither the Company nor any of its
Subsidiaries has entered into any agreement or settlement with any Governmental
Authority with respect to its non-compliance with, or violation of, any
applicable Law.

              (c) Except as set forth on Section 3.06(a) of the Company
Disclosure Letter, since December 31, 2003, the Company and each of its
Subsidiaries has timely filed all material regulatory reports, schedules,
statements, documents, filings, submissions, forms, registrations and other
documents, together with any amendments required to be made with respect
thereto, that each was required to file with any Governmental Authority,
including state health and regulatory authorities and any applicable Federal
regulatory authorities, and have timely paid all taxes, fees and assessments due
and payable in connection therewith, except where the failure to make such
payments would not be material to the Company or any of its Subsidiaries.

              (d) The Company and its Subsidiaries have implemented policies,
procedures and/or programs designed to assure that its agents and employees are
in material compliance with all applicable Laws, including laws, regulations,
directives and opinions of Governmental Authorities relating to advertising,
licensing and sales practices.

              (e) The Company and each of its officers and directors are in
compliance with, and have complied in all material respects with (i) the
applicable provisions of the Sarbanes-Oxley Act of 2002 and the related rules
and regulations promulgated under such act ("Sarbanes-Oxley") or the Exchange
Act and (ii) the applicable listing and corporate governance rules and
regulations of the New York Stock Exchange (the "NYSE"). The Company has
previously disclosed to Parent all of the information required to be disclosed
by the Company and its officers and employees, including the Company's chief
executive officer and chief financial officer, to the Company Board or any
committee thereof pursuant to the certification requirements relating to Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q. The Company and each of
its Subsidiaries maintains a system of internal accounting controls sufficient
to comply with all legal and accounting requirements applicable to the Company,
including compliance with the SEC rules promulgated under Section 404 of
Sarbanes-Oxley.

              (f) The Company and its Subsidiaries have complied, in all
material respects, with all applicable security and privacy standards regarding
protected health information under the Health Insurance Portability and
Accountability Act of 1996 and all applicable state privacy laws, and with all
applicable regulations promulgated under any such legislation.

         Section 3.12. Employee Benefit Plans.

              (a) Section 3.12(a) of the Company Disclosure Letter sets forth a
correct and complete list of: all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other employee benefit plans, programs, agreements,
policies, arrangements or payroll practices, including bonus plans, employment,
consulting or other compensation agreements, collective bargaining agreements,
Company Stock Plans, individual stock option agreements to which the Company is
a party granting stock options to acquire Company Common Stock that have not
been granted under a Company Stock Plan, incentive and other equity or
equity-based compensation, or deferred compensation arrangements, change in
control, termination or severance plans or arrangements, stock purchase,
severance pay, sick leave, vacation pay, salary continuation for disability,
hospitalization, medical insurance, life insurance and scholarship plans and
programs maintained by the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries contributed or is obligated to contribute
thereunder for current or former employees of the Company or any of its
Subsidiaries (the "Employees") or directors or former directors thereof
(collectively, the "Company Plans").

              (b) Correct and complete copies of the following documents, with
respect to each of the Company Plans (other than a Multiemployer Plan), have
prior to the date hereof, been delivered or made available to Parent by the
Company, to the extent applicable: (i) any plans, all amendments and attachments
thereto and related trust documents, insurance contracts or other funding
arrangements, and amendments thereto; (ii) the most recent Forms 5500 and all
schedules thereto and the most recent actuarial report, if any; (iii) the most
recent IRS determination letter; (iv) summary plan descriptions; and (v)
material written communications to employees generally.

              (c) The Company Plans have been maintained in all material
respects in accordance with their terms and with all provisions of ERISA, the
Code and other applicable Laws, and neither the Company (or any of its
Subsidiaries) nor any "party in interest" or "disqualified person" with respect
to the Company Plans has engaged in a non-exempt "prohibited transaction" within
the meaning of Section 4975 of the Code or Section 406 of ERISA that would cause
the Company or any of its Subsidiaries to incur any liability for any material
amount. No fiduciary has any liability for breach of fiduciary duty or any other
failure to act or comply with applicable Law in connection with the
administration or investment of the assets of any Company Plan.

              (d) The Company Plans intended to qualify under Section 401 of the
Code are so qualified and any trusts intended to be exempt from Federal income
taxation under Section 501 of the Code are so exempt.

              (e) None of the Company, its Subsidiaries or any trade or business
(whether or not incorporated) that is treated as a single employer, with any of
them under Section 414(b), (c), (m) or (o) of the Code (or would have been so
treated at any time during the six years immediately prior to the date of this
Agreement) has any current or contingent liability with respect to (i) a plan
subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code
or (ii) any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).

              (f) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Company Plans (including workers compensation) or by Law (without regard to
any waivers granted under Section 412 of the Code), to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension), except where failure to do so has not
resulted and would not reasonably be expected to result in any material
liability to the Company or any of its Subsidiaries.

              (g) There are no pending actions, claims or lawsuits that have
been asserted or instituted against the Company Plans, the assets of any of the
trusts under the Company Plans or the sponsor or administrator of any of the
Company Plans, or against any fiduciary of the Company Plans with respect to the
operation of any of the Company Plans (other than routine benefit claims), nor
does the Company have any Knowledge of facts that could form the basis for any
such action, claim or lawsuit, other than such actions, claims or lawsuits that
individually or in the aggregate have not had and would not reasonably be
expected to have a Company Material Adverse Effect.

              (h) None of the Company Plans provides for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), or applicable state law, or
which is provided at the expense of the participant or the participant's
beneficiary. Each of the Company and any ERISA Affiliate which maintains a
"group health plan" within the meaning of Section 5000(b)(1) of the Code has
complied with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder, except where the failure to comply individually or in the aggregate
has not had and would not reasonably be expected to have a Company Material
Adverse Effect.

              (i) Except as set forth on Section 3.12(i) of the Company
Disclosure Letter (to the extent applicable, in each case broken down as to each
item, and the individual and amount involved), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby, including the Company Shareholder Approval or the Merger (either by
themselves or when combined with any other event), will (i) result in any
payment becoming due to any Employee, (ii) increase any benefits otherwise
payable under any Company Plan, (iii) result in the acceleration of the time of
payment or vesting of any such benefits under any Company Plan or (iv) result in
any obligation to fund any trust or other arrangement with respect to
compensation or benefits under a Company Plan. Except as set forth in Section
3.12(i) of the Company Disclosure Letter, since January 1, 2004, the Company,
including, for purposes of this sentence, the Company Board, any committee
thereof, any committee administering a Company Plan and any officer of the
Company, has not taken any action to increase the compensation or benefits
payable after the date hereof to any officer having the title of senior vice
president or higher of the Company, which increase may be directly or
indirectly, partially or wholly, related to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.

              (j) Neither the Company nor any of its Subsidiaries has a
contract, plan or commitment, whether legally binding or not, to create any
additional Company Plan or to modify any existing Company Plan, except as
required by applicable Law or tax qualification requirement.

              (k) Any individual who performs services for the Company or any of
its Subsidiaries (other than through a contract with an organization other than
such individual) and who is not treated as an employee of the Company or any of
its Subsidiaries for Federal income tax purposes by the Company or any of its
Subsidiaries is not an employee for such purposes, except as individually or in
the aggregate, together with any breach or breaches of Section 3.12(c) hereof
(without regard to any materiality or Company Material Adverse Effect qualifiers
therein), has not had and would not reasonably be expected to have a Company
Material Adverse Effect.

              (l) Except as set forth in Section 3.12(i) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any contract, agreement or other arrangement providing for the payment of any
amount which would not be deductible by reason of Section 162(m) or Section 280G
of the Code.

         Section 3.13. Taxes.

              (a) The Company and each of its Subsidiaries has timely filed, or
has caused to be timely filed on its behalf (taking into account any valid
extension of time within which to file), all income, franchise and other
material tax returns required to be filed by it, and all such filed tax returns
are correct and complete in all material respects. All taxes shown to be due on
such tax returns, and all material taxes otherwise required to be paid by the
Company or any of its Subsidiaries, have been timely paid. Section 3.13(a) of
the Company Disclosure Letter lists each material income or franchise tax return
filed with respect to the Company and its Subsidiaries for the preceding three
taxable years.

              (b) All taxes due and payable by the Company and its Subsidiaries
have been adequately provided for in the financial statements of the Company and
its Subsidiaries (in accordance with GAAP) for all periods ending through the
date hereof. No material deficiency with respect to taxes has been proposed,
asserted or assessed against the Company or any of its Subsidiaries that has not
been paid in full or fully resolved in favor of the taxpayer. No reductions have
been made to the December 31, 2005 current tax reserve or valuation allowance
previously reported to Parent.

              (c) The United States federal income tax returns of the Company
and each of its Subsidiaries have been examined by and settled with (or received
a "no change" letter from) the Internal Revenue Service (the "IRS") (or, to the
Knowledge of the Company, the applicable statute of limitations has expired) for
all years through 2001. All material assessments for taxes due with respect to
such completed and settled examinations or any concluded litigation have been
fully paid.

              (d) Neither the Company nor any of its Subsidiaries is a party to,
is bound by, or has any obligation under any tax allocation or tax sharing
agreement or arrangement with any person pursuant to which it may have any
obligation to make any payments after the Closing.

              (e) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code since the
effective date of Section 355(e) of the Code.

              (f) Since January 1, 1999, neither the Company nor any of its
Subsidiaries has been a member of any consolidated, combined or unitary group
other than each such group of which it is a member on the date hereof, and the
Company and each of its Subsidiaries currently file Federal income tax returns
on a consolidated basis with the "affiliated group" (within the meaning of
Section 1504 of the Code) of which the Company is the common parent. Neither the
Company nor any of its Subsidiaries has any liability for the taxes of any other
person (other than the Company or any of its Subsidiaries) under any state,
local or foreign Law, as a transferee or successor, by contract, or otherwise.

              (g) Except as set forth on Section 3.13(g) of the Company
Disclosure Letter, no audit or other administrative or court proceedings are
pending with any taxing authority or court with respect to any Federal, state or
local income, franchise or other material taxes of the Company or any of its
Subsidiaries, and no written notice thereof has been received by the Company or
any of its Subsidiaries. No issue has been raised by any taxing authority in any
presently pending tax audit that could be material to the Company or any of its
Subsidiaries for any period after the Effective Time. Neither the Company nor
any of its Subsidiaries has any outstanding agreements, waivers or arrangements
extending the statutory period of limitations applicable to any claim for, or
the period for the collection or assessment of, any Federal, state or local
income, franchise or other material taxes.

              (h) No written claim that could give rise to material taxes has
been made within the previous five years by a taxing authority in a jurisdiction
where the Company or any of its Subsidiaries does not file tax returns that the
Company or any of its Subsidiaries is or may be subject to taxation in that
jurisdiction.

              (i) The Company has, prior to the date hereof, made available to
Parent correct and complete copies of (i) all income, franchise and other
material tax returns of the Company and its Subsidiaries for the preceding three
taxable years and (ii) any audit reports issued within the last three years (or
otherwise with respect to any audit or proceeding in progress) relating to
income, franchise or other material taxes of the Company or any of its
Subsidiaries.

              (j) No Liens for taxes exist with respect to any properties or
other assets of the Company or any of its Subsidiaries, except for Liens for
taxes not yet due.

              (k) All material taxes required to be withheld by the Company or
any of its Subsidiaries have been withheld, have been or will be duly and timely
paid to the proper taxing authority, and have been or will be reported pursuant
to applicable tax information reporting Laws.

              (l) With respect to any taxable years ending on or before the
Closing Date, neither the Company nor any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method, and the IRS has not proposed
any such adjustment or change in accounting method.

              (m) There is no power of attorney given by or binding upon the
Company or any of its Subsidiaries with respect to taxes for any period for
which the applicable statute of limitations (including any waivers and
extensions) has not expired as of the date hereof.

              (n) Neither the Company nor any of its Subsidiaries is or has been
a United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code.

              (o) Neither the Company nor any of its Subsidiaries has applied
for, received, or has pending any request for a ruling or determination with
respect to taxes or commenced negotiations or entered into a closing agreement
or other similar agreement relating to taxes with any Governmental Authority.

              (p) Neither the Company nor any of its Subsidiaries has
participated in, or otherwise made a filing with respect to, any "reportable
transaction" within the meaning of Treasury Regulations ss. 1.6011-4(b). Neither
the Company nor any of its Subsidiaries is a direct or indirect beneficiary of a
guarantee of tax benefits or any other arrangement that has the economic effect
of providing a guarantee of tax benefits (including a tax indemnity from a
seller or lessee of property, or insurance protection with respect to tax
treatment) with respect to any transaction, or tax opinion relating to the
Company or any of its Subsidiaries.

              (q) For purposes of this Agreement, (i) "taxes" shall mean taxes
of any kind (including those measured by or referred to as income, franchise,
gross receipts, sales, use, ad valorem, profits, license, withholding, payroll,
employment, excise, escheat, severance, stamp, occupation, premium, value added,
property, windfall profits, customs, duties or similar fees, assessments or
charges of any kind whatsoever) together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto, domestic or foreign, and shall include any transferee or
successor liability in respect of taxes (whether by contract or otherwise) and
any several liability in respect of any tax as a result of being a member of any
affiliated, consolidated, combined, unitary or similar group and (ii) "tax
returns" shall mean any return, report, claim for refund, estimate, information
return or statement or other similar document relating to, filed or required to
be filed with any taxing authority with respect to taxes, including any schedule
or attachment thereto, and including any amendment thereof.

         Section 3.14. Intellectual Property; Software.

              (a) As used herein: (i) "Intellectual Property" means all U.S. and
foreign (a) trademarks, service marks, trade names, Internet domain names,
designs, logos, slogans and other distinctive indicia of origin, together with
goodwill, registrations and applications relating to the foregoing
("Trademarks"); (b) patents and pending patent applications, invention
disclosure statements, and any and all divisions, continuations,
continuations-in-part, reissues, reexaminations, and any extensions thereof, any
counterparts claiming priority therefrom and like statutory rights ("Patents");
(c) registered and unregistered copyrights (including those in Software), rights
of publicity and all registrations and applications to register the same
("Copyrights"); and (d) confidential technology, know-how, inventions,
processes, formulae, algorithms, models and methodologies ("Trade Secrets");
(ii) "IP Licenses" means all Contracts (excluding "click-wrap" or "shrink-wrap"
agreements or agreements contained in "off-the-shelf" Software or the terms of
use or service for any Web site) pursuant to which the Company and its
Subsidiaries have acquired rights in (including usage rights) to any
Intellectual Property, or licenses and agreements pursuant to which the Company
and its Subsidiaries have licensed or transferred the right to use any
Intellectual Property, including license agreements, settlement agreements and
covenants not to sue; (iii) "Software" means all computer programs, including
any and all software implementations of algorithms, models and methodologies
whether in source code or object code form, databases and compilations,
including any and all electronic data and electronic collections of data, all
documentation, including user manuals and training materials, related to any of
the foregoing and the content and information contained on any Web site; and
(iv) "Company Intellectual Property" means the Intellectual Property and
Software held for use or used in the business of the Company or its Subsidiaries
as presently conducted.

              (b) Section 3.14(b) of the Company Disclosure Letter sets forth,
for the Intellectual Property owned by the Company and its Subsidiaries, a
complete and accurate list of all U.S., state and foreign: (i) Patents issued or
pending; (ii) Trademark registrations and applications for registration
(including Internet domain name registrations) and material unregistered
trademarks and service marks; and (iii) material Copyrights, applications and
registrations.

              (c) Section 3.14(c) of the Company Disclosure Letter lists all (i)
material Software that is owned by the Company or its Subsidiaries and (ii)
material IP Licenses.

              (d) The Company, or one of its Subsidiaries, owns or possesses all
licenses or other legal rights to use, sell or license all material Company
Intellectual Property, free and clear of all Liens, except as would not
reasonably be expected to result in, in the aggregate, material direct or
indirect costs or liabilities to, or other material direct or indirect negative
impact on, the Company and its Subsidiaries, taken as a whole.

              (e) All Trademark registrations and applications for registration,
Patents issued or pending and Copyright registrations and applications for
registration owned by the Company and its Subsidiaries are valid and subsisting,
in full force and effect and have not lapsed, expired or been abandoned, and, to
the Knowledge of the Company or its Subsidiaries, are not the subject of any
opposition filed with the United States Patent and Trademark Office or any other
intellectual property registry.

              (f) Except as set forth on Section 3.14(f) of the Company
Disclosure Letter:

                  (i) to the Knowledge of the Company, no unresolved claims or
threat of claims within the three (3) years prior to the date of this Agreement,
have been asserted in writing by any third party against the Company or any of
its Subsidiaries related to the use in the conduct of the businesses of the
Company and its Subsidiaries that the Company Intellectual Property or the
conduct of the business of the Company infringes, misappropriates or dilutes any
Intellectual Property rights of any third party;

                  (ii) to the Knowledge of the Company, the conduct of the
businesses of the Company and its Subsidiaries does not infringe, misappropriate
or dilute any Intellectual Property rights of any third party, except as would
not reasonably be expected to result in, in the aggregate, material direct or
indirect costs or liabilities to, or other material direct or indirect negative
impact on, the Company and its Subsidiaries, taken as a whole;

                  (iii) to the Knowledge of the Company, no third party is
infringing, misappropriating or diluting any Company Intellectual Property,
except as would not reasonably be expected to result in, in the aggregate,
material direct or indirect costs or liabilities to, or other material direct or
indirect negative impact on, the Company and its Subsidiaries, taken as a whole;

                  (iv) no settlement agreements, consents, judgments, orders,
forbearances to sue or similar obligations limit or restrict the Company's or
any Subsidiary's rights in and to any Company Intellectual Property, except as
would not reasonably be expected to result in, in the aggregate, material direct
or indirect costs or liabilities to, or other material direct or indirect
negative impact on, the Company and its Subsidiaries, taken as a whole;

                  (v) the Company and its Subsidiaries have not licensed or
sublicensed their rights in any Company Intellectual Property, or received or
been granted any such rights (except pursuant to "click wrap" or "shrink wrap"
agreements or agreements contained in "off the shelf" Software or the terms of
use or service for any Web site) other than pursuant to the IP Licenses;

                  (vi) to the Knowledge of the Company, there is no default
under any of the IP Licenses by the Company or any of its Subsidiaries or, by
the other party thereto, except as would not reasonably be expected to result
in, in the aggregate, material direct or indirect costs or liabilities to, or
other material direct or indirect negative impact on, the Company and its
Subsidiaries, taken as a whole;

                  (vii) the Company and its Subsidiaries have taken reasonable
measures to protect the confidentiality of their Trade Secrets; and

                  (viii) the consummation of the transactions contemplated
hereby will not result in the loss or impairment of the Company's and its
Subsidiaries' rights to own or use any of the Company Intellectual Property or
obligate them to pay any royalties or other amounts to any third party in excess
of the amounts payable by them prior to the Closing, nor will such consummation
require the consent of any third party in respect of any Company Intellectual
Property, except as would not reasonably be expected to result in, in the
aggregate, material direct or indirect costs or liabilities to, or other
material direct or indirect negative impact on, the Company and its
Subsidiaries, taken as a whole.

         Section 3.15. Real Property. Section 3.15(i) of the Company Disclosure
Letter lists: (a) each of the senior living facilities owned, leased or operated
by the Company and its Subsidiaries (the "Company Facilities"), (b) the street
address and the licensed capacity of each such Company Facility, (c) the
landlord and owner of each such Company Facility, (d) the term of each lease
pursuant to which the Company or any of its Subsidiaries lease all or part of a
Company Facility (each a "Lease"), and (e) any extension and expansion or
purchase options with respect thereto. The Company has, prior to the date
hereof, made available to Parent complete and accurate copies of the Leases
(including all amendments, modifications and supplements thereto) along with, to
the extent in the Company's possession and control: any title insurance
policies; surveys; environmental assessment and similar reports, and any
subleases, licenses or agreements (including any amendments or modifications
thereto) providing for payments in excess of $250,000 on an annual basis and
granting to any other party the right of use or occupancy of any portion of the
real property and improvements that are the subject of such Lease. Except as set
forth in Section 3.15 of the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries, pursuant to any agreement or other arrangement under
which payments exceed $250,000 on an annual basis, leases, subleases or
otherwise permits the occupancy by any third party (other than the Residents) of
all or any portion of any of the Company Facilities. With respect to each Lease,
except as set forth in Section 3.15 of the Company Disclosure Letter or except
as would not reasonably be expected to result in, in the aggregate, material
costs or liabilities to, or other material negative impact on, the Company and
its Subsidiaries, taken as a whole:

              (a) such Lease is legal, valid, binding, enforceable and in full
force and effect, subject to bankruptcy, insolvency, reorganization, moratoriums
or similar laws now or hereafter in effect relating to creditor's rights
generally or to general principles of equity;

              (b) neither the Company nor any Subsidiary nor, to the Knowledge
of the Company, any other party, is in material breach or violation of, or
material default under, any such Lease, and no event has occurred, is pending
or, to the Knowledge of the Company, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a material breach or
default by the Company or any Subsidiary or, to the Knowledge of the Company,
any other party under such Lease;

              (c) all Company Facilities are supplied with utilities and other
services adequate for the operation of said Company Facilities and are in good
repair and working order sufficient for normal operation of the Company's
business, subject to normal wear and tear, and adequate and suitable for the
purposes for which they are presently being used; and

              (d) to the Knowledge of the Company, each of the Company
Facilities has unlimited access to and from publicly dedicated streets, the
responsibility for maintenance of which has been accepted by the appropriate
Governmental Authority;

              (e) to the Knowledge of the Company, no mortgage, pledge, security
interest, encumbrance, charge or other lien (whether arising by contract or by
operation of law) (collectively, "Security Interest"), easement, covenant or
other restriction or title matter applicable to the real property subject to any
such lease, other than Permitted Liens, would reasonably be expected to
materially impair the current uses or the occupancy by the Company or a
Subsidiary of the property subject thereto;

              (f) there are no material disputes, oral agreements or forbearance
programs in effect as to such Lease;

              (g) there are no outstanding options or rights of any party to
terminate such Lease prior to the expiration of the term thereof (except for
termination rights following a casualty, condemnation, default or similar
event);

              (h) to the Knowledge of the Company, all material components of
all improvements located on or included with any real property subject to such
Lease, including, without limitation, the roofs and structural elements thereof
and the heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, paving and parking equipment,
systems and facilities included therein, are, in all material respects, in good
working condition and order (ordinary wear and tear excepted) and free from
material structural or other material defects, adequate for the operation of
such buildings and improvements for the purposes for which they are presently
being used and the Company has maintained or cause to be maintained the same
substantially in accordance with the terms of the Lease;

              (i) no portion of any real property or improvements located
thereon that is the subject of such Lease has suffered any damage by fire or
other casualty loss which has not heretofore been completely repaired and
restored in accordance with the terms of such Lease except as would not,
individually or in the aggregate, reasonably be expected to materially interfere
with the use of such leased Company Facility as a senior living facility; and

              (j) there are no (i) pending or, to the Knowledge of the Company,
threatened condemnation proceedings relating to the real property that is the
subject of such Lease, or (ii) pending or, to the Knowledge of the Company,
threatened litigation, claims, actions, suits, proceedings, investigations or
administrative actions relating to such Lease or the real property and/or
improvements that are the subject thereof.

              With respect to each parcel of real property owned by the Company
and its Subsidiaries (each, an "Owned Real Property"), except as set forth on
Section 3.15(ii) of the Company Disclosure Letter or except as would not
reasonably be expected to result in, in the aggregate, material costs or
liabilities to, or other material negative impact on, the Company and its
Subsidiaries, taken as a whole:

              (a) the Company or the Subsidiary that is the record owner thereof
has good and clear record and marketable title to such Owned Real Property, free
and clear of any Security Interest, easement, covenant or other restriction or
title matter applicable to such Owned Real Property, other than Permitted Liens,
which would reasonably be expected to materially impair the current uses or the
occupancy by the Company or a Subsidiary of the property subject thereto;

              (b) all Company Facilities are supplied with utilities and other
services adequate for the operation of said Company Facilities and are in good
repair and working order sufficient for normal operation of the Company's
business, subject to normal wear and tear, and adequate and suitable for the
purposes for which they are presently being used;

              (c) to the Knowledge of the Company, each of the Company
Facilities has unlimited access to and from publicly dedicated streets, the
responsibility for maintenance of which has been accepted by the appropriate
Governmental Authority;

              (d) there are no (i) pending or, to the Knowledge of the Company,
threatened condemnation proceedings relating to such Owned Real Property or (ii)
pending or, to the Knowledge of the Company, threatened litigation, claims,
actions, suits, proceedings, investigations or administrative actions relating
to such Owned Real Property;

              (e) except as would not reasonably be expected to, individually or
in the aggregate, materially and adversely affect the use or operation of the
Owned Real Property or the business conducted or proposed to be conducted at the
Owned Real Property, the existing buildings and improvements located on such
Owned Real Property are located entirely within the boundary lines of such Owned
Real Property or on permanent easements on adjoining land benefiting such Owned
Real Property and may lawfully be used under applicable zoning and land use laws
(either as of right, by special permit or variance, or as a grandfathered use)
for the purposes for which they are presently being used, and such Owned Real
Property is not located within any flood plain or subject to any similar type
restriction for which any permits or licenses, if any, necessary to the use
thereof have not been obtained;

              (f) there are no outstanding options or rights of first refusal to
purchase such Owned Real Property, or any portion thereof or interest therein;

              (g) neither the Company nor any Subsidiary has received written
notice of any, and to the Knowledge of the Company there is no, proposed or
pending proceeding to change or redefine the zoning classification of all or any
portion of such Owned Real Property;

              (h) to the Knowledge of the Company, the material improvements and
mechanical and utility systems, including, without limitation, the roofs and
structural elements of any buildings or structures and the heating, ventilation,
air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm
water and parking systems and facilities serving the buildings and other
improvements located on such Owned Real Property, are, in all material respects,
in good working condition and order (ordinary wear and tear excepted) and free
from material structural or other material defects adequate for the operation of
such buildings and improvements for the purposes for which they are presently
being used;

              (i) such Owned Real Property is assessed by local property
assessors as a tax parcel or parcels separate from all other tax parcels;

              (j) no portion of such Owned Real Property has suffered any damage
by fire or other casualty loss which has not heretofore been completely repaired
and restored to its original condition (ordinary wear and tear excepted), except
as would not, individually or in the aggregate, reasonably be expected to
materially interfere with the use of such Owned Real Property as a senior living
facility;

              (k) such Owned Real Property is in material compliance with the
terms and provisions of any restrictive covenants, easements, or agreements
affecting such Owned Real Property; and

              (l) the Company has made available to Parent complete and accurate
copies of all of the following materials relating to such Owned Real Property,
to the extent in the Company's possession or control: title insurance policies;
deeds; surveys; environmental assessment and similar reports, and leases,
subleases, licenses or agreements (including any amendments or modifications
thereto) granting to any other party the right of use or occupancy of any
portion of such Owned Real Property and providing for payments in excess of
$250,000 on an annual basis.

         Section 3.16. Environmental Matters. Except as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect in the case of clauses (b), (c) and (d) below (it being agreed that
clause (a) below shall not be qualified by a Company Material Adverse Effect),
(a) no material written notice, notification, demand, request for information,
citation, summons, complaint or order has been received by, and no material
action, claim, suit, proceeding or review or investigation is pending or, to the
Knowledge of the Company or any of its Subsidiaries, threatened by any person
against, the Company, any of its Subsidiaries or any person whose liability the
Company or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law with respect to any matters relating to or
arising out of any Environmental Law; (b) the Company and its Subsidiaries have
been and are in compliance with all Environmental Laws, including possessing all
permits, authorizations, licenses, exemptions and other governmental
authorizations required for its operations under applicable Environmental Laws;
(c) the Company and its Subsidiaries do not have any Environmental Liabilities
and, to the Knowledge of the Company or any of its Subsidiaries, no facts,
circumstances or conditions relating to, arising from, associated with or
attributable to (i) any real property currently or formerly owned, operated or
leased by the Company or its Subsidiaries or operations thereon or (ii) any
person whose liability the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law would reasonably
be expected to result in Environmental Liabilities; and (d) to the Knowledge of
the Company or any of its Subsidiaries, with respect to any real property
currently or formerly owned or leased, as the case may be, by the Company or its
Subsidiaries, there have been no Releases of Hazardous Materials that have or
are reasonably likely to result in a claim against the Company or its
Subsidiaries.

         As used in this Agreement, the term "Environmental Laws" means Federal,
state, local and foreign statutes, Laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, codes, injunctions, permits and
governmental agreements relating to the protection of human health as it relates
to Hazardous Materials exposure or the environment, including Hazardous
Materials.

         As used in this Agreement, the term "Environmental Liabilities" with
respect to any person means any and all liabilities of or relating to such
person or any of its Subsidiaries (including any entity which is, in whole or in
part, a predecessor of such person or any of such Subsidiaries), whether vested
or unvested, contingent or fixed, including contractual, which (i) arise under
applicable Environmental Laws or with respect to Hazardous Materials and (ii)
relate to actions occurring or conditions existing on or prior to the Closing
Date.

         As used in this Agreement, the term "Hazardous Material" means all
substances or materials regulated as hazardous, toxic, explosive, dangerous,
flammable or radioactive under any Environmental Law including (i) petroleum,
asbestos or polychlorinated biphenyls and (ii) in the United States, all
substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Section 300.5.

         As used in this Agreement, the term "Release" means any release, spill,
emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal,
leaching or migration into the indoor or outdoor environment (including ambient
air, surface water, groundwater, and surface or subsurface strata) or into or
out of any property, including the movement of Hazardous Materials through or in
the air, soil, surface water, groundwater or property.

         Section 3.17. Transactions with Related Parties. Except as disclosed in
the Filed Company SEC Documents, since January 1, 2005, there has been no
transaction, or series of similar transactions, agreements, arrangements or
understandings, nor are there any currently proposed transactions, or series of
similar transactions, agreements, arrangements or understandings to which the
Company or any of its Subsidiaries was or is to be a party, that would be
required to be disclosed under Item 404 of Regulation S-K promulgated under the
Securities Act.

         Section 3.18. Brokers and Other Advisors. No broker, investment banker,
financial advisor or other person, other than Cohen & Steers Capital Advisors,
LLC, the fees and expenses of which will be paid by the Company in accordance
with the Company's agreements with such firm (a complete copy of which has
heretofore been made available to Parent), is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission, or the
reimbursement of expenses, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company or
its Subsidiaries.

         Section 3.19.Opinion of Financial Advisor. The Company has received the
opinion of Cohen & Steers Capital Advisors, LLC dated the date hereof to the
effect that, as of such date, the Merger Consideration is fair from a financial
point of view to the holders of shares of Company Common Stock, a complete copy
of which opinion will be made available to Parent as soon as practicable after
the date of this Agreement.

         Section 3.20. Residence Agreements. Except as set forth on Section 3.20
of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is in default under, nor to the Company's Knowledge is any Resident
in default, or is there any dispute under or with respect to, any agreement
(each such agreement, a "Residence Agreement") between any person currently
residing at a Company Facility (each, a "Resident") and the owner, lessee or
operator of such Company Facility, except as would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. True
and complete copies of representative forms of Residence Agreements currently
used in each of the Company Facilities have been made available to Parent prior
to the date hereof. Except as set forth on Section 3.20 of the Company
Disclosure Letter or as otherwise would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, all
Residents of the Company Facilities have executed Residence Agreements and all
Residence Agreements do not vary in any material respect from the forms of the
applicable specimen agreements made available to Parent, and were entered into
on an arms' length basis.

         Section 3.21. Insurance. Section 3.21 of the Company Disclosure Letter
lists each insurance policy (including policies providing casualty, liability,
medical and workers compensation coverage) to which the Company or any
Subsidiary is currently a party (the "Policies"). Except as set forth on Section
3.21 of the Company Disclosure Letter, correct and complete copies of all
Policies have been provided to Parent prior to the date hereof. All Policies are
in full force and effect, and, to the Knowledge of the Company, have been issued
by licensed insurers, all premiums with respect thereto covering all periods up
to and including the Closing Date have been paid, and no notice of cancellation
or termination has been received with respect to any Policies, except for such
cancellations or terminations which would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.

         Section 3.22. Labor Matters. No labor strike, work slowdown, work
stoppage, lockout or other concerted labor action or dispute involving the
employees of the Company or any of its Subsidiaries is pending, or to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries and, since December 31, 2001, there has not been any such
action. Except as set forth on Section 3.22 of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries is party to or bound by any
collective bargaining or similar agreement with any labor organization or any
work rules or practices agreed to with any labor organization applicable to
employees of the Company or any of its Subsidiaries, and no collective
bargaining or similar agreement is currently being negotiated by the Company or
any of its Subsidiaries. No representation election petition or application for
certification of a labor organization as the exclusive collective bargaining
representative of any employees of the Company or any of its Subsidiaries has
been served on the Company or any of its Subsidiaries within the past three
years, nor, to the Knowledge of the Company, is such a petition or application
pending with the National Labor Relations Board or any other Governmental
Authority, and no labor organization is currently engaged in or, to the
Knowledge of the Company, threatening organizational efforts with respect to any
employees of the Company or any of its Subsidiaries. Except as would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, each of the Company and its Subsidiaries (i) is, and
has been since December 31, 2001, in compliance with all applicable Laws
respecting employment and employment practices, terms and conditions of
employment, health and safety and wages and hours, and (ii) is not liable for
any material payment to any trust or other fund or to any Governmental
Authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for employees (other than routine payments to
be made in the ordinary course of business consistent with past practice). The
Company and its Subsidiaries have not, at any time prior to the date that is 90
days before the Closing Date, without fully complying with the notice and other
requirements of the Worker Adjustment Retraining Notification Act of 1988, as
amended (the "WARN Act"), effectuated (i) a "plant closing" (as defined in the
WARN Act), affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Company or any
of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Company or any of its
Subsidiaries; or any similar action under applicable state or local Law
requiring notice to employees in the event of a plant closing or mass layoff.

         Section 3.23. Licensing Surveys. The Company is periodically subject to
monitoring, inspections or survey reports, waivers of deficiencies, plans of
correction, and other investigation reports or certifications by Governmental
Authorities (collectively, "Licensing Surveys"). Except as set forth on Section
3.23 of the Company Disclosure Letter or except as otherwise would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, there are no deficiencies or violations noted in any
Licensing Surveys, and the Company or its Subsidiaries have remedied, discharged
and complied in all material respects (or are in the process of so complying)
with all applicable plans of correction, such that there are no violations or
deficiencies with respect to any of the licenses issued and required by
Governmental Authorities in connection with the ownership, maintenance and
operation of the Company Facilities or the operation of the business of the
Company and the Subsidiaries.

         Section 3.24. Resident Records. Except as set forth on Section 3.24 of
the Company Disclosure Letter or except as otherwise would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, none of Company or any of the Subsidiaries has received written notice:
(a) that Resident records used or developed in connection with the business
conducted at the Company Facilities have not been maintained in accordance with
any applicable federal, state or local laws or regulations governing the
preparation, maintenance of confidentiality, transfer and/or destruction of such
records, and (b) of any deficiency in the Resident records used or developed in
connection with the operation of the business conducted at the Company
Facilities.

         Section 3.25. Third Party Payor Reimbursement. All billing practices of
the Company and its Subsidiaries with respect to the Company Facilities,
including the Government Programs (as defined below) and private insurance
companies, have been in compliance with all applicable laws, regulations and
policies of such third party payors and Government Programs, except where any
failure to be in compliance has not had and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
Except as set forth on Section 3.25 of the Company Disclosure Letter, since
December 31, 2001, none of the Company or any of its Subsidiaries has received
written notice that the Company or any of its Subsidiaries has billed or
received any payment or reimbursement in excess of amounts permitted by
applicable Law, except to the extent cured or corrected and all penalties or
interest discharged in connection with such cure or correction. For purposes of
this Agreement, "Government Programs" shall refer to Title XVIII ("Medicare")
and Title XIX ("Medicaid") of the Social Security Act, CHAMPUS, TRICARE and
other federal, state or local governmental reimbursement programs, or successor
programs to any of the above.

         Section 3.26. State Takeover Statutes; Company Rights Plan. Assuming
that neither Parent nor Merger Sub is an "interested shareholder" within the
meaning of the TBCA, the Company has taken all necessary action so that no
"investor protection act," "business combination," "control share acquisition"
or other anti-takeover statute or regulation, in each case under the TBCA, nor
any takeover provision in the Company Charter or the Company Bylaws would (i)
prohibit or restrict the Company's ability to perform its obligations under this
Agreement, the Articles of Merger or the Certificate of Merger or its ability to
consummate the transactions contemplated hereby and thereby, (ii) have the
effect of invalidating or voiding this Agreement, the Articles of Merger or the
Certificate of Merger, or any provision hereof or thereof, or (iii) subject
Parent to any impediment or condition in connection with the exercise of any of
its rights under this Agreement, the Articles of Merger or the Certificate of
Merger. The Company has taken all actions necessary to render the Company Rights
inapplicable to this Agreement and the transactions contemplated hereby and to
cause the Company Rights Plan to terminate as of the Effective Time.

                                   ARTICLE IV.
             Representations and Warranties of Parent and Merger Sub

         Parent and Merger Sub represent and warrant to the Company as follows:

         Section 4.01. Organization, Standing and Corporate Power. Each of
Parent, its Subsidiaries and Merger Sub is an entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction in which it is
formed and has all requisite power and authority to carry on its business as now
being conducted. Each of Parent, its Subsidiaries and Merger Sub is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate has not resulted in, and would not
reasonably be expected to result in, material direct or indirect costs or
liabilities to Parent and its Subsidiaries. Parent has, prior to the date
hereof, made available to the Company complete and correct copies of its
Articles of Incorporation (the "Parent Articles") and Bylaws (the "Parent
Bylaws") and the articles of incorporation and by-laws or comparable
organizational documents) of each of its Subsidiaries and Merger Sub, in each
case as amended to the date of this Agreement.

         Section 4.02. Capital Structure of Merger Sub. The authorized capital
stock of Merger Sub consists of 1,000 shares of common stock, par value $0.01
per share ("Merger Sub Interests"). All of the issued and outstanding Merger Sub
Interests are owned by Parent. Merger Sub does not have issued or outstanding
any options, warrants, subscriptions, calls, rights, convertible securities or
other agreements or commitments obligating Merger Sub to issue, transfer or sell
any Merger Sub Interests to any person, other than Parent.

         Section 4.03. Authority; Noncontravention.

              (a) Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Merger Sub and no other corporate proceedings on the part of
Parent or Merger Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the other party hereto, constitutes a legal, valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms (subject to applicable bankruptcy,
solvency, fraudulent transfer, reorganization, moratorium and other Laws
affecting creditors' rights generally from time to time in effect and by general
principles of equity). As of the date hereof, the board of directors of Parent
(the "Parent Board"), at a meeting duly called and held, duly adopted
resolutions, approving this Agreement, the Merger and the other transactions
contemplated by this Agreement.

              (b) The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of Parent, any of its Subsidiaries or Merger Sub
under (i) the Parent Articles or Parent By-laws or the comparable organizational
documents of any of its Subsidiaries or Merger Sub, (ii) any Contract to which
Parent, any of its Subsidiaries or Merger Sub is a party or any of their
respective properties or other assets is subject or (iii) subject to the
governmental filings and other matters referred to in Section 4.04 hereof, any
Law applicable to Parent, any of its Subsidiaries or Merger Sub or their
respective properties or other assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, breaches, defaults, rights, losses or
Liens that individually or in the aggregate (A) would not reasonably be expected
to impair in any material respect the ability of Parent or Merger Sub to perform
its obligations under this Agreement and (B) would not reasonably be expected to
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.

         Section 4.04. Governmental Approvals. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Authority is required by or with respect to
Parent, any of its Subsidiaries or Merger Sub in connection with the execution
and delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the Merger or the other transactions contemplated by
this Agreement, except for (a) Necessary Consents and (b) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate would
not reasonably be expected to (x) impair in any material respect the ability of
Parent or Merger Sub to perform its obligations under this Agreement or (y)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.

         Section 4.05. Information Supplied. None of the information supplied or
to be supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date it is first
mailed to the shareholders of the Company and at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. Notwithstanding the foregoing, no representation or
warranty is made by Parent or Merger Sub with respect to statements made or
incorporated by reference in the Proxy Statement based on information supplied
by the Company specifically for inclusion or incorporation by reference in the
Proxy Statement.

         Section 4.06. Litigation. There is no suit, action, claim, proceeding
or investigation pending or, to the Knowledge of Parent, threatened against
Parent or any of its Subsidiaries that individually or in the aggregate has had
or would reasonably be expected to prevent or materially delay the consummation
of any of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Authority or
arbitrator outstanding against, or, to the Knowledge of Parent, investigation by
any Governmental Authority involving, Parent or any of its Subsidiaries that
individually or in the aggregate has had or would reasonably be expected to
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.

         Section 4.07. No Business Activities. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby.

         Section 4.08. Brokers and Other Advisors. No broker, investment banker,
financial advisor or other person other than Goldman, Sachs & Co., the fees and
expenses of which will be paid by Parent in accordance with Parent's agreements
with such firm, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission, or the reimbursement of expenses in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Merger Sub.

         Section 4.09. Financing. Parent has delivered to the Company a true and
complete copy of the investment agreement as in effect on the date hereof, dated
as of the date hereof (the "Financing Commitment"), between Parent and RIC
Coinvestment Fund LP ("RIC") pursuant to which RIC has committed to provide
equity financing in the aggregate amount of $1,300,000,000, which constitutes
sufficient funds for Parent to consummate the transactions contemplated hereby
(the "Equity Financing"). Except as set forth therein, there are no conditions
precedent or other contingencies (other than the consummation of the Merger) and
all necessary approvals and consents have been obtained related to the funding
of the full amount of the Equity Financing. Parent will comply with all of the
terms and provisions of the Financing Commitment.

                                   ARTICLE V.
                    Covenants Relating to Conduct of Business

         Section 5.01. Conduct of Business.

              (a) Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
each of its Subsidiaries to, carry on its business in the ordinary course
consistent with past practice and comply with all applicable Laws in all
material respects, and, to the extent consistent therewith, use its reasonable
efforts to preserve intact its current business organizations, keep available
the services of its current officers, employees and consultants and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it with the intention that its goodwill and
ongoing business shall not be materially impaired at the Effective Time. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as provided on Section 5.01(a) of
the Company Disclosure Letter and except as expressly contemplated by this
Agreement or required by applicable Laws, the Company shall not, and shall not
permit any of its Subsidiaries to, without Parent's prior written consent:

                  (i) (A) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect of, any
of its capital stock, other than dividends or distributions by a direct or
indirect wholly owned Subsidiary of the Company to its parent, (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;

                  (ii) issue, deliver, sell, grant, pledge or otherwise encumber
or subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities, or any "phantom" stock, "phantom" stock rights, stock appreciation
rights or stock based performance units (other than the issuance of shares of
Company Common Stock upon the exercise of Company Stock Options outstanding on
the date hereof in accordance with their terms on the date hereof);

                  (iii) amend the Company Charter or the Company Bylaws or the
comparable charter or organizational documents of any of its Subsidiaries or
adopt another shareholders' rights plan (i.e., "poison pill");

                  (iv) except in the ordinary course of business consistent with
past practice, directly or indirectly acquire (A) by merging or consolidating
with, or by purchasing all of or a substantial equity interest in, or by any
other manner, any division, business or equity interest of any person or (B) any
assets forming part of such a division or business; provided, however, that in
no event shall the Company and its Subsidiaries be permitted to acquire any such
assets that have a purchase price in excess of $20,000,000 in the aggregate;

                  (v) sell, lease, license, mortgage, sell and leaseback or
otherwise encumber or subject to any Lien (other than Permitted Liens) or
otherwise dispose of any of its properties or other assets with a fair market
value in excess of $1,000,000 individually or $2,000,000 in the aggregate to a
third party, except for Residence Agreements, leases or subleases entered into
in the ordinary course of business consistent with past practices;

                  (vi) make any capital expenditure or expenditures which (1)
involves the purchase of any real property or (2) are not in accordance with the
Company's capital expenditure budget for the balance of fiscal year 2006
provided to Parent prior to the date hereof;

                  (vii) (A) repurchase or prepay any indebtedness for borrowed
money except as required by the terms of such indebtedness, (B) incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person or issue or sell any debt securities or options, warrants, calls or other
rights to acquire any debt securities of the Company or any of its Subsidiaries,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the foregoing
or (C) make any loans, advances or capital contributions to, or investments in,
any other person in excess of $750,000 in the aggregate, other than in the
Company or in or to any direct or indirect wholly-owned Subsidiary of the
Company;

                  (viii) (A) pay, discharge, settle or satisfy any claims
(including claims of shareholders), liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) (1) in
excess of $1,000,000 individually and $2,000,000 in the aggregate, other than in
the ordinary course of business consistent with past practice or (2) involving
any material limitation on the conduct of the business of the Company or its
Subsidiaries or (B) waive or release any right of the Company or any of its
Subsidiaries with a value in excess of $250,000;

                  (ix) except in the ordinary course of business consistent with
past practice, modify, amend or terminate any Contract (i) that by its terms is
required to be disclosed on Section 3.10(b) of the Company Disclosure Letter, or
(ii) that would be required, as so amended or modified, to be disclosed on
Section 3.10(b) of the Company Disclosure Letter, or enter into any Contract
which if in effect on the date hereof would be required to be disclosed on
Section 3.10(b) of the Company Disclosure Letter; provided that the Company
shall not, without the prior written consent of Parent, enter into any Contract
which if in effect on the date hereof would be required to be disclosed on
Section 3.10(b) of the Company Disclosure Letter pursuant to Section 3.10(b)(ii)
or which would require consent of or notice to a third party in the event of or
with respect to the Merger;

                  (x) terminate, amend or otherwise modify any agreement entered
into by the Company, at the request of Parent after the date hereof, with any
individual party to a New Employment Agreement;

                  (xi) except in the ordinary course of business consistent with
past practice, and except as required to comply with applicable Law or any
Contract disclosed in Section 3.12 of the Company Disclosure Letter, (A)
increase in any manner the compensation or fringe benefits of, or pay any bonus
(other than the bonus payments described in Section 6.11(a) of the Company
Disclosure Letter) to, any current or former director, officer, employee or
consultant of the Company or any of its Subsidiaries, (B) pay to any current or
former director, officer, employee or consultant of the Company or any of its
Subsidiaries any benefit not provided for under any Contract or Company Plan
other than the payment of cash compensation in the ordinary course of business
consistent with past practice, (C) grant any awards under any Company Plan
(including the grant of stock options, stock appreciation rights, stock based or
stock related awards, performance units, or restricted stock or the removal of
existing restrictions in any Contract or Company Plan or awards made
thereunder), (D) take any action to fund or in any other way secure the payment
of compensation or benefits under any Contract or Company Plan, (E) exercise any
discretion to accelerate the vesting or payment of any compensation or benefit
under any Contract or Company Plan, (F) materially change any actuarial or other
assumption used to calculate funding obligations with respect to any Company
Plan or change the manner in which contributions to any Company Plan are made or
the basis on which such contributions are determined or (G) adopt any new
employee benefit plan or arrangement or amend, modify or terminate any existing
Company Plan, in each case for the benefit of any current or former director,
officer, employee or consultant of the Company or any of its Subsidiaries, other
than required by applicable Law or tax qualification requirement; provided,
however, that with the prior consent of Parent, such consent not to be
unreasonably withheld, the Company may offer and make payments to current
employees for retention purposes;

                  (xii) adopt or enter into any collective bargaining agreement
or other labor union contract applicable to the employees of the Company or any
of its Subsidiaries;

                  (xiii) fail to use reasonable efforts to maintain existing
insurance policies or comparable replacement policies to the extent available
for a reasonable cost;

                  (xiv) change its fiscal year, revalue any of its material
assets, or make any changes in financial, actuarial, reserving, statutory or tax
accounting methods, principles or practices, except in each case as required by
GAAP or applicable Law;

                  (xv) make any material tax election or settle or compromise
any material tax liability, or agree to an extension of a statute of limitations
with respect to material taxes; or

                  (xvi) authorize any of, or commit, propose or agree to take
any of, the foregoing actions.

              (b) Other Actions. Except as otherwise contemplated or permitted
by this Agreement, the Company and Parent shall not, and shall not permit any of
their respective Subsidiaries to, take any action that would reasonably be
expected to result in (i) any of the representations and warranties of such
party set forth in this Agreement that are qualified by materiality or Company
Material Adverse Effect as the case may be, becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Merger set forth in
Article VII not being satisfied.

              (c) Advice of Changes; Filings. Each of the Company and Parent
shall as promptly as practicable advise the other party orally and in writing
upon obtaining Knowledge of (i) any representation or warranty made by it (and,
in the case of Parent, made by Merger Sub) contained in this Agreement that is
qualified as to materiality or Company Material Adverse Effect, as the case may
be, becoming untrue or inaccurate in any respect or any representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect or (ii) the failure of it (and, in the case of Parent, of Merger Sub) to
comply with or satisfy in any respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement. The Company and Parent
shall promptly provide the other copies of all filings made by such party with
any Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.

         Section 5.02. No Solicitation by the Company.

              (a) The Company shall not, nor shall it authorize or permit any of
its Subsidiaries, any of its or their respective directors, officers, employees
or any investment banker, financial advisor, attorney, accountant or other
advisor, agent or representative retained by the Company or any Subsidiary in
connection with the transactions contemplated by this Agreement (collectively,
"Representatives") to, directly or indirectly through another person, (i)
solicit, initiate, cause, knowingly encourage, or knowingly facilitate, any
inquiries or the making of any proposal that constitutes or is reasonably likely
to lead to a Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal, or furnish to any person any
information in connection with or in furtherance of any Takeover Proposal.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative of the
Company or any of its Subsidiaries shall be a breach of this Section 5.02(a) by
the Company. The Company shall, and shall cause its Subsidiaries and instruct
its Representatives to, immediately cease and cause to be terminated all
existing discussions or negotiations with any person conducted heretofore with
respect to any Takeover Proposal and request the prompt return or destruction of
all confidential information previously furnished. Notwithstanding the
foregoing, at any time prior to obtaining the Company Shareholder Approval (and
in no event after obtaining such Company Shareholder Approval), in response to
an unsolicited bona fide written Takeover Proposal made after the date hereof
that the Company Board determines in good faith (after receiving advice of a
financial advisor of nationally recognized reputation, which may be Cohen &
Steers Capital Advisors, LLC, and of its outside counsel) constitutes or is
reasonably likely to constitute a Superior Proposal, the Company may, if the
Company Board determines in good faith (after receiving advice of its outside
counsel) that it is necessary to do so in order to comply with its fiduciary
duties to the shareholders of the Company under applicable Law, and subject to
compliance with Section 5.02(c) and after giving Parent two business days
written notice of such determination, (A) furnish information with respect to
the Company and its Subsidiaries to the person making such Takeover Proposal
(and its Representatives) pursuant to a customary confidentiality agreement not
less restrictive of such person than the Confidentiality Agreement, provided
that all such oral or written information (to the extent that such information
has not been previously provided to Parent) is provided or made available to
Parent, as the case may be, prior to or substantially concurrent with the time
it is provided or made available to such person, as the case may be, and (B)
participate in discussions or negotiations with the person making such Takeover
Proposal (and its Representatives) regarding such Takeover Proposal.

         For purposes of this Agreement, "Takeover Proposal" shall mean any
inquiry, proposal or offer, whether or not conditional and whether or not
withdrawn, (a) for a merger, consolidation, dissolution, recapitalization or
other business combination involving the Company, (b) for the issuance of 20% or
more of the equity securities of the Company as consideration for the assets or
securities of another person or (c) to acquire in any manner, directly or
indirectly, 20% or more of the equity securities of the Company or assets
(including equity securities of any Subsidiary of the Company) that represent
20% or more of the total consolidated assets of the Company, other than the
transactions contemplated by this Agreement.

         For purposes of this Agreement, "Superior Proposal" shall mean any bona
fide written offer made by a third party, that if consummated would result in
such person (or its shareholders) owning, directly or indirectly, 75% of the
shares of Company Common Stock then outstanding (or of the surviving entity in a
merger or the direct or indirect parent of the surviving entity in a merger) or
all or substantially all of the total consolidated assets of the Company (i) on
terms which the Company Board determines in good faith (after receiving advice
of a financial advisor of nationally recognized reputation and of its outside
counsel and in light of all relevant circumstances, including, without
limitation, all the terms and conditions of such proposal and this Agreement) to
be more favorable to the shareholders of the Company from a financial point of
view than the transactions contemplated by this Agreement, (ii) which is
reasonably likely to be completed, taking into account any financing and
approval requirements and all other financial, legal, regulatory and other
aspects of such proposal, and (iii) which does not have a financing contingency.

              (b) Neither the Company Board nor any committee thereof shall (i)
(A) withdraw (or modify in a manner adverse to Parent), or propose to withdraw
(or modify in a manner adverse to Parent), the approval, recommendation or
declaration of advisability by such Company Board or any such committee thereof
of this Agreement or the Merger (it being understood that taking a neutral
position or no position with respect to a Takeover Proposal shall be considered
an adverse modification) or (B) recommend, adopt or approve, or propose publicly
to recommend, adopt or approve, any Takeover Proposal (any action described in
this clause (i) being referred to as a "Company Adverse Recommendation Change")
or (ii) approve or recommend, or propose to approve or recommend, or allow the
Company or any of its Subsidiaries to execute or enter into, any letter of
intent, memorandum of understanding, agreement in principle, merger agreement,
acquisition agreement, option agreement, joint venture agreement, partnership
agreement or other similar agreement constituting or related to, any Takeover
Proposal (other than a confidentiality agreement pursuant to Section 5.02(a)).
Notwithstanding the foregoing, the Company Board may, if the Company Board
determines in good faith (after receiving advice of its outside counsel) that it
is necessary to do so in order to comply with its fiduciary duties to the
shareholders of the Company under applicable Law, effect a Company Adverse
Recommendation Change or terminate this Agreement solely in order to
concurrently enter into an agreement with respect to a Superior Proposal, but,
in each case, only at a time that is after the fifth business day following
Parent's receipt of written notice from the Company (an "Adverse Notice")
advising Parent that the Company Board has determined that a Takeover Proposal
is a Superior Proposal, that the Company Board intends to make such Company
Adverse Recommendation Change or to terminate this Agreement and containing all
information required by Section 5.02(c), together with copies of any written
offer or proposal in respect of such Superior Proposal (it being understood and
agreed that any amendment to the financial terms or other material terms of such
Superior Proposal shall require a new Adverse Notice and a new five business day
period). In determining whether to make a Company Adverse Recommendation Change
or to terminate this Agreement in response to a Superior Proposal, the Company
Board shall take into account any changes to the terms of this Agreement
proposed by Parent (in response to an Adverse Notice or otherwise) in
determining whether such third party Takeover Proposal still constitutes a
Superior Proposal.

              (c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.02, the Company shall promptly advise
Parent orally and in writing of any request for information or other inquiry
that the Company reasonably believes could lead to any Takeover Proposal, the
terms and conditions of any such request, Takeover Proposal or inquiry
(including any changes thereto) and the identity of the person making any such
request, Takeover Proposal or inquiry. The Company shall promptly keep Parent
fully informed of the status and details (including any change to the terms
thereof) of any such request, Takeover Proposal or inquiry.

              (d) Nothing contained in this Section 5.02 shall prohibit the
Company or the Company Board from (i) complying with the Company's obligations
required under Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
(ii) making any required disclosure to the shareholders of the Company if, in
the good faith judgment of the Company Board (after consultation with outside
counsel), failure to so disclose would constitute a violation of applicable Law;
provided, however, that any such disclosure relating to a Takeover Proposal
shall be deemed a Company Adverse Recommendation Change unless the Company Board
reaffirms its recommendation and declaration of advisability of this Agreement
and the Merger.

                                  ARTICLE VI.
                              Additional Agreements

         Section 6.01. Preparation of the Proxy Statement; Shareholder Meetings.

              (a) As soon as practicable following the date of this Agreement
(but in no event later than 20 days after the date hereof), the Company shall
prepare and file with the SEC the Proxy Statement. The Company will respond
promptly to any comments from the SEC or the staff of the SEC on the Proxy
Statement. The Company shall use its reasonable efforts to cause the Proxy
Statement to be mailed to the shareholders of the Company as promptly as
practicable following the date of this Agreement. No filing of, or amendment or
supplement to, the Proxy Statement will made by the Company, without providing
Parent and its counsel a reasonable opportunity to review and comment thereon.
If at any time prior to the Effective Time any information relating to the
Company or Parent, or any of their respective Affiliates, directors or officers,
should be discovered by the Company or Parent which should be set forth in an
amendment or supplement to the Proxy Statement, so that such document would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such information
shall promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by Law, disseminated to the shareholders of the Company.
The parties shall notify each other promptly of the receipt of any comments from
the SEC or the staff of the SEC and of any request by the SEC or the staff of
the SEC for amendments or supplements to the Proxy Statement or for additional
information and shall supply each other with copies of all correspondence
between it or any of its Representatives, on the one hand, and the SEC or the
staff of the SEC, on the other hand, with respect to the Proxy Statement or the
Merger.

              (b) The Company shall, as soon as practicable following the date
of this Agreement, establish a record date for and promptly take any and all
actions in connection therewith, and as soon as practicable after the date of
this Agreement, duly call, give notice of, convene and hold, a meeting of its
shareholders (the "Company Shareholders Meeting") solely for the purpose of
obtaining the Company Shareholder Approval. Subject to Section 5.02(b), the
Company shall, through the Company Board, recommend to its shareholders adoption
of this Agreement, the Merger and the other transactions contemplated by this
Agreement.

         Section 6.02. Access to Information; Confidentiality. The Company shall
afford to Parent and its Representatives reasonable access during normal
business hours during the period prior to the Effective Time or the termination
of this Agreement to all of its and its Subsidiaries' properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by such party during such period
pursuant to the requirements of Federal or state securities Laws and (b)
consistent with its legal obligations all other information concerning the
Company and its Subsidiaries' business, properties and personnel as Parent or
any of its Representatives may reasonably request; provided, however, that the
Company may restrict the foregoing access to the extent that any law, treaty,
rule or regulation of any Governmental Authority applicable to the Company
requires the Company to restrict access to any properties or information. Except
for disclosures expressly permitted by the terms of the confidentiality
agreement, dated as of April 25, 2006, between Parent and the Company (as it may
be amended from time to time, the "Confidentiality Agreement"), Parent shall
hold, and shall cause its Representatives to hold, all information received from
the Company, directly or indirectly, in confidence in accordance with the
Confidentiality Agreement. No investigation pursuant to this Section 6.02 or
information provided, made available or delivered to Parent pursuant to this
Agreement will affect any of the representations or warranties of the Company
contained in this Agreement or the conditions hereunder to the obligations of
the parties hereto.

         Section 6.03. Reasonable Best Efforts. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including using reasonable best
efforts to accomplish the following: (a) the taking of all acts necessary to
cause the conditions to Closing to be satisfied as promptly as practicable, (b)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Authorities and the making of all necessary
registrations and filings (including filings with Governmental Authorities, if
any) and the taking of all steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by any Governmental Authority,
(c) the obtaining of all necessary consents, approvals or waivers from third
parties and (d) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. In connection with and without limiting the
first sentence of this Section 6.03, each of the Company and the Company Board
and Parent and the Parent Board shall (i) take no action to cause any state
takeover statute or similar statute or regulation to become applicable to this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement and (ii) if any state takeover statute or similar statute is or
becomes applicable to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement, take all action reasonably
necessary to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Merger and the other transactions
contemplated by this Agreement. Notwithstanding the foregoing or anything else
to the contrary in this Agreement, nothing shall be deemed to require Parent to
(A) agree to, or proffer to, divest or hold separate any assets or any portion
of any business of Parent or any of its Subsidiaries or, assuming the
consummation of the Merger, the Company or any of its Subsidiaries, (B) not
compete in any geographic area or line of business, (C) restrict the manner in
which, or whether, Parent, the Company, the Surviving Corporation or any of
their respective Affiliates may carry on business in any part of the world or
(D) agree to any terms or conditions that would impose any obligations on Parent
or any of its Subsidiaries or, assuming the consummation of the Merger, the
Company or any of its Subsidiaries, to maintain facilities, operations, places
of business, employment levels, products or businesses.

         Section 6.04. Indemnification, Exculpation and Insurance.

              (a) All rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time now existing
in favor of the current or former directors and officers of the Company and its
Subsidiaries (the "Indemnified Parties") as provided in the Company Charter or
the Company Bylaws (in each case, as in effect on the date hereof) shall be
assumed by the Surviving Corporation in the Merger, without further action, as
of the Effective Time and shall survive the Merger and shall continue in full
force and effect in accordance with their terms for six years after the
Effective Time.

              (b) For six years after the Effective Time, Parent shall maintain
in effect the Company's current directors' and officers' liability insurance in
respect of acts or omissions occurring at or prior to the Effective Time
(including for acts or omissions occurring in connection with the approval of
this Agreement and the consummation of the transactions contemplated hereby),
covering the Indemnified Parties currently covered by the Company's directors'
and officers' liability insurance policy (a correct and complete copy of which
has been heretofore made available to Parent), on terms with respect to such
coverage and amount no less favorable than those of such policy in effect on the
date hereof; provided, however, that Parent may substitute therefor a tail
policy or policies of Parent containing terms with respect to coverage and
amount no less favorable to such Indemnified Parties; provided, further,
however, that in satisfying its obligation under this Section 6.04(b) Parent
shall not be obligated to pay aggregate premiums in excess of 250% of the amount
paid by the Company in its last full fiscal year (which premiums are hereby
represented and warranted by the Company to be approximately $465,000), it being
understood and agreed that Parent shall nevertheless be obligated to provide
such coverage as may be obtained for such 250% amount.

              (c) The covenants contained in this Section 6.04 are intended to
be for the benefit of, and shall be enforceable by, each of the Indemnified
Parties and their respective heirs and legal representatives, and shall not be
deemed exclusive of any other rights to which an Indemnified Party is entitled,
whether pursuant to Law, contract or otherwise.

         Section 6.05 Fees and Expenses. All fees and expenses incurred in
connection with this Agreement, the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except that each of the
Company and Parent shall bear and pay one-half of (a) the costs and expenses
incurred in connection with filing, printing and mailing the Proxy Statement and
(b) the filing fees for the premerger notification and report forms under the
HSR Act.

         Section 6.06 Public Announcements. Parent and the Company shall consult
with each other before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.

         Section 6.07 Shareholder Litigation. The Company shall promptly advise
Parent orally and in writing of any shareholder litigation against the Company
and/or its directors relating to this Agreement, the Merger and/or the
transactions contemplated by this Agreement and shall keep Parent fully informed
regarding any such shareholder litigation. The Company shall give Parent the
opportunity to consult with the Company regarding the defense or settlement of
any such shareholder litigation, shall give due consideration to Parent's advice
with respect to such shareholder litigation and shall not settle any such
litigation prior to such consultation and consideration; provided, however, that
the Company further will not, without Parent's prior written consent, settle any
shareholder litigation (a) for an amount greater than $2,000,000 individually,
and $3,000,000 in the aggregate or (b) that involves or has the effect of
imposing any remedy or restriction upon the Company or any of its Subsidiaries
other than monetary damages.

         Section 6.08 Employee Matters.

              (a) Following the Effective Time, Parent shall cause to be
provided to individuals who are employed by the Company and its Subsidiaries
immediately prior to the Effective Time and who are employed thereafter by the
Surviving Corporation, Parent or any of Parent's Subsidiaries (the "Affected
Employees"), compensation and employee benefits no less favorable in the
aggregate than those provided to other similarly situated employees of Parent
and its Subsidiaries.

              (b) For purposes of eligibility and vesting, with respect to any
benefit plan, program or arrangement (including any "employee benefit plan" (as
defined in Section 3(3) of ERISA), Parent shall, and shall cause the Surviving
Corporation to, recognize the service of the Affected Employees with the Company
and its Subsidiaries prior to the Effective Time to the same extent as such
service was taken into account under the corresponding Company Plan for those
purposes; provided, however, that such recognition shall not result in a
duplication of benefits. Parent agrees to honor, or cause the Surviving
Corporation to honor, all vacation accrued by Affected Employees as of the
Effective Time.

              (c) With respect to any welfare plan in which employees of the
Company and its Subsidiaries are eligible to participate after the Effective
Time, Parent shall, and shall cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to such employees
to the extent such conditions were satisfied under the welfare plans of the
Company and its Subsidiaries prior to the Effective Time, and (ii) provide each
such employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any analogous deductible or out-of-pocket
requirements.

              (d) Prior to the Effective Time, the Company shall amend (or cause
duly authorized persons to amend) its Supplemental Executive Retirement Plan
(the "SERP") to ensure that (i) after the date hereof, no "rabbi trust" shall be
established by the Company and no corporate owned life insurance shall be
purchased to create a reserve for payments under the plan in connection with the
transactions contemplated herein, and (ii) if a "rabbi trust" or a
corporate-owned-life-insurance reserve has previously been established by the
Company, no contributions shall be made to any such trust and no additional
insurance coverage shall be purchased by the Company in connection with the
transactions contemplated herein.

              (e) Prior to the Effective Time, the Company shall amend (or cause
duly authorized persons to amend) its Deferred Compensation Plan to ensure that
(i) after the date hereof no "rabbi trust" shall be established by the Company
in connection with the transactions contemplated herein, and (ii) if a "rabbi
trust" has previously been established by the Company, no contributions shall be
made to such trust by the Company in connection with the transactions
contemplated herein.

              (f) Nothing contained herein, express or implied, is intended to
confer upon any Affected Employee any right to continued employment for any
period by reason of this Agreement.

         Section 6.09 Employment Agreements. Notwithstanding anything to the
contrary in this Agreement, the Company shall use its reasonable best efforts to
cause each of the Covered Employees not to repudiate or otherwise breach the New
Employment Agreement to which such Covered Employee is a party.

         Section 6.10 Standstill Agreements, Confidentiality Agreements,
Anti-takeover Provisions. During the period from the date of this Agreement
through the Effective Time, the Company will not terminate, amend, modify or
waive any provision of any agreement required to be disclosed pursuant to
Section 3.10(b)(v) hereof to which it or any of its Subsidiaries is a party,
other than the Confidentiality Agreement pursuant to its terms or by written
agreement of the parties thereto. During such period, the Company shall enforce,
to the fullest extent permitted under applicable Law, the provisions of any such
agreement, including by obtaining injunctions to prevent any material breaches
of such agreements and to enforce specifically the material terms and provisions
thereof in any court of the United States of America or of any state having
jurisdiction. In addition, except as provided in Section 5.02, the Company will
not approve a Takeover Proposal or Superior Proposal for purposes of Section
48-103-205 of the TBCA.

         Section 6.11 Cooperation. Each of the Company and its Subsidiaries
will, and will cause each of its Representatives to, use its reasonable efforts,
subject to applicable Laws, to cooperate with and assist Parent and Merger Sub
in connection with planning the integration of the Company and its Subsidiaries
and their respective employees with the business operations of Parent and its
Subsidiaries.

         Section 6.12 Financing. The Company shall, if reasonably requested by
Parent in connection with Parent's efforts to obtain financing in respect of its
obligations under this Agreement (the "Financing"), cooperate in good faith with
Parent, form or cause its Subsidiaries to form, on or prior to the Closing, new
wholly-owned Subsidiaries, and, at the Closing execute any documents, agreements
and instruments and take such other actions as may be reasonably requested by
Parent in connection with the Financing, all in such order, form and substance
as reasonably requested by Parent; provided that such cooperation shall not
unreasonably interfere with the ongoing business operations of the Company,
require the expenditure of any material amount of money by the Company or any of
its Subsidiaries, violate any contract to which the Company or any of its
Subsidiaries is a party, or violate any Law.

         Section 6.13 Hedging Agreements. During the period of time from the
date of this Agreement and through the Effective Time, if requested by Parent,
the Company shall enter into fixed-rate interest rate swap agreements or similar
arrangements, in form and substance reasonably satisfactory to Parent, with
respect to all or a portion of its currently outstanding floating-rate
indebtedness; provided that the Company shall not be required to enter into such
hedging arrangements to the extent that, individually or in the aggregate, such
hedging arrangements involve a notional amount in excess of $80,000,000.

                                  ARTICLE VII.
                              Conditions Precedent

         Section 7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:

              (a) Company Shareholder Approval. The Company Shareholder Approval
shall have been obtained.

              (b) Antitrust. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable competition,
merger control, antitrust or similar Law shall have been terminated or shall
have expired.

              (c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other judgment, order or decree issued by
any court of competent jurisdiction or other statute, law, rule, legal restraint
or prohibition (collectively, "Restraints") shall be in effect preventing the
consummation of the Merger.

         Section 7.02 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:

              (a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (other than the
representations and warranties of the Company set forth in Section 3.03) shall
be true and correct as of the date of this Agreement and as of the Closing Date
as though made on the Closing Date (without regard to materiality or Company
Material Adverse Effect qualifiers contained therein), except to the extent such
representations and warranties expressly relate to an earlier date, in which
case as of such earlier date, except where the failure of the representations
and warranties to be true and correct individually or in the aggregate, has not
had and would not reasonably be expected to have a Company Material Adverse
Effect. The representations and warranties of the Company set forth in Section
3.03 shall be true and correct in all respects (subject to de minimis exceptions
for breaches involving discrepancies of no more than 30,000 shares of Company
Common Stock or stock options in the aggregate covering no more than 30,000
shares of Company Common Stock) as of the date of this Agreement and as of the
Closing Date as though made on the Closing Date. Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to the effect of the foregoing two
sentences.

              (b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.

              (c) No Litigation. There shall not be pending or overtly
threatened in writing any suit, action or proceeding by any Governmental
Authority (i) challenging the acquisition by Parent or Merger Sub of any shares
of Company Common Stock, seeking to restrain or prohibit the consummation of the
Merger, seeking to place limitations on the ownership of shares of Company
Common Stock (or shares of capital stock of the Surviving Corporation) by Parent
or Merger Sub, or (ii) seeking to (A) prohibit or limit the ownership or
operation by the Company or any of its Subsidiaries or by Parent or any of its
Subsidiaries of any portion of any business or of any assets of the Company and
its Subsidiaries or Parent and its Subsidiaries, (B) compel the Company or any
of its Subsidiaries or Parent or any of its Subsidiaries to divest or hold
separate any portion of any business or of any assets of the Company and its
Subsidiaries or Parent and its Subsidiaries, as a result of the Merger or (C)
impose any obligations on Parent or any of its Subsidiaries or the Company or
any of its Subsidiaries to maintain facilities, operations, places of business,
employment levels, products or businesses.

              (d) Restraint. No Restraint that would reasonably be expected to
result, directly or indirectly, in any of the effects referred to in Section
7.02(c) shall be in effect.

              (e) Permits. Parent shall have obtained such customary assurances
as are customarily obtained under local custom and practice (if any) to allow a
reasonable person, acting in good faith, to conclude that all material Permits
necessary for the lawful conduct of the business of the Company and its
Subsidiaries following consummation of the Merger will be issued in the ordinary
course and effective as of Closing. Notwithstanding the foregoing, the forgoing
provision shall be inapplicable to the extent that (i) such customary assurances
are unavailable solely as a result of the negative operating history or
qualifications of the Parent, or solely as a result of the negative background
of any director(s) or officers(s) of the Parent, or (ii) the failure to obtain
any such Permits would not, individually or in the aggregate result, or be
reasonably likely to result, in a material adverse effect of Parent.

              (f) Closing Consents. The consents, authorizations, orders,
permits and approvals listed on Exhibit B hereto shall have been obtained and
shall be in full force and effect.

              Section 7.03 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:

              (a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on the Closing Date (without regard to materiality qualifiers
contained therein), except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier date,
except where the failure of the representations and warranties to be true and
correct individually or in the aggregate, has not had and would not reasonably
be expected to have a material adverse effect on Parent's ability to consummate
the transactions contemplated hereby. The Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent to such
effect.

              (b) Performance of Obligations of Parent and Merger Sub. Parent
and Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of
Parent by an executive officer of Parent to such effect.

         Section 7.04 Frustration of Closing Conditions. None of the Company,
Parent or Merger Sub may rely on the failure of any condition set forth in
Sections 7.01, 7.02 or 7.03, as the case may be, to be satisfied if such failure
was caused by such party's failure to use its reasonable best efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.03.

                                  ARTICLE VIII.
                        Termination, Amendment and Waiver

         Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of the Company
Shareholder Approval:

              (a) by mutual written consent of Parent and the Company;

              (b) by either Parent or the Company:

                  (i) if the Merger shall not have been consummated on or before
the nine month anniversary of the date of this Agreement (the "Termination
Date"); provided, however, that the right to terminate this Agreement under this
Section 8.01(b)(i) shall not be available to any party whose action or failure
to act has been a principal cause of or resulted in the failure of the Merger to
be consummated on or before such date;

                  (ii) if any Restraint having the effect of permanently
restraining, enjoining, or otherwise prohibiting the Merger and the transactions
contemplated by this Agreement shall be in effect and shall have become final
and nonappealable;

                  (iii) if the Company Shareholder Approval shall not have been
obtained at the Company Shareholders Meeting duly convened therefor or at any
adjournment or postponement thereof;

              (c) by Parent, if the Company shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 7.02(a) or (b) and (B) is
incapable of being cured, or is not cured, by the Company within 30 calendar
days following receipt of written notice from Parent of such breach or failure
to perform;

              (d) by the Company, if Parent or Merger Sub shall have breached or
failed to perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set forth in Section 7.03(a) or
(b) and (ii) is incapable of being cured, or is not cured, by Parent or Merger
Sub, as the case may be, within 30 calendar days following receipt of written
notice from the Company of such breach or failure to perform;

              (e) by Parent, if (i) a Company Adverse Recommendation Change
shall have occurred or (ii) within ten (10) business days of the date any
Takeover Proposal shall have been made or communicated to the Company, the
Company Board or any committee thereof shall have failed to publicly confirm its
recommendation and declaration of advisability of this Agreement and the Merger;
or

              (f) by the Company, if the Company Board shall have exercised its
termination rights set forth in Section 5.02(b); provided that in order for the
termination of this Agreement pursuant to this Section 8.01(f) to be deemed
effective, the Company shall have complied with all provisions of Section 5.02,
including the notice provisions therein and paid the amounts required by Section
8.02.

         Section 8.02 Termination Fee and Shareholder Termination Fee.

              (a) In the event that:

                  (i) this Agreement is terminated by either Parent or the
Company pursuant to Section 8.01(b)(i), and after the date of this Agreement a
Takeover Proposal shall have been made or communicated to the Company or shall
have been made directly to the shareholders of the Company generally and (B)
within twelve (12) months after such termination the Company shall have reached
a definitive agreement to consummate, or shall have consummated a Takeover
Proposal; provided that for purposes of this Clause (B) all references in the
definition of Takeover Proposal to 20% shall instead refer to 50%;

                  (ii) this Agreement is terminated by the Company pursuant to
Section 8.01(f);

                  (iii) this Agreement is terminated by Parent pursuant to
Section 8.01(c) and (A) after the date of this Agreement a Takeover Proposal
shall have been made or communicated to the Company or shall have been made
directly to the shareholders of the Company generally and (B) within twelve (12)
months after such termination the Company shall have reached a definitive
agreement to consummate, or shall have consummated a Takeover Proposal; provided
that for purposes of this Clause (B) all references in the definition of
Takeover Proposal to 20% shall instead refer to 50%; or

                  (iv)  this Agreement is terminated by Parent pursuant to
Section 8.01(e),

then the Company shall (1) in the case of a Termination Fee payable pursuant to
clauses (i) or (iii) of this Section 8.02(a), upon the earlier of the date of
such definitive agreement and such consummation of a Takeover Proposal, (2) in
the case of a Termination Fee payable pursuant to clause (ii) of this Section
8.02(a), on the date of such termination, or (3) in the case of a Termination
Fee payable pursuant to clause (iv) of this Section 8.02(a), on the date that is
two business days after the date of such termination, pay Parent a fee equal to
$45,000,000 (the "Termination Fee") by wire transfer of same-day funds.
Notwithstanding the foregoing sentence, in the event that the Company proposes
to terminate this Agreement at a time when the Termination Fee is payable, the
Company shall pay Parent the Termination Fee as described above prior to such
termination by the Company. In case of the termination of this Agreement by the
Company or Parent pursuant to Section 8.01(b)(iii), then the Company shall
reimburse Parent for all reasonable out of pocket expenses (including, without
limitation, all fees and expenses of financing sources, counsel, accountants,
investment bankers, experts and consultants) incurred prior to the date of such
termination by Parent or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, promptly upon the Company's
receipt of reasonable documentation of such expenses; provided, however, that
notwithstanding any provision herein to the contrary, the liability of the
Company pursuant to this provision shall not exceed $5,000,000 (the "Shareholder
Termination Fee"). In the case of a Termination Fee payable pursuant to clause
(iii) of this Section 8.02(a), the parties hereby agree that the Termination Fee
(including the right to receive such fee or the payment of such fee) shall not
limit in any respect any rights or remedies available to Parent and Merger Sub
relating to any willful breach or failure to perform any representation,
warranty, covenant or agreement set forth in this Agreement resulting, directly
or indirectly, in the right to receive the Termination Fee. In the event that
either party terminates this Agreement pursuant to Section 8.01(b)(iii) and (i)
after the date of this Agreement a Takeover Proposal shall have been made or
communicated to the Company or shall have been made directly to the shareholders
of the Company generally and (ii) within twelve (12) months after such
termination the Company shall have reached a definitive agreement to consummate,
or shall have consummated a Takeover Proposal, then the Company shall, upon the
earlier of the date of such definitive agreement and such consummation of a
Takeover Proposal, pay Parent the Termination Fee, less any portion of the
Shareholder Termination Fee previously paid by the Company to Parent pursuant to
this Section 8.02, by wire transfer of same-day funds; provided that for
purposes of clause (ii) of this sentence, all references in the definition of
Takeover Proposal to 20% shall instead refer to 50%. Notwithstanding anything to
the contrary contained in this Agreement, the Company in no event shall be
obligated to pay more than one such Termination Fee with respect to all such
agreements and occurrences and such termination.

              (b) The Company acknowledges and agrees that the agreements
contained in Section 8.02(a) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement. If the Company fails promptly to pay the amount
due pursuant to Section 8.02(a), and, in order to obtain such payment, Parent
commences a suit that results in a judgment against the Company for the
Termination Fee, the Company shall pay to Parent its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with such suit, together with interest on the amount of the
Termination Fee from the date such payment was required to be made until the
date of payment at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.

         Section 8.03 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company, other than the
provisions of the penultimate sentence of Section 6.02(a), Sections 6.05 and
8.02, this Section 8.03 and Article IX, which provisions shall survive such
termination; provided that nothing herein shall relieve any party from any
liability for any material breach hereof.

              Section 8.04 Amendment. This Agreement may be amended by the
parties hereto at any time before or after receipt of the Company Shareholder
Approval; provided, however, that after such approval has been obtained, there
shall be made no amendment that by Law requires further approval by the
shareholders of the Company without such approval having been obtained. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.

         Section 8.05 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso to the first sentence of Section
8.04, waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.

         Section 8.06 Procedure for Termination or Amendment. A termination of
this Agreement pursuant to Section 8.01 or an amendment of this Agreement
pursuant to Section 8.04 shall, in order to be effective, require, in the case
of Parent or the Company, action by the Parent Board or the Company Board, as
applicable, or, with respect to any amendment of this Agreement pursuant to
Section 8.04, the Parent Board or the Company Board, as applicable, or the duly
authorized committee or other designee of the Parent Board or the Company Board,
as applicable, to the extent permitted by Law.

                                   ARTICLE IX.
                               General Provisions

         Section 9.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.

         Section 9.02 Notices. Except for notices that are specifically required
by the terms of this Agreement to be delivered orally, all notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, facsimiled (which is confirmed) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

         if to Parent or Merger Sub, to:

                           Brookdale Senior Living Incorporated
                           330 North Wabash, Suite 1400
                           Chicago, Illinois 60611
                           Attention:  General Counsel

         with a copy to:

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           Four Times Square
                           New York, New York 10036
                           Facsimile No.:  (212) 735-2000
                           Attention:  Joseph A. Coco

         if to the Company, to:

                           American Retirement Corporation
                           111 Westwood Place, Suite 200
                           Brentwood, Tennessee 37027
                           Attention:  Chief Executive Officer

         with a copy to:

                           Bass, Berry & Sims PLC
                           315 Deaderick Street, Suite 2700
                           Nashville, Tennessee 37238
                           Facsimile No.:   (615) 742-6293
                           Attention:  T. Andrew Smith


         Section 9.03 Definitions. For purposes of this Agreement:

              (a) an "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;

              (b) "Knowledge" of any person that is not an individual means,
with respect to the Company regarding any matter in question, the actual
knowledge of the individuals listed in Section 9.03(b) of the Company Disclosure
Letter;

              (c) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity;

              (d) "Permitted Liens" means (i) any liens for taxes not yet
delinquent or which are being contested in good faith by appropriate
proceedings, (ii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other similar liens, (iii) pledges or deposits in connection with
workers' compensation, unemployment insurance and other social security
legislation, (iv) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the aggregate,
are not material in amount and that do not, in any case, materially detract from
the use or value of the property subject thereto, and (v) any liens described
in, set forth in, or securing the Leases or the Contracts described in Section
3.10(b) of the Company Disclosure Letter;

              (e) a "Subsidiary" of any person means another person, an amount
of the voting securities, other voting rights or voting partnership interests of
which is sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.

         Section 9.04 Interpretation. When a reference is made in this Agreement
to an Article, a Section, Exhibit or Schedule, such reference shall be to an
Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". 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. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns. The
parties have participated jointly in the negotiating and drafting of this
Agreement. In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

         Section 9.05 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.

         Section 9.06 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the Company Disclosure Letter, the Exhibits hereto and the
Confidentiality Agreement constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and the Confidentiality
Agreement and are not intended to confer upon any person other than the parties
any rights, benefits or remedies.

         Section 9.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable principles of conflicts of
laws thereof.

         Section 9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties without the prior written
consent of the other parties and any attempt to make any such assignment without
such consent shall be null and void, except that Merger Sub may assign, in its
sole discretion any of or all its rights, interests and obligations under this
Agreement to any direct or indirect, wholly owned Subsidiary of Parent, but no
such assignment shall relieve Merger Sub of any of its obligations hereunder
(except in the case of any such request). Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.

         Section 9.09 Specific Enforcement; Consent to Jurisdiction. The parties
agree that irreparable damage would occur and that the parties would not have
any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in any state court in the State of
Delaware, without proof of actual damages, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
Federal court located in the State of Delaware or of any state court located in
the State of Delaware in the event any dispute arises out of this Agreement or
the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court located in the State of Delaware or a state
court located in the State of Delaware.

         Section 9.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.



         IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.


                                          BROOKDALE SENIOR LIVING INCORPORATED


                                          By: /s/ Mark J. Schulte
                                             ----------------------------------
                                             Name:  Mark J. Schulte
                                             Title: Chief Executive Officer


                                          BETA MERGER SUB CORPORATION


                                          By: /s/ Mark J. Schulte
                                             ----------------------------------
                                             Name:  Mark J. Schulte
                                             Title: President


                                          AMERICAN RETIREMENT CORPORATION


                                          By: /s/ W.E. Sheriff
                                             ----------------------------------
                                             Name:  W.E. Sheriff
                                             Title: Chairman, President and CEO

EX-10

                                                                    Exhibit 10.1
                                                                    ------------


                                                                  EXECUTION COPY





                              INVESTMENT AGREEMENT


                                     between

                          BROOKDALE SENIOR LIVING INC.

                                       and

                            RIC CO-INVESTMENT FUND LP





                                   Dated as of

                                  May 12, 2006



                                TABLE OF CONTENTS


                                                                           Page
                                                                           ----

                                    ARTICLE I

                                   DEFINITIONS


                                   ARTICLE II

                           PURCHASE AND SALE OF SHARES

Section 2.1 Notice of Commitment Amount........................................6
Section 2.2 Issuance and Sale..................................................6
Section 2.3 The Purchase Price.................................................6
Section 2.4 Repurchase Option..................................................6
Section 2.5 Commitment Fee.....................................................6

                                   ARTICLE III

                                   THE CLOSING

Section 3.1 The Closing........................................................7
Section 3.2 Deliveries.........................................................7

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 4.1 Organization; Subsidiaries.........................................7
Section 4.2 Due Authorization..................................................8
Section 4.3 Capitalization.....................................................9
Section 4.4 SEC Reports.......................................................10
Section 4.5 Financial Statements..............................................10
Section 4.6 Litigation........................................................10
Section 4.7 Consents and Approvals............................................11
Section 4.8 Compliance with Laws..............................................12
Section 4.9 Financial Advisory, Legal and Other Fees..........................12
Section 4.10 Board of Directors...............................................12
Section 4.11 Information Statement............................................12
Section 4.12 Taxes ...........................................................13

                                    ARTICLE V

                 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

Section 5.1 Investment........................................................13
Section 5.2 Rule 144..........................................................13
Section 5.3 Organization; Etc.................................................14
Section 5.4 Authority.........................................................14
Section 5.5 Non-Contravention.................................................14
Section 5.6 Consents and Approvals............................................15
Section 5.7 Brokers and Finders...............................................15
Section 5.8 Sufficient Funds..................................................15
Section 5.9 Information Supplied..............................................15

                                   ARTICLE VI

                                    COVENANTS

Section 6.1  Conduct of the Business Pending the Closing......................16
Section 6.2  Information Statement............................................17
Section 6.3  Listing Obligation...............................................17
Section 6.4  Cooperation......................................................17
Section 6.5  Notification of Certain Matters..................................17
Section 6.6  Consent; Approvals...............................................18
Section 6.7  Further Assurances...............................................18
Section 6.8  Use of Proceeds..................................................18
Section 6.9  Waiver of Piggyback Registration Rights For
             Registration on Form S-1.........................................18
Section 6.10 Venture Capital Operating Company Rights.........................18

                                   ARTICLE VII

                              CONDITIONS PRECEDENT

Section 7.1 Conditions to Obligations of the Investor and the Company.........19
Section 7.2 Conditions to Obligations of the Investor.........................19
Section 7.3 Conditions to Obligations of the Company..........................20

                                  ARTICLE VIII

                                   TERMINATION

Section 8.1 Termination.......................................................21

                                   ARTICLE IX

                                 INDEMNIFICATION

Section 9.1 Survival of Representations and Warranties........................22
Section 9.2 Indemnification...................................................22
Section 9.3 Procedure for Indemnification.....................................24
Section 9.4 Sole Remedy.......................................................25

                                    ARTICLE X

                                  MISCELLANEOUS

Section 10.1 Governing Law....................................................25
Section 10.2 Jurisdiction; Forum; Service of Process; Waiver of Jury
                    Trial.....................................................26
Section 10.3 Successors and Assigns...........................................26
Section 10.4 Fees and Expenses................................................26
Section 10.5 Entire Agreement; Amendment......................................26
Section 10.6 Notices..........................................................27
Section 10.7 Delays or Omissions..............................................28
Section 10.8 Counterparts.....................................................28
Section 10.9 Severability.....................................................28
Section 10.10 Titles and Subtitles............................................29
Section 10.11 No Public Announcement..........................................29




         THIS INVESTMENT AGREEMENT is made and entered into as of May 12, 2006
(the "Agreement"), between Brookdale Senior Living Inc., a Delaware corporation
(the "Company") and RIC Co-Investment Fund LP, a Delaware limited partnership
(the "Investor"). Capitalized terms used in this Agreement but not otherwise
defined herein shall have the meanings ascribed to such terms in Article I.
References herein to sections shall be to sections of this Agreement, and
references herein to this Agreement shall include each of the Exhibits and
Schedules attached hereto.

         WHEREAS, the Company has entered into an Agreement and Plan of Merger,
dated the date hereof, by and among the Company, Beta Merger Sub Corporation, a
Delaware corporation and a direct wholly owned subsidiary of the Company
("Merger Sub"), and American Retirement Corporation, a Tennessee corporation
("ARC") (the "Merger Agreement"), whereby Merger Sub shall be merged with and
into ARC (collectively, the "Transaction");

         WHEREAS, in connection with the Transaction, the Investor desires to
subscribe for and purchase, and the Company desires to sell to the Investor,
upon the terms and subject to the conditions set forth herein, shares of the
Company's common stock, par value $0.01 per share (the "Common Stock");

         WHEREAS, at the Closing, the Investor and the Company desire to enter
into an option agreement, the form of which is attached hereto as Exhibit A (the
"Option Agreement"), pursuant to which the Company shall have the right and
option (but not the obligation) to purchase a portion of the shares of the
Company's Common Stock issued to the Investor pursuant to this Agreement;

         WHEREAS, the Company has obtained the Written Consent of Stockholders
In Lieu of a Special Meeting attached hereto as Exhibit B for the issuance of
the Shares (as defined below) (the "Stockholder Approval"); and

         WHEREAS, at the Closing, the Investor and the Company desire to enter
into an agreement pursuant to which the Investor will be bound by the provisions
of the Stockholders Agreement dated as of November 28, 2005, by and among the
Company, FIT-ALT Investor LLC, Fortress Brookdale Acquisition LLC, Fortress
Investment Trust II and Health Partners (the "Stockholders Agreement"), pursuant
to which the Investor shall have certain rights regarding the registration under
the Securities Act of the Common Stock purchased by the Investor pursuant to
this Agreement.

         NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS
                                   -----------

         As used herein, the following terms shall have the meanings set forth
below:

         Affiliate shall have the meaning ascribed to such term in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Affiliates of the Investor shall be deemed to include limited partners,
general partners and members (including the managing member) in, and other
direct or indirect owners or managers of the Investor, together with entities
owned, controlled or managed by any or all of such Persons.

         Claim has the meaning ascribed to it in Section 9.3(a).

         Closing has the meaning ascribed to it in Section 3.1.

         Closing Date means the date on which the Closing occurs.

         Code means the Internal Revenue Code of 1986, as amended.

         Commitment Amount means up to $1,300,000,000; provided, however, that
such amount may be reduced by the Company on or before the Closing Date
("Offering Reduction"), but in no event shall the Commitment Amount be less than
$650,000,000.

         Commitment Amount Notice has the meaning ascribed to it in Section 2.1.

         Consents has the meaning ascribed to it in Section 6.6.

         Common Stock has the meaning ascribed to it in the second whereas
clause above.

         Company Add-On Offering Reduction means an Offering Reduction through
the use by the Company of an amount equal to the net proceeds received by the
Company pursuant to any public or private offering of equity securities of the
Company that is consummated on or before the Closing Date.

         Encumbrance means, with respect to any Person, any mortgage, pledge,
charge, claim, option, proxy, voting trust, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or capital lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).

         Exchange Act has the meaning ascribed to it in the definition of
Affiliate.

         Facilities means the senior living facilities owned, leased or managed
by the Company.

         GAAP has the meaning ascribed to it in Section 4.5.

         Governmental Entity means any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.

         HSR Act has the meaning ascribed to it in Section 4.7.

         Indemnified Person has the meaning ascribed to it in Section 9.2(b).

         Indemnifying Party has the meaning ascribed to it in Section 9.3(a).

         Indemnitee has the meaning ascribed to it in Section 9.3(a).

         Information Statement has the meaning ascribed to it in Section 6.2.

         Investor Indemnified Person has the meaning ascribed to it in Section
9.2(a).

         Investor Representative means Randal A. Nardone.

         Knowledge of a party hereto means the actual knowledge of any executive
officer after due inquiry.

         Laws means all foreign, federal, state, and local laws, statutes,
ordinances, rules, regulations, orders, judgments, decrees and bodies of law.

         Licenses has the meaning ascribed to it in Section 4.8.

         Lien means with respect to any asset or right, any mortgage, deed of
trust, lien (statutory or other), pledge, hypothecation, assignment, claim,
charge, security interest, conditional sale agreement, title, exception, or
Encumbrance, option, right of first offer or refusal, easement, servitude,
voting or transfer restriction, or any other right of another to or adverse
claim or any kind in respect of such asset or right.

         Litigation has the meaning ascribed to it in Section 4.5(a).

         Losses means each and all of the following items: claims, losses,
liabilities, obligations, payments, damages (actual or punitive), charges,
judgments, fines, penalties, amounts paid in settlement, costs and expenses
(including, without limitation, interest which may be imposed in connection
therewith, costs and expenses of investigation, actions, suits, proceedings,
demands, assessments and fees, expenses and disbursements of counsel,
consultants and other experts).

         Material Adverse Effect means any event which has had, has or would
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of the Company and its
Subsidiaries, taken as a whole, other than (i) as a result of changes in general
economic or industry conditions or changes in applicable Laws, rules or
regulations or (ii) as a result of changes arising out of the announcement of
the transactions contemplated by this Agreement.

         Merger Agreement has the meaning ascribed thereto in the second whereas
clause above.

         NYSE has the meaning ascribed to it in Section 4.2.

         Offering Reduction has the meaning ascribed thereto in the definition
of Commitment Amount.

         Option Agreement has the meaning ascribed to thereto in the third
whereas clause above.

         Option Per Share Price means $38.07.

         Per Share Price means $36.93.

         Person means any individual, firm, corporation, limited liability
company, partnership, company, trust or other entity, and shall include any
successor (by merger or otherwise) of such entity.

         Preferred Stock has the meaning ascribed to it in Section 4.3(a).

         Proceeding has the meaning ascribed to it in Section 10.2.

         Purchase Price means the Per Share Price multiplied by the aggregate
number of Shares purchased by the Investor pursuant to this Agreement.

         Repurchase Amount means the difference between the Commitment Amount
set forth in the Commitment Amount Notice and $650,000,000.

         Repurchase Option has the meaning ascribed to it in Section 2.4.

         Repurchase Shares means that number of shares of Common Stock equal to
the quotient of the Repurchase Amount divided by the Option Per Share Price,
such number to be rounded upwards to the nearest whole number.

         SEC means the United States Securities and Exchange Commission and any
successor Governmental Entity.

         SEC Reports has the meaning ascribed to it in Section 4.4. Securities
Act means the Securities Act of 1933, as amended, or any successor federal
statute, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the time. Reference to a particular section of the
Securities Act shall include reference to the comparable section, if any, of
such successor federal statute.

         Selected Courts has the meaning ascribed to it in Section 10.2(a).

         Shares means that number of shares of Common Stock equal to the
quotient of the Commitment Amount divided by the Per Share Price, such number to
be rounded upwards to the nearest whole number.

         Stockholders Agreement has the meaning ascribed thereto in the fifth
whereas clause above.

         Stockholder Approval has the meaning ascribed to it in the fourth
whereas clause above.

         Subsidiary means as to any Person, each corporation, partnership or
other entity of which shares of capital stock or other equity interests having
ordinary voting power (other than capital stock or other equity interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, directly or indirectly, or the management of
which is otherwise controlled, directly or indirectly, or both, by such Person.

         Transaction has the meaning ascribed to it in the second whereas clause
above.

         Transaction Agreement means the Merger Agreement and any ancillary
documents.

                                   ARTICLE II

                           PURCHASE AND SALE OF SHARES
                           ---------------------------

         Section 2.1 Notice of Commitment Amount. The Company shall deliver to
the Investor a notice setting forth the Commitment Amount at least 10 business
days prior to the Closing (the "Commitment Amount Notice"); provided, however,
that, the Company shall be entitled until the Closing Date to amend the
Commitment Amount Notice to reduce the Commitment Amount.

         Section 2.2 Issuance and Sale. Upon the terms and conditions set forth
herein, at the Closing, the Company shall issue and sell, free and clear of any
Liens, to the Investor and the Investor shall purchase from the Company the
Shares. Notwithstanding anything to the foregoing set forth herein, the Investor
shall have the right to assign its right to purchase Shares to one or more of
its Affiliates but any such assignment shall not relieve such Investor of its
obligations hereunder.

         Section 2.3 The Purchase Price.The Investor shall pay to the Company,
by wire transfer of immediately available funds, the Purchase Price in
consideration for the Shares purchased by the Investor pursuant to this
Agreement.

         Section 2.4 Repurchase Option. Upon the terms and conditions set forth
herein, at the Closing, the Investor and the Company shall enter into the Option
Agreement, pursuant to which the Investor shall issue to the Company a one time
right and option (but not the obligation) to purchase for cash (the "Repurchase
Option") from the Investor the Repurchase Shares, at a price per share equal to
the Option Per Share Price; provided, however, the Company shall not be entitled
to a Repurchase Option and no Option Agreement shall be executed at the Closing,
if a Company Add-On Offering Reduction occurs prior to the Closing. Such
Repurchase Option shall be available for a period commencing on the Closing Date
and concluding one day following the six month anniversary of the Closing Date.

         Section 2.5 Commitment Fee. In the event the Company receives a
Termination Fee (as such term is defined in the Merger Agreement) pursuant to
Section 8.02 of the Merger Agreement, the Company shall, as soon as reasonably
practicable, pay to the Investor or its assignees, by wire transfer of
immediately available funds, a commitment fee equal to 50% of the Termination
Fee received by the Company pursuant to the terms of the Merger Agreement. The
Company in good faith will pursue its rights to receive the Termination Fee
under the terms of the Merger Agreement.

                                  ARTICLE III

                                   THE CLOSING
                                   -----------

         Section 3.1 The Closing. Subject to the satisfaction or waiver of the
conditions contained in Article VII, the closing (the "Closing") of the purchase
and sale of the Shares and the issuance of the Repurchase Option will take place
at the office of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New
York, New York at the same time as the closing of the Transaction.

         Section 3.2 Deliveries.

         (a) Subject to the satisfaction or waiver of each of the conditions
hereof, at the Closing, the Company shall deliver to the Investor against
payment of the Purchase Price: (i) one certificate representing the Shares
registered in the name of the Investor; (ii) each of the certificates,
instruments and agreements required to be delivered by the Company pursuant to
Article VII; (iii) the executed Option Agreement; (iv) the executed agreement
pursuant to which the Company shall be bound by the provisions of the
Stockholders Agreement; and (v) such other documents as the Investor may
reasonably request in connection with the Closing.

         (b) Subject to the satisfaction or waiver of each of the conditions
hereof, at the Closing, the Investor shall deliver to the Company: (i) payment
of the Purchase Price, by wire transfer of immediately available funds to an
account or accounts designated by the Company prior to the Closing; (ii) the
certificates, instruments and agreements required to be delivered by the
Investor pursuant to Article VII; (iii) the executed Option Agreement; (iv) the
executed agreement pursuant to which the Investor shall be a Stockholder (as
defined in the Stockholders Agreement) and bound by the provisions of and
entitled to the registration rights of, the Stockholders Agreement; and (v) such
other documents as the Company may reasonably request in connection with the
Closing.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY
                  ---------------------------------------------

         The Company hereby represents and warrants to the Investor that all of
the statements contained in this Article IV are true and correct as of the date
hereof and the Closing Date.

         Section 4.1 Organization; Subsidiaries.

         (a) The Company is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Delaware and has the requisite
corporate power and corporate authority to carry on its business as it is now
being conducted or presently proposed to be conducted. To the Company's
Knowledge, the Company is duly qualified and licensed as a foreign corporation
to do business and is in good standing (and has paid all relevant franchise or
analogous taxes) in each jurisdiction where the character of its assets owned or
held under lease or the nature of its business makes such qualification
necessary, except where the failure to be so qualified or licensed, individually
or in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect.

         (b) The Company owns, either directly or indirectly through one or more
of its Subsidiaries, all of the capital stock or other equity interests of its
Subsidiaries free and clear of all Liens, except those Liens pursuant to the
credit and other loan agreements existing as of the date hereof. There are no
outstanding subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever relating to issued or
unissued capital stock or other equity interests of any Subsidiary, or any
commitments of any character whatsoever relating to issued or unissued capital
stock or other equity interests of any Subsidiary or pursuant to which any
Subsidiary is or may become bound to issue or grant additional shares of its
capital stock or other equity interests or related subscription rights, options,
warrants, convertible or exchangeable securities or other rights, or to grant
preemptive rights.

         (c) Each Subsidiary is a corporation, limited liability company,
partnership, business association or other Person duly organized, validly
existing and in good standing (in jurisdictions where such concept is
recognized) under the Laws of the jurisdiction of its organization and has the
requisite corporate power and authority to carry on its business as it is now
being conducted. To the Company's Knowledge, each Subsidiary of the Company is
duly qualified and licensed as a foreign corporation or other business entity to
do business and is in good standing (and has paid all relevant franchise or
analogous taxes) in each jurisdiction where the character of its assets owned or
held under lease or the nature of its business makes such qualification
necessary, except where the failure of one or more Subsidiaries to be so
qualified or licensed, individually or in the aggregate, has not had and would
not be reasonably expected to have a Material Adverse Effect.

         Section 4.2 Due Authorization.

         (a) The Company has all corporate right, power and authority to enter
into this Agreement and the Merger Agreement and to consummate the transactions
contemplated hereby and thereby. The (a) execution and delivery by the Company
of this Agreement, (b) issuance, sale and delivery of the Shares by the Company
and (c) compliance by the Company with each of the provisions of this Agreement
(i) are within the corporate power and authority of the Company and (ii) have
been duly authorized by all requisite corporate action of the Company. This
Agreement has been duly and validly executed and delivered by the Company, and
(assuming this Agreement constitutes a valid and binding obligation of the
Investor) this Agreement constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
such enforcement is limited by bankruptcy, insolvency, reorganization,
moratorium and other similar Laws affecting the enforcement of creditors' rights
generally and limitations imposed by general principles of equity.

         (b) The Shares have been duly authorized by the Company and, when
issued, sold and delivered in accordance with this Agreement, the Shares will be
validly issued, fully paid and nonassessable, free and clear of all Liens, and
the issuance thereof will not be subject to any preemptive rights, right of
first refusal or similar right. At the Closing, no further approval or authority
of the stockholders or the Board of Directors under the Delaware General
Corporation Law (the "DGCL"), the rules of the New York Stock Exchange (the
"NYSE") or the consent of any other party will be required for the issuance of
the Shares, other than the approval of the NYSE of the listing of such shares of
Common Stock on the NYSE. No preemptive rights or other rights to subscribe for
or purchase securities exist with respect to the issuance and sale of the
Shares.

         Section 4.3 Capitalization.

         (a) The authorized capital stock of the Company consists of (i)
200,000,000 shares of Common Stock and (ii) 50,000,000 shares of preferred
stock, par value $.01 per share ("Preferred Stock"). As of the date hereof,
there are 65,006,833 shares of Common Stock and no shares of Preferred Stock
issued and outstanding. All of the issued and outstanding shares of Common Stock
have been duly authorized and are validly issued, fully paid and nonassessable
and not subject to preemptive or other similar rights of the stockholders of the
Company.

         (b) Except as set forth in this Agreement or as described in the SEC
Reports filed prior to the date hereof, there are no outstanding subscription
rights, options, warrants, convertible or exchangeable securities or other
rights of any character whatsoever to which the Company is a party relating to
issued or unissued capital stock of the Company, or any commitments of any
character whatsoever relating to issued or unissued capital stock of the Company
or pursuant to which the Company or any of the Subsidiaries are or may become
bound to issue or grant additional shares of their capital stock or related
subscription rights, options, warrants, convertible or exchangeable securities
or other rights, or to grant preemptive rights. Except as set forth in the SEC
Reports filed prior to the date hereof and except as contemplated by this
Agreement, including Section 6.1, (a) the Company has not agreed to register any
securities under the Securities Act or under any state securities law or granted
registration rights to any Person and (b) there are no voting trusts,
stockholders agreements, proxies or other commitments or understandings in
effect to which the Company is a party with respect to the voting or transfer of
any of the outstanding shares of Common Stock.

         Section 4.4 SEC Reports. The Company has filed all annual reports,
quarterly reports, proxy statements and other reports required to be filed by it
with the SEC under the Exchange Act since November 21, 2005 (together with the
Company's final prospectus filed with the SEC pursuant to Rule 424 of the
Securities Act on November 23, 2005, the "SEC Reports"). Each SEC Report was, on
the date of its filing or as subsequently amended prior to the date hereof, in
compliance in all material respects with the requirements of its respective
report form and applicable Laws and did not, on the date of filing or as
subsequently amended, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

         Section 4.5 Financial Statements. The consolidated financial statements
of the Company (including any related schedules and/or notes) included in the
SEC Reports, as subsequently amended prior to the date hereof, comply in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, and have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
consistently followed throughout the periods involved (except as may be
indicated in the notes thereto) and fairly present in accordance with GAAP the
consolidated financial condition, results of operations, cash flows and changes
in stockholders' equity of the Company and the Subsidiaries as of the respective
dates thereof and for the respective periods then ended (in each case subject,
as to interim statements, to the absence of footnotes and as permitted by Form
10-Q and subject to changes resulting from year-end adjustments). Except as
disclosed in the SEC Reports filed prior to the date hereof, neither the Company
nor any Subsidiary has any liability or obligation (whether accrued, absolute,
contingent, unliquidated or otherwise, whether known or unknown, whether due or
to become due and regardless of when asserted), except for (i) liabilities and
obligations reflected or disclosed in the audited consolidated balance sheet of
the Company and its Subsidiaries as of December 31, 2005, or the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of March 31,
2006, or the footnotes thereto, (ii) liabilities and obligations incurred in the
ordinary course of business since March 31, 2006, or (iii) liabilities and
obligations which, individually or in the aggregate, have not had and would not
reasonably be expected to have or result in a Material Adverse Effect.

         Section 4.6 Litigation.

         (a) Except as disclosed in the SEC Reports filed prior to the date
hereof, there is no claim, action, suit, investigation or proceeding of any kind
or nature whatsoever ("Litigation") pending or, to the Knowledge of the Company,
threatened against the Company or any of the Subsidiaries or involving any of
their respective properties or assets by or before any court, arbitrator or
other Governmental Entity that (x) in any manner challenges or seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement or (y) if
resolved adversely to the Company or a Subsidiary would have or would reasonably
be expected to have a Material Adverse Effect. Except as disclosed in such SEC
Reports, there is no judgment, decree, injunction, rule, or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against the Company or any of the Subsidiaries which has or would
reasonably be expected to have a Material Adverse Effect.

         (b) To the Knowledge of the Company, neither the Company nor any of the
Subsidiaries is in default under or in breach of any order, judgment or decree
of any court, arbitrator or other Governmental Entity, and neither the Company
nor any of the Subsidiaries is a party or subject to any order, judgment or
decree of any court, arbitrator or other Governmental Entity, except where such
default, breach, order, judgment or decree has not had or would not reasonably
be expected to have a Material Adverse Effect.

         Section 4.7 Consents and Approvals. The execution, delivery or
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby, do not and will not (i) conflict with, or
result in a breach or a violation of, any provision of the certificate of
incorporation or by-laws or other organizational documents of the Company or any
of its Subsidiaries, (ii) constitute, with or without notice or the passage of
time or both, a breach, violation or default, create an Encumbrance, or give
rise to any right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration, under (A) any applicable Law
or (B) any provision of any agreement or other instrument to which the Company
or any of the Subsidiaries is a party or pursuant to which any of them or any of
their assets or properties is subject, except where such breach, violation or
default, creation of an Encumbrance, or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or acceleration,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect or (iii) except for (A) the approval
of the NYSE of the listing of the Shares on the NYSE, (B) the filing with the
SEC of the Information Statement relating thereto, (C) any required filing under
any foreign governmental and regulatory filings (including the premerger
notification and report form under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), notices and approvals required to be
made or obtained as contemplated by Section 6.6, and (D) any filings, consents,
approvals or authorizations of, notifications to, or exemptions or waivers by
any Governmental Entity or any other Person which are not, individually or in
the aggregate, material to the consummation of the transactions contemplated
hereby, require any consent, approval or authorization of, notification to,
filing with, or exemption or waiver by, any Governmental Entity or any other
Person on the part of the Company or any of its Subsidiaries.

         Section 4.8 Compliance with Laws. Except as disclosed in the SEC
Reports filed prior to the date hereof, the Company and the Subsidiaries are in
compliance with all Laws in all respects, and neither the Company nor any
Subsidiary has received any notice of any alleged violation of Law, except where
a failure to comply or alleged violation of Law has not had or would not
reasonably be expected to have a Material Adverse Effect. To the Knowledge of
the Company, the Company holds all material licenses, franchise permits,
consents, registrations, certificates, and other governmental or regulatory
permits, authorizations or approvals required for the operation of the business
as presently conducted and for the ownership, lease or operation of the
Company's and its Subsidiaries' Facilities (collectively, "Licenses"). To the
Knowledge of the Company, all of such Licenses are valid and in effect, the
Company and the Subsidiaries have duly performed and are in compliance with all
of their obligations under such Licenses and no investigation or review by any
governmental or regulatory body or authority is pending or threatened, except
where a failure with respect thereto has not had or would not reasonably be
expected to have a Material Adverse Effect.

         Section 4.9 Financial Advisory, Legal and Other Fees.. No agent,
broker, accounting firm, investment bank, other financial advisor, commercial
bank, other financial institution, law firm, public relations firm or any other
Person other than Bear, Stearns & Co., Inc. and Goldman, Sachs & Co. is or will
be entitled to any fee, commission, expense or other amount from the Company or
any of the Subsidiaries in connection with any of the transactions contemplated
by this Agreement.

         Section 4.10 Board of Directors. The Board of Directors of the Company,
after accepting the recommendation of a Special Committee of the Board of
Directors, has determined that the issuance of the Shares, this Agreement and
the transactions contemplated hereby, are advisable and in the best interests of
the Company and its stockholders.

         Section 4.11 Information Statement. The Information Statement will not,
at the date it is first mailed to the Company's stockholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Information
Statement will comply as to form in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to information or statements specifically supplied by or on behalf
of any of the Investor for inclusion or incorporation by reference in the
Information Statement.

         Section 4.12 Taxes. The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them,
except, in all cases, for any such amounts that the Company is contesting in
good faith and except in any case in which the failure to so file or pay would
not in the aggregate cause a Material Adverse Effect. The Company has made, to
the extent required by GAAP, adequate charges, accruals and reserves in the
applicable financial statements referred to in Section 4.5 in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not been
finally determined.

                                   ARTICLE V

                 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
                 ----------------------------------------------

         The Investor hereby represents and warrants to the Company that all of
the statements contained in this Article V are true and correct as of the date
hereof and the Closing Date.

         Section 5.1 Investment.

         (a) The Investor is acquiring the Shares for investment for its own
account, and not with a view to any resale or distribution thereof in violation
of the Securities Act.

         (b) The Investor's financial condition and investments are such that it
is in a position to hold the Shares for an indefinite period, bear the economic
risks of the investment and withstand the complete loss of the investment. The
Investor has extensive knowledge and experience in financial and business
matters and has the capability to evaluate the merits and risks of such Shares.
The Investor qualifies as (i) an "accredited investor" as such term is defined
in Section 2(a)(15) of the Securities Act and Regulation D promulgated
thereunder or (ii) a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.

         Section 5.2 Rule 144. The Investor acknowledges that the Shares must be
held indefinitely unless subsequently registered under the Securities Act and
any applicable state securities laws or unless exemptions from such
registrations are available. The Investor is aware of and familiar with the
provisions of Rule 144 promulgated under the Securities Act that permit limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions.

         Section 5.3 Organization; Etc. The Investor is duly organized and
validly existing and in good standing under the Laws of the jurisdiction of its
organization.

         Section 5.4 Authority.

         (a) The Investor has all right, power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated hereby and
thereby and to comply with the terms, conditions and provisions hereof and
thereof.

         (b) The (i) execution, delivery and performance by the Investor of this
Agreement, (ii) compliance by the Investor with each of the provisions of this
Agreement and (iii) consummation of the transactions contemplated hereby and
thereby (A) are within the power and authority of the Investor, (B) have been
duly authorized and approved by the requisite actions of the Investor and (C) do
not require any further authorization or consent of the Investor or, if
applicable, its beneficial owners. This Agreement has been duly and validly
executed and delivered by the Investor, and (assuming this Agreement constitutes
a valid and binding obligation of the Company) this Agreement constitutes a
legal, valid and binding agreement of the Investor, enforceable against the
Investor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws from time to time affecting the enforcement of creditors'
rights generally and limitations imposed by general principles of equity.

         Section 5.5 Non-Contravention. The execution, delivery and performance
by the Investor of this Agreement and the consummation of the transactions
contemplated hereby, will not (a) conflict with or result in a breach of any of
the terms and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, or result
in the creation or imposition of any Lien, charge or Encumbrance upon any
property or assets of the Investor pursuant to any agreement, instrument,
franchise, license or permit to which the Investor is a party or by which any of
its properties or assets may be bound or (b) violate or conflict with any Law of
any Governmental Entity applicable to the Investor or any of its properties or
assets, other than such breaches, defaults or violations that are not reasonably
expected to impair the ability of the Investor to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance by the
Investor of this Agreement and the consummation of the transactions contemplated
hereby, do not and will not violate or conflict with any provision of the
organizational documents of the Investor, as currently in effect.

         Section 5.6 Consents and Approvals. No consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any Governmental Entity applicable to the Investor or of or with any
third party is required for the execution, delivery and performance of this
Agreement and to consummate the transactions contemplated hereby.

         Section 5.7 Brokers and Finders. No agent, broker, investment banker,
financial advisor or other firm or person engaged by or on behalf of the
Investor is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement.

         Section 5.8 Sufficient Funds. The Investor has available, or has
obtained commitments for, sufficient funds to acquire the Shares to be purchased
pursuant to this Agreement.

         Section 5.9 Information Supplied. None of the information supplied or
to be supplied by or on behalf of the Investor in writing specifically for
inclusion or incorporation by reference in the Information Statement will, at
the date it is first mailed to the Company's stockholders, contain, any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.

                                   ARTICLE VI

                                    COVENANTS
                                    ---------

         Section 6.1 Conduct of the Business Pending the Closing. The Company
covenants and agrees that, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the Closing
unless the Investor otherwise consents in writing (which consent shall not be
unreasonably withheld, conditioned or delayed) the Company shall, and shall
cause each of its Subsidiaries to, (i) conduct its business only in the ordinary
course and consistent with past practice; (ii) use commercially reasonable best
efforts to preserve and maintain its assets and properties and its relationships
with its customers, suppliers, advertisers, distributors, agents, officers and
employees and other persons with which it has significant business
relationships; (iii) use its commercially reasonable best efforts to maintain
all of the material assets it owns or uses in the ordinary course of business
consistent with past practice; (iv) use its commercially reasonable best efforts
to preserve the goodwill and ongoing operations of its business; (v) maintain
its books and records in the usual, regular and ordinary manner, on a basis
consistent with past practice; and (vi) comply in all material respects with
applicable Laws. Notwithstanding the forgoing and except as expressly
contemplated by this Agreement or the Transaction Agreements or as consented to
by the Investor in writing (which consent shall not be unreasonably withheld,
conditioned or delayed), during the period from the date of this Agreement
through and including the Closing Date, the Company shall not, and shall not
permit any of its Subsidiaries to:

         (a) (i) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or (ii) purchase, redeem or
otherwise acquire any capital stock in the Company or any of the Subsidiaries or
any other securities thereof or any rights, warrants or options to acquire any
such shares or other securities, except in the ordinary course of business
pursuant to the Company's employee benefit plans;

         (b) take any action that is reasonably likely to result in (i) any of
the representations and warranties set forth in Article IV becoming false or
inaccurate in any material respect as of, or at any time prior to, the Closing
Date or (ii) any of the conditions to the obligations of the Investor set forth
in Section 7.2 not being satisfied;

         (c) amend the charter, bylaws or other comparable organizational
documents of the Company in a manner likely to adversely affect the Investor; or

         (d) agree to take any of the foregoing actions.

Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be prevented from, or obligated to obtain the consent of the
Investor prior to, (i) issuing shares of its capital stock or entering into
agreements with respect thereto, including with respect to registration rights,
or (ii) engaging in any merger, acquisition or business combination transaction.

         Section 6.2 Information Statement. As promptly as practicable following
the date of this Agreement, the Company shall prepare a form of information
statement to be mailed to the stockholders of the Company relating to the
Stockholder Approval (the "Information Statement") (provided that the Investor
shall have the right to consent to any descriptions of or references to the
Investor or any of their Affiliates, which consent shall not be unreasonably
withheld, conditioned or delayed) and use its commercially reasonable best
efforts (x) (1) to respond as promptly as practicable to any comments made by
the SEC with respect to the Information Statement and (2) to promptly supply the
Investor with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Information Statement, and (y) to cause the Information
Statement to be mailed to its stockholders at the earliest practicable date
following the clearance of the Information Statement by the SEC.

         Section 6.3 Listing Obligation. Prior to the Closing, the Company will
take all reasonable steps necessary, and pay all reasonable fees required, to
list the Shares on the NYSE, to the extent required by the NYSE. Following the
initial listing of the Shares, the Company will use its commercially reasonable
best efforts to maintain the listing of the Common Stock for so long as the
Investor owns any Shares.

         Section 6.4 Cooperation. The Investor, on the one hand, and the
Company, on the other, agrees to use its commercially reasonable best efforts to
cause, or not to impede, to the extent that such party has control or influence
over such matters, satisfaction of the conditions, set forth in Sections 7.2 and
7.3, to the other party's obligation to consummate the transactions contemplated
by this Agreement.

         Section 6.5 Notification of Certain Matters. From the date hereof
through the Closing, the Investor, on the one hand, and the Company, on the
other shall give prompt notice to such other party of the occurrence, or failure
to occur, of any event the occurrence or failure of which caused any of the
Company's or the Investor's representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect; provided, however,
that no such notification shall be deemed for any purpose under this Agreement
to permit the Company or the Investor to alter or amend the representations and
warranties contained herein.

         Section 6.6 Consent; Approvals. The Company shall use its commercially
reasonable efforts to obtain, as promptly as practicable, all consents, waivers,
exemptions, approvals, authorizations or orders (collectively, "Consents")
(including, without limitation (i) all Consents required to avoid any breach,
violation, default, encumbrance or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or acceleration of
any material agreement or instrument to which the Company is a party or its
properties or assets are bound, and (ii) all approvals of Governmental Entities,
required in connection with the consummation of the transactions contemplated by
this Agreement as promptly as practicable (including the premerger notification
and report form under the HSR Act), except where the failure to obtain such
Consents, individually or in the aggregate, has not had and would not be
reasonably expected to have a Material Adverse Effect.

         Section 6.7 Further Assurances. From time to time after the date of
this Agreement, the parties hereto shall execute, acknowledge and deliver to the
other parties such other instruments, documents, and certificates and will take
such other actions as the other parties may reasonably request in order to
consummate the transactions contemplated by this Agreement.

         Section 6.8 Use of Proceeds. The Company shall apply the proceeds from
the sale of the Shares to the payments required to be made by the Company
pursuant to the Transaction Agreements and associated costs and expenses.

         Section 6.9 Waiver of Piggyback Registration Rights For Registration on
Form S-1. In the event the Company files a registration statement on Form S-1
prior to the six month anniversary of the execution of this Agreement, the
Investor hereby covenants and agrees to irrevocably and unconditionally waive
all piggyback registration rights and other rights provided pursuant to Section
5.2 of the Stockholders Agreement in connection with such registration statement
including, without limitation, the right to receive any notices from the Company
pursuant to Section 6.4 of the Stockholders Agreement. Nothing in this Section
6.9 shall be deemed to be a waiver of any of the Investor's other rights under
the Stockholders Agreement, including the right of the Investor to demand
registration pursuant to Section 5.1 or 5.3 of the Stockholders Agreement.

         Section 6.10 Venture Capital Operating Company Rights. In the event the
Investor were to transfer some or all of its equity investment in the Company to
an entity that intends to qualify as a "venture capital operating company," the
Company hereby agrees to enter into a letter substantially in the form attached
hereto as Exhibit C prior to, or simultaneously with, such transfer.

                                   ARTICLE VII

                              CONDITIONS PRECEDENT
                              --------------------


         Section 7.1 Conditions to Obligations of the Investor and the Company.
The respective obligations of the Investor and the Company to consummate the
transactions contemplated hereby shall be subject to the satisfaction or waiver
at or prior to the Closing of each of the following conditions:

         (a) Laws. No Laws shall be in effect which prohibit the consummation of
the transactions contemplated hereby.

         (b) Consummation of Transaction. The Closing shall be consummated
simultaneously with the closing of the Transaction.

         Section 7.2 Conditions to Obligations of the Investor. The obligation
of the Investor to consummate the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions:

         (a) Representations and Warranties. All of the representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date, as if made at and as of such time, except to the extent
expressly made as of an earlier date, in which case as of such date.

         (b) Performance of Obligations. The Company shall have performed,
satisfied and complied with, in all material respects, all covenants and
agreements set forth in this Agreement required to be performed by it under this
Agreement at or prior to the Closing.

         (c) Officer's Certificate. The Company shall have delivered to the
Investor a certificate signed by its president, dated the Closing Date, in form
and substance reasonably satisfactory to the Investor, to the effect that the
conditions set forth in Sections 7.2(a) have been satisfied.

         (d) Receipts of Consents. The Company shall have obtained the Consents
contemplated by Section 6.6, if any, and a copy of each such consent or evidence
thereof reasonably satisfactory to the Investor shall have been provided to the
Investor at or prior to the Closing, unless the failure to obtain such Consents,
when taken together with other events, developments or circumstances, has had or
would reasonably be expected to have a Material Adverse Effect.

         (e) Stockholders Agreement. On the Closing Date, the Investor shall
have received the agreement pursuant to which the Investor shall be bound by the
provisions of the Stockholders Agreement, executed by the Company, and such
agreement shall be in full force and effect.

         Section 7.3 Conditions to Obligations of the Company. The obligation of
the Company to consummate the transactions with the Investor contemplated hereby
shall be subject to the satisfaction at or prior to the Closing of each of the
following conditions:

         (a) Representations and Warranties. All of the representations and
warranties of the Investor set forth in this Agreement shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date, as if made at and as of such time, except to the extent
expressly made as of an earlier date, in which case as of such date.

         (b) Performance of Obligations. The Investor shall have performed,
satisfied and complied with, in all material respects, all covenants and
agreements set forth in this Agreement required to be performed by it under this
Agreement at or prior to the Closing.

         (c) Investor Certificate. The Investor shall have delivered to the
Company a certificate signed by an authorized signatory thereof, dated the
Closing Date, in form and substance reasonably satisfactory to the Company, to
the effect that the conditions set forth in Sections 7.3(a) and 7.3(b) have been
satisfied.

         (d) Stockholders Agreement. On the Closing Date, the Company shall have
received the agreement pursuant to which the Investor shall be bound by the
provisions of the Stockholders Agreement, executed by the Investor, and such
agreement shall be in full force and effect.

                                  ARTICLE VIII

                                   TERMINATION
                                   -----------

         Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date notwithstanding the fact that any requisite authorization and
approval of the transactions contemplated hereby shall have been received and no
party hereto shall have any liability to any other party hereto (provided that
any such termination shall not (i) relieve any party from liability for a breach
of any provision hereof prior to such termination or (ii) terminate the parties'
respective obligations under Article IX or Section 10.04); provided, however,
that in the event this Agreement is terminated in accordance with this Section
8.1, no Investor Indemnified Person may seek indemnification from the Company
pursuant to Article IX hereof other than for the reasonable out-of-pocket fees,
costs or expenses incurred by the Investor Indemnified Person in connection with
the Transactions):

         (a) by the Investor or the Company if the Merger Agreement is
terminated in accordance with its terms;

         (b) by the Investor or the Company if there shall be any Law that makes
consummation of the purchase of the Shares hereunder illegal or otherwise
prohibited or if any court of competent jurisdiction or governmental authority
shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the purchase of the Shares
hereunder and such order, decree, ruling or other action shall have become final
and non-appealable;

         (c) by the Investor or the Company if the Closing shall not have
occurred on or before the nine month anniversary of the date of the Merger
Agreement.

         (d) by the Company if the Investor shall have breached in any respect
any of its representations, warranties, covenants or other agreements contained
in this Agreement that would give rise to the failure of a condition set forth
in Article VII; or

         (e) by the Investor if the Company shall have breached in any respect
any of its representations, warranties, covenants or other agreements contained
in this Agreement that would give rise to the failure of a condition set forth
in Article VII.

                                   ARTICLE IX

                                 INDEMNIFICATION
                                 ---------------

         Section 9.1 Survival of Representations and Warranties. The
representations and warranties of the parties hereto contained in this Agreement
shall expire twelve months after the Closing Date, except that the
representations and warranties set forth in Sections 4.1(a), 4.2, 4.3, 5.1, 5.2,
5.3 and 5.4 shall survive until 6 months after the expiration of the applicable
statute of limitations (including any extensions thereof). After the expiration
of such periods, any claim by a party hereto based upon any such representation
or warranty shall be of no further force and effect, except to the extent a
party has asserted a claim in accordance with this Article IX for breach of any
such representation or warranty prior to the expiration of such period, in which
event any representation or warranty to which such claim relates shall survive
with respect to such claim until such claim is resolved as provided in this
Article IX. The covenants and agreements of the parties hereto contained in this
Agreement shall survive the Closing until performed in accordance with their
terms.

         Section 9.2 Indemnification.

         (a) The Company shall indemnify, defend and hold harmless the Investor,
its Affiliates, and their respective officers, directors, partners, members,
employees, agents, representatives, successors and assigns (each an "Investor
Indemnified Person") from and against all Losses incurred or suffered by an
Investor Indemnified Person arising from, relating to or as a result of (i) the
breach of any of the representations or warranties made by the Company in this
Agreement or in any certificate furnished by the Company to the Investor
pursuant to this Agreement (which breach shall be determined without regard to
any materiality or Material Adverse Effect qualifications contained in the
representation and warranty giving rise to such claim for indemnity), (ii) the
breach of any covenant, obligation or agreement made by the Company in this
Agreement or (iii) any actual or threatened Litigation against the Investor
Indemnified Person by any Person (other than an Investor Indemnified Person) in
connection with (A) the transactions contemplated hereby, (B) the negotiation,
execution, delivery and performance of this Agreement or (C) any actions taken
by any Investor Indemnified Person pursuant hereto or thereto or in connection
with the transactions contemplated hereby (whether or not the transactions
contemplated hereby are consummated); provided, however, that the Company shall
not have any obligation to indemnify a particular Investor Indemnified Person
pursuant to this Section 9.2(a)(iii) to the extent such suit, action, claim or
proceeding arises from a breach of this Agreement by the Investor or Investor
Indemnified Person or a failure of any representation or warranty of the
Investor set forth in Article V hereof to be true and correct and such breach or
failure of a representation or warranty to be true and correct results in any
condition contained in Sections 7.1 or 7.3 hereof being incapable of being
satisfied prior to the Closing.

         (b) The Investor shall indemnify, defend and hold harmless the Company,
its Affiliates, and their respective officers, directors, partners, members,
employees, agents, representatives, successors and assigns (each an "Indemnified
Person") from and against all Losses incurred or suffered by an Indemnified
Person arising from, relating to, or as a result of (i) the breach of any of the
representations or warranties made by the Investor in this Agreement or any
certificate furnished by the Investor to the Company pursuant to this Agreement
or (ii) the breach of any covenant, obligation or agreement made by the Investor
in this Agreement.

         (c) No claim may be made against the Company for indemnification with
respect to breaches of representations and warranties pursuant to Section
9.2(a)(i) above with respect to any Losses unless the aggregate amount of Losses
incurred by the Investor Indemnified Persons thereunder exceeds $10,000,000, and
the Company shall then only be liable for the amount of such Losses which exceed
$10,000,000. The maximum amount recoverable under Section 9.2(a)(i) by the
Investor and the Investor Indemnified Persons, in the aggregate, shall not
exceed the Purchase Price. No claim may be made against the Investor for
indemnification with respect to breaches of representations and warranties
pursuant to Section 9.2(b)(i) above with respect to any Losses unless the
aggregate amount of Losses incurred by the Indemnified Persons thereunder
exceeds $10,000,000, and the Investor shall then only be liable for the amount
of such Losses which exceed $10,000,000. With respect to the Investor, the
maximum amount recoverable under Section 9.2(b)(i) by all Indemnified Persons
from the Investor shall be equal to the Purchase Price.

         (d) In no case shall any payment be made in the case of an
indemnification claim under Section 9.2(a)(i) or 9.2(a)(ii) until a Loss occurs.
No Person shall have any liability to any Investor Indemnified Person under
Section 9.2(a)(i) for any breach of a representation or warranty to the extent
that a claim for indemnification is based upon facts of which the Investor
Indemnified Person had knowledge on or prior to the Closing Date, unless such
claim also relies upon a materially adverse occurrence or development that
occurs after the Closing Date. For purposes of this Section 9.2(d), (i) the
Investor shall be deemed to have knowledge of a fact only if any of the Persons
set forth in the definition of "Investor Representative" has knowledge of the
particular fact and (ii) such individual shall be deemed to have knowledge only
to the extent of his or her actual knowledge of such fact and only to the extent
of his or her awareness that such fact constitutes a breach of such
representation or warranty.

         Section 9.3 Procedure for Indemnification.

         (a) If an Investor Indemnified Person or an Indemnified Person (such
Person being referred to as the "Indemnitee") shall receive notice or otherwise
learn of the assertion by a Person who is not a party to this Agreement of any
claim or of the commencement by any such Person of any action (a "Claim") with
respect to which the other party (the "Indemnifying Party") may be obligated to
provide indemnification, such Indemnitee shall give such Indemnifying Party
written notice thereof promptly after becoming aware of such Claim; provided,
that the failure of any Indemnitee to give notice as provided in this Section
9.3 shall not relieve the applicable Indemnifying Party of its obligations under
this Article IX, except to the extent that such Indemnifying Party is materially
prejudiced by such failure to give notice; provided, further, that the
applicable Indemnifying Party shall have no obligations under Section 9.2(a)(i)
or Section 9.2(b)(i), as applicable, unless such written notice is received by
the Indemnifying Party within the survival periods set forth in Section 9.1.
Such notice shall describe the Claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the Loss that has been or may be
sustained by or is claimed against such Indemnitee.

         (b) An Indemnifying Party may elect to compromise, settle or defend, at
such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel, any Claim; provided, however, that the Indemnifying Party shall not
compromise, settle or defend a Claim without the consent of the Indemnitee
(which consent shall not be unreasonably withheld, conditioned or delayed). If
an Indemnifying Party elects to compromise, settle or defend a Claim, it shall,
within 30 days of the receipt of notice from an Indemnitee pursuant to Section
9.3(a) (or sooner, if the nature of such Claim so requires), notify the
applicable Indemnitee of its intent to do so, and such Indemnitee shall
cooperate in a commercially reasonable manner in the compromise or settlement
of, or defense against, such Claim. After notice from an Indemnifying Party to
an Indemnitee of its election to assume the defense of a Claim, the Indemnitee
shall have the right to participate in the defense thereof, at its own expense,
and such Indemnifying Party shall not be liable to such Indemnitee under this
Article IX for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof (except expenses approved in
advance by the Indemnitee); provided, that such Indemnitee shall have the right
to employ one separate counsel reasonably satisfactory to the Indemnifying Party
to represent such Indemnitee if (i) in the reasonable judgment of the
Indemnitee, there are legal defenses available to such Indemnitee that are
different from or additional to those available to the Indemnifying Party, (ii)
the Indemnifying Party shall authorize in writing the Indemnitee to retain a
single, separate counsel at the Indemnifying Party's expense or (iii) the
defendants in any such Claim include both the Indemnifying Party and the
Indemnitee and, in such Indemnitee's reasonable judgment, a conflict of interest
between such Indemnitee and such Indemnifying Party exists in respect of such
Claim, and only in the events listed in clauses (i) through (iii) of this
paragraph (b) shall the reasonable fees and expenses of such separate counsel be
paid by such Indemnifying Party. If an Indemnifying Party elects not to
compromise, settle or defend against a Claim, or fails to notify an Indemnitee
of its election as provided in this Section 9.3 within 30 days of notice from
the Indemnitee pursuant to Section 9.3(a), such Indemnitee may compromise,
settle or defend such Claim at the expense of such Indemnifying Party.

         (c) If an Indemnifying Party chooses to defend any claim, the
applicable Indemnitee shall make available to such Indemnifying Party any
personnel or any books, records or other documents within its control that are
reasonably necessary or appropriate for such defense.

         (d) If the aggregate amount of any Loss shall, at any time subsequent
to payment pursuant to this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, net of any expenses incurred in
connection therewith or additional Losses incurred, shall promptly be repaid by
the applicable Indemnitee to the applicable Indemnifying Party.

         (e) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Claim, such Indemnifying Party shall be subrogated to and
shall stand in the place of such Indemnitee as to any events or circumstances in
respect of which such Indemnitee may have any right or claim relating to such
Claim. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and, at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.

         Section 9.4 Sole Remedy. Except in the case of fraud, the rights to
indemnification provided for in this Article IX for a breach of representations
or warranties by the Investor (in the case of indemnification pursuant to
Section 9.2(b)(i)) or the Company (in the case of indemnification pursuant to
Section 9.2(a)(i)) shall constitute the sole post-closing remedy of the Company
and the Investor respectively, for such breach, and the Company and the Investor
shall have no other liability or damages to the other party resulting from any
such breach.

                                    ARTICLE X

                                  MISCELLANEOUS
                                  -------------

         Section 10.1  Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal and substantive Laws of the State of
New York without giving effect to conflicts of law principles thereof.

         Section 10.2  Jurisdiction; Forum; Service of Process; Waiver of Jury
Trial. With respect to any suit, action or proceeding ("Proceeding") arising out
of or relating to this Agreement, the Company and the Investor hereby
irrevocably:

         (a) submits to the exclusive jurisdiction of the courts of the United
States of America located in the State of New York and the courts of the State
of New York (the "Selected Courts"), for any Proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any Litigation relating hereto except in such Selected Courts)
and waives any objection to venue being laid in the Selected Courts whether
based on the grounds of forum non conveniens or otherwise;

         (b) consents to service of process in any Proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, or by
recognized international express carrier or delivery service, to the Company or
the Investor at its address referred to in Section 10.6; provided, however, that
nothing herein shall affect the right of any party hereto to serve process in
any other manner permitted by Law; and

         (c) waives, to the fullest extent permitted by Law, any right it may
have to a trial by jury in any Proceeding directly or indirectly arising out of,
under or in connection with this Agreement.

         Section 10.3 Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors by operation of Law and permitted assigns of the parties
hereto. Except as permitted under Section 2.2, no assignment of this Agreement
may be made by any party at any time, whether or not by operation of Law,
without the other parties' prior written consent. Only the parties to this
Agreement or their permitted assigns shall have rights under this Agreement.

         Section 10.4 Fees and Expenses. Except as otherwise provided herein,
all fees, costs or expenses shall be paid by the party incurring such fees,
costs or expenses. All legal fees and expenses of Skadden, Arps, Slate, Meagher
& Flom LLP will be paid by the Company.

         Section 10.5 Entire Agreement; Amendment. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and supercedes all prior agreements relating to the
subject matter hereof. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and by the Investor. No
waiver of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar). No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.

         Section 10.6 Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by facsimile,
nationally recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:

                           if to the Company to:

                           Brookdale Senior Living Inc.
                           330 North Wabash Avenue,
                           Suite 1400
                           Chicago, Illinois 60611
                           Facsimile:   312-977-3699
                           Attention:    General Counsel


                           with a copy to:

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           4 Times Square
                           New York, NY 10036-6522
                           Facsimile: (212) 735-2000
                           Attention:  Joseph A. Coco


                           if to Investor to:

                           1345 Avenue of the Americas, 46th Floor
                           New York, NY 10105
                           Facsimile:  (212) 798-6120
                           Attention:  Randal A. Nardone

                           with a copy to:

                           1345 Avenue of the Americas, 46th Floor
                           New York, NY 10105
                           Facsimile:  (212) 798-6060
                           Attention:  Alan Chesick

                           and a copy to:

                           1345 Avenue of the Americas, 46th Floor
                           New York, NY 10105
                           Facsimile:  (212) 798-6000
                           Attention:  William B. Doniger

All such notices, requests, consents and other communications shall be deemed to
have been given or made if and when delivered personally or by overnight courier
to the parties at the above addresses or sent by electronic transmission, with
confirmation received, to the facsimile numbers specified above (or at such
other address or facsimile number for a party as shall be specified by like
notice). Any notice delivered by any party hereto to any other party hereto
shall also be delivered to each other party hereto simultaneously with delivery
to the first party receiving such notice.

         Section 10.7 Delays or Omissions. Except as expressly provided herein,
no delay or omission to exercise any right, power or remedy accruing to the
Company or the Investor upon any breach or default of any party under this
Agreement, shall impair any such right, power or remedy of the Company or the
Investor nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of the
Company or the Investor of any breach or default under this Agreement, or any
waiver on the part of any such party of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by Law or otherwise afforded to the Company or the Investor shall
be cumulative and not alternative, except as set forth in Section 9.4.

         Section 10.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be executed by only one of the parties
hereto, each of which shall be enforceable against the party actually executing
such counterpart, and all of which together shall constitute one instrument.

         Section 10.9 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided that, no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.

         Section 10.10 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

         Section 10.11 No Public Announcement. (a) None of the Company or its
Subsidiaries or the Investor or its Affiliates shall make any press release,
public announcement or filing with any Governmental Entity concerning the
transactions contemplated by this Agreement, except as and to the extent that
any such party shall be obligated to make any such disclosure by this Agreement,
by Law or the rules of any national securities exchange.

                             Signature pages follow






         IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be executed as of the date first above written.


                                BROOKDALE SENIOR LIVING INC.


                                By: /s/ Mark J. Schulte
                                   ----------------------------------
                                   Name:  Mark J. Schulte
                                   Title: Chief Executive Officer


                                RIC COINVESTMENT FUND LP

                                By: RIC Coinvestment GP LLC, its general partner


                                By:  /s/ Randal A. Nardone
                                   ----------------------------------
                                   Name:  Randal A. Nardone
                                   Title: COO and Secretary






        Brookdale Senior Living Inc. Investment Agreement Signature Page

EX-10

                                                                    Exhibit 10.2
                                                                    ------------

                            FORM OF OPTION AGREEMENT


                             STOCK OPTION AGREEMENT
                             ----------------------

         This STOCK OPTION AGREEMENT (this "Agreement"), is entered into this th
day of , 2006 (the "Date of Grant") between Brookdale Senior Living Inc., a
Delaware corporation (the "Company") and RIC Co-Investment Fund LP, a Delaware
limited partnership (the "Investor").

         This Agreement is a one-time stock option (an "Option") to repurchase
shares of the Company's common stock. This Option is granted for the purpose of
permitting the Company to repurchase a portion of the shares of the Company's
common stock, par value $0.01 per share (the "Common Stock") issued to the
Investor pursuant to an Investment Agreement, dated May 12, 2006, between the
Company and the Investor.

Terms and Conditions of the Option

         1.  Number of Shares and Option Price. The Option entitles the Company
to purchase from the Investor an aggregate of shares (the "Option Shares") of
the Company's Common Stock, at an exercise price of $38.07 per share (the
"Option Price") subject to adjustment as set forth herein.

         2.  Period of Option. This Option may be exercised as provided herein
at any time from and after the Date of Grant until 5:00 p.m., New York City
time, on the date that is six months and one day after the Date of Grant or if
such date is not a business day on the next succeeding business day (the
"Expiration Date"). Upon the occurrence of the Expiration Date, all rights of
the Company hereunder, with respect to the Option, shall cease.

         3.  Conditions of Exercise. Subject to the provisions of this
Agreement, the Option shall be fully vested and immediately exercisable in
accordance with Section 4 below.

         4.  Exercise of Option. The Option may be exercised one-time, as
provided herein, in whole or in part, at any time until the Expiration Date in
the manner described in this Section 4. In the case of exercise, the Company
shall deliver to the Investor written notice specifying the number of Option
Shares to be acquired pursuant to such exercise, together with cash in an amount
equal to the aggregate Option Price. The Company shall also deliver to the
Investor a certificate from a duly authorized officer of the Company to the
effect that the covenants, representations and warrants set forth in Section
6(b) hereof are true and correct in all material respects with the same force
and effect as though expressly made at the time of this Agreement. Upon the
Investor's receipt of the Company's written notice of exercise and the cash, the
Investor shall promptly deliver to the Company the number of Option Shares set
forth in such notice.

         5.  Nontransferability of Option. Except as permitted by the Investor
in writing or a corporate successor of the Investor by merger, consolidation or
otherwise, the Company shall not be permitted to sell, transfer, pledge or
assign the Option. The Option shall be exercisable only by the Company or any
subsequent party or parties having the right to exercise the Option pursuant to
the foregoing sentence. Any attempted assignment, transfer, pledge or other
disposition of the Option contrary to the provisions hereof shall be null and
void and without effect.

         6.  Covenants, Representations and Warranties.

             (a) Covenants, Representations and Warranties of Investor. The
Investor hereby covenants, represents and warrants to the Company as follows:

                (i) The Investor has full power and authority to execute,
deliver and perform its obligations under this Agreement and this Agreement is a
valid and binding obligation of the Investor, enforceable in accordance with its
terms.

                (ii) The execution, delivery and performance by the Investor of
this Agreement requires no action by or in respect of, or filing with, any
governmental body, agency or official and do not and will not (i) violate the
certificate of incorporation or bylaws of the Investor, (ii) violate any law,
rule, regulation, judgment, injunction, order or decree applicable to the
Investor or (iii) require any consent or other action by any person, constitute
a default, or give rise to termination, cancellation or acceleration of any
right or obligation of the Investor under any provision of any agreement or
other instrument binding upon the Investor.

                (iii) The Investor has or will have available for delivery upon
exercise or exchange of this Option the total number of shares of Common Stock
issuable upon exercise of this Option. All shares of Common Stock deliverable
upon exercise will be delivered free and clear of all liens and encumbrances.

             (b) Covenants, Representations and Warranties of the Company. The
Company hereby covenants, represents and warrants to the Investor as follows:
(i) The Company has full power and authority to execute, deliver and perform its
obligations under this Agreement and this Agreement is a valid and binding
obligation of the Company, enforceable in accordance with its terms. (ii) The
execution, delivery and performance by the Company of this Agreement requires no
action by or in respect of, or filing with, any governmental body, agency or
official and do not and will not (i) violate the certificate of incorporation or
bylaws of the Company, (ii) violate any law, rule, regulation, judgment,
injunction, order or decree applicable to the Company or (iii) require any
consent or other action by any person, constitute a default, or give rise to
termination, cancellation or acceleration of any right or obligation of the
Company under any provision of any agreement or other instrument binding upon
the Company.

          7.  Notices. Any notice required or permitted under this Agreement
shall be deemed given when delivered personally, or when deposited in a United
States Post Office, postage prepaid, addressed, as appropriate, to the Investor
either at its address set forth below or such other address as it may designate
in writing to the Company, or to the Company: 330 North Wabash Avenue, Suite
1400, Chicago, Illinois 60611, Attention: Mark J. Schulte, Chief Executive
Officer (or his designee), at the Company's address or such other address as the
Company may designate in writing to the Investor.

          8. Failure to Enforce Not a Waiver. The failure of the Company or
the Investor to enforce at any time any provision of this Agreement shall in no
way be construed to be a waiver of such provision or of any other provision
hereof.

          9. Governing Law. This Agreement shall be governed by and construed
according to the laws of the State of New York without regard to its principles
of conflict of laws.

         10.  Adjustments.

              (a) In the event of any change in the share of Common Stock by
reason of stock dividends, splits, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or other similar transactions,
then that which is then transferable upon exercise of the Option shall be
appropriately adjusted so that the Company shall receive, upon exercise of the
Option and payment of the Option Price, the number and class of shares of Common
Stock or other securities or property (including cash) that the Company would
have owned or been entitled to receive after the happening of any of the events
described above if the Option had been exercised immediately prior to such
event.

              (b) Whenever the number of Option Shares are adjusted pursuant to
Section 10(a) herein, the Option Price shall be appropriately adjusted, if
applicable, by multiplying the Option Price by a fraction, the numerator of
which shall be equal to the aggregate number of Option Shares transferred under
the Option prior to the adjustment and the denominator of which shall be equal
to the aggregate number of Option Shares transferred under the Option
immediately after the adjustment.

         11.  Amendments. This Agreement may be amended or modified at any time
by an instrument in writing signed by the parties hereto.

         12.  Securities Laws Requirements. The Option shall not be exercisable
to any extent, and the Investor shall not be obligated to transfer any Option
Shares to the Company upon exercise of such Option, if such exercise, in the
opinion of counsel for the Investor, would violate the Securities Act (or any
other Federal or state securities laws as may be in effect at that time).

         13.  Protections Against Violations of Agreement. No purported sale,
assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift,
transfer in trust (voting or other) or other disposition of, or creation of a
security interest in or lien on, any of the Option or any interest therein by
any holder thereof in violation of the provisions of this Agreement will be
valid unless and until there has been full compliance with said provisions to
the satisfaction of the Investor. The foregoing restrictions are in addition to
and not in lieu of any other remedies, legal or equitable, available to enforce
said provisions.



                          Signatures on Following Page



         IN WITNESS WHEREOF, the parties have executed this Agreement on this
day of      , 2006.



                               RIC COINVESTMENT FUND LP

                               By:  RIC Coinvestment GP LLC, its general partner

                                    By:_________________________________
                                    Name:
                                    Title:


                                    Address for Notices:
                                    --------------------
                                    1345 Avenue of the Americas, 46th Floor
                                    New York, NY 10105
                                    Facsimile: (212) 798-6120
                                    Attention:  Randal A. Nardone

                                    With a Copy to:
                                    ---------------

                                    1345 Avenue of the Americas, 46th Floor
                                    New York, NY 10105
                                    Facsimile: (212) 798-6060
                                    Attention:  Alan Chesick, Esq.







                                    The undersigned hereby accepts and agrees
                                    to all the terms and provisions of the
                                    foregoing Agreement



                                    BROOKDALE SENIOR LIVING INC.




                                    ____________________________________
                                    Name:

                                    Title:

EX-10

                                                                    Exhibit 10.3
                                                                    ------------



                          BROOKDALE SENIOR LIVING INC.
                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 12th day of May, 2006, by and between Brookdale Senior Living Inc., a
Delaware corporation (the "Company"), and W. E. Sheriff ("Executive"). Where the
context permits, references to "the Company" shall include the Company and any
successor of the Company.

                              W I T N E S S E T H:

         WHEREAS, concurrently with the execution of this Agreement, the
Company, Beta Merger Sub Corporation and American Retirement Corporation ("ARC")
are entering into an Agreement and Plan of Merger dated as of May 12, 2006 (the
"Merger Agreement"); and

         WHEREAS, the Executive is currently employed by ARC;

         WHEREAS, the Company desires to secure the services of the Executive
from and after the "Closing Date" of the "Merger" (as such terms are defined in
the Merger Agreement); and

         WHEREAS, Executive desires to provide such services.

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, together with other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:

         1. SERVICES AND DUTIES. Subject to Section 6 hereof, from and after the
Closing Date of the Merger (which shall be the "Effective Date" of this
Agreement), Executive shall be employed by the Company in the capacity of its
Co-Chief Executive Officer; in such capacity Executive shall report directly to
the Company's Board of Directors (the "Board"). The principal location of
Executive's employment with the Company shall be the same as the Executive's
current principal location of employment with ARC, although Executive
understands and agrees that Executive may be required to travel from time to
time for business reasons. Executive shall be a full-time employee of the
Company and shall dedicate all of Executive's working time to the Company and
shall have no other employment and no other business ventures which are
undisclosed to the Company or which conflict with Executive's duties under this
Agreement. Executive will perform such duties as are required by the Company
from time to time and normally associated with Executive's position, together
with such additional duties, commensurate with Executive's position, as may be
assigned to Executive from time to time by the Board. Notwithstanding the
foregoing, nothing herein shall prohibit Executive from (i) engaging in personal
investment activities for the Executive and the Executive's family that do not
give rise to any conflict of interests with the Company or its affiliates, (ii)
subject to prior approval of the Board, accepting directorships unrelated to the
Company that do not give rise to any conflict of interests with the Company or
its affiliates and (iii) engaging in charitable and civic activities, so long as
such outside interests do not interfere with the performance of the Executive's
duties hereunder. The Company acknowledges and approves the current activities
of the Executive as set forth on Schedule 1 hereto.

         2.   TERM AND WAIVER.

              (a) Term. Subject to Section 6 hereof, Executive's employment
under the terms and conditions of this Agreement will commence on the Effective
Date. The term of this Agreement (the "Term") shall consist of the Initial Term
and a maximum of two (2) Renewal Terms which, in any case, may be earlier
terminated pursuant to Section 5; provided, that in no event shall the Term
extend beyond December 31, 2011. The initial term of this Agreement (the
"Initial Term") shall commence on the Effective Date and end on December 31,
2009. The Initial Term shall automatically renew for up to two (2) additional
one (1)-year periods (each such one-year period, a "Renewal Term") unless either
party delivers to the other party at least ninety (90) days prior to the end of
the Initial Term or the first Renewal Term a written notice indicating that it
intends not to extend the Term hereof. The delivery by the Company to Executive
of written notice indicating that it intends not to extend the Term as provided
in this Section 2 prior to the expiration of the Initial Term or the expiration
of the first Renewal Term (i.e., so that the Term would end before December 31,
2011) shall constitute "Good Reason" (as defined below) for purposes of this
Agreement. However, the delivery by the Company pursuant to this Section 2 of a
notice not to extend the Term shall not be deemed a termination of Executive's
employment by the Company without Cause for purposes of this Agreement. If the
Term expires on December 31, 2011, and Executive is employed by the Company
thereafter, such employment shall be "at-will" and this Agreement will be of no
further force and effect. Expiration of the Term upon December 31, 2011, shall
not be considered a termination of employment entitling Executive to severance
pay or benefits under Section 5(b) or 5(c) hereof.

              (b) Waiver. The Executive hereby waives any right which he might
otherwise have, now or in the future, to have the transactions contemplated in
the Merger Agreement treated as a Change in Control, Potential Change in
Control, or any similar term with respect to him under any ARC compensation or
benefit plan, program, agreement or arrangement, other than ARC's Supplemental
Executive Retirement Plan and the ARC 1997 Stock Incentive Plan and award
agreements entered into thereunder. Without intending to limit the application
of such waiver in any way, the parties hereto agree and acknowledge that the
waiver applies to the Amended and Restated Executive Change in Control Severance
Benefits Plan and the Executive waives the right to benefit from any provision
thereof, including, without limitation, any right to reimbursement for any
excise tax incurred under Section 4999 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code").

         3.   COMPENSATION.

              (a) Base Salary. In consideration of Executive's full and faithful
satisfaction of Executive's duties under this Agreement, the Company agrees to
pay to Executive a salary in the amount of two hundred thousand dollars
($200,000) per annum (the "Base Salary"), payable in such installments as the
Company pays its similarly placed employees (but not less frequently than each
calendar month), subject to usual and customary deductions for withholding taxes
and similar charges, and customary employee contributions to health, welfare and
retirement programs in which Executive is enrolled. The Base Salary shall be
reviewed on an annual basis in accordance with Executive's annual performance
evaluation and adjusted at the Company's sole discretion; provided, however, in
no event shall the Base Salary be reduced without Executive's approval.

              (b) Bonus Compensation. In addition to any salary payable pursuant
to Section 3(a) above, for the first fiscal year of the Company commencing after
the Effective Date, Executive shall be eligible to receive in respect of such
fiscal year a bonus (the "Bonus"), based on the achievement, as determined by
the Board in its sole discretion, of certain performance standards as agreed to
by Executive and the Board, with a target Bonus of two hundred thousand dollars
($200,000) (the "Target Bonus"), payable in a combination of 50% cash and 50%
vested shares of common stock of the Company ("Common Stock") (the stock portion
of any such Bonus, the "Bonus Stock Grant"). The number of shares comprising any
Bonus Stock Grant shall be determined by dividing the applicable portion of the
Bonus being awarded in Common Stock by the fair market value (as determined by
the Board in good faith) of the Common Stock on the date of grant. Any Bonus
Stock Grant described in this Section may be separately granted pursuant to the
terms of a stock agreement, and this Section is not intended to duplicate such
grant.

In addition to any salary payable pursuant to Section 3(a) above, for each
succeeding fiscal year of the Company Executive shall also be eligible to
receive an annual bonus, based on achievement of certain performance standards,
as determined by the Board in its sole discretion, payable in a combination of
cash and vested shares of Common Stock, as determined by the Board in its sole
discretion, and to the extent permitted by law and applicable stock exchange
listing requirements; provided, however, that to the extent that any amount of
such annual bonus exceeds the Target Bonus, such excess amount may be paid in
the form of unvested Common Stock, as determined by the Board in its sole
discretion.

For calendar year 2006, Executive's bonus will be calculated according to the
2006 bonus formula of ARC in effect prior to the consummation of the Merger, as
adjusted as mutually agreed-upon by the Company and the Executive to give effect
to the impact of the Merger (the "2006 Bonus").]

         The cash portion of each Bonus, the 2006 Bonus and any other annual
bonus shall be paid to Executive within a reasonable time after the end of the
fiscal year, but in no event later than thirty (30) days (the "Outside Payment
Date") following completion of the Company's audit for the applicable fiscal
year, which the Company shall endeavor in good faith to complete within three
months of the last day of the applicable fiscal year; provided, however, that
the Outside Payment Date may not be later than the later of (i) two and one-
half (2-1/2) months after the end of the applicable fiscal year; and (ii) two
and one- half (2-1/2) months after the end of the calendar year; and the stock
grant portion, if any, of each Bonus shall be made on such date as the Board
determines in its discretion, though no later than the applicable Outside
Payment Date. Notwithstanding anything to the contrary contained herein, no
Bonus in respect of any fiscal year of the Company will be due to Executive
unless Executive is employed by the Company on the last day of the fiscal year
in respect of which the Bonus is awarded.

              (c) Initial Restricted Stock Grant. As soon as practicable after
the Executive's purchase of shares of common Stock pursuant to Section 6 hereof,
the Company shall cause the Executive to be granted a number of shares of Common
Stock equal to the number of such shares the Executive has acquired pursuant to
Section 6 hereof. The grant shall be pursuant to the terms of, and subject to
the restrictions set forth in, a separate stock agreement (the "Initial
Restricted Stock Grant") under the Company's Omnibus Stock Incentive Plan.
Eighty percent (80%) of the restricted shares subject to the Initial Restricted
Stock Grant shall vest upon the attainment of performance goals (the
"Performance-Vesting Shares"). Twenty percent (20%) of the restricted shares
subject to the Initial Restricted Stock Grant shall vest based upon continued
employment (the "Time-Vesting Shares"). This Section 3(c) is not intended to
duplicate the Initial Restricted Stock Grant, which shall substantially
incorporate the following terms and conditions and the terms and conditions set
forth on Exhibit A hereto (Exhibit A's terms and conditions also being
incorporated in this Employment Agreement):

         As to Performance-Vesting Shares:
         ---------------------------------

         o    The first vesting date for the Performance-Vesting Shares shall be
              December 31, 2008. Up to fifty percent (50%) of the
              Performance-Vesting Shares may vest on that date, depending on the
              degree to which a performance goal based on the cash earnings of
              the Company during the fourth quarter of the preceding fiscal
              year, 2007, has been met, in accordance with the schedule set
              forth on Exhibit B hereto. Any of such shares which do not vest on
              the first vesting date shall not be forfeited, but shall remain
              subject to the terms and conditions of the Initial Restricted
              Stock Grant.

         o    The second vesting date for the Performance-Vesting Shares shall
              be December 31, 2009. Up to hundred percent (100%) of the
              Performance-Vesting Shares still subject to the Initial Restricted
              Stock Grant (including shares which failed to vest at the first
              vesting date) may vest on the second vesting date, depending on
              the degree to which a performance goal based on the cash earnings
              of the Company during the fourth quarter of the preceding fiscal
              year, 2008, has been met, in accordance with the schedule set
              forth on Exhibit B hereto. Any of such shares which do not vest on
              the second vesting date shall be forfeited.

         o    If the Executive's employment shall be terminated by the Company
              without Cause or by the Executive for Good Reason at any time
              prior to the second vesting date, the shares of Common Stock
              subject to the Initial Restricted Stock Grant at the time of such
              termination shall remain subject to the Initial Restricted Stock
              Grant until the vesting date which immediately follows such
              termination. Upon such vesting date the same number of shares
              shall vest as would have vested if the Executive had remained
              employed by the Company on such vesting date. If the Executive's
              employment terminates for any other reason while shares of Common
              Stock remain subject to the terms and conditions of the Initial
              Restricted Stock Grant, all such shares shall be forfeited at such
              termination.

         As to Time-Vesting Shares:
         --------------------------

         o    Subject to the Executive's continuing to be employed by the
              Company on the relevant vesting date, one-third (1/3) of the
              Time-Vesting Shares shall vest on each of the following three
              vesting dates: December 31, 2007, December 31, 2008, and December
              31, 2009; provided that, upon the occurrence of a Change of
              Control, 100% of the Time-Vesting Shares that are not vested at
              that time shall immediately vest.

         o    If the Executive's employment shall be terminated by the Company
              without Cause or by the Executive with Good Reason at any time
              prior to December 31, 2007, one-third of the Time-Vesting Shares
              remaining subject to the Initial Restricted Stock Grant shall vest
              and any remaining Time-Vesting Shares shall be immediately
              forfeited. If the Executive's employment is so terminated after
              December 31, 2007, and prior to December 31, 2008, one-half of the
              Time-Vesting Shares remaining subject to the Initial Restricted
              Stock Grant shall vest and any remaining Time-Vesting Shares shall
              be immediately forfeited. If the Executive's employment is so
              terminated after December 31, 2008, and prior to December 31,
              2009, all of the Time-Vesting Shares remaining subject to the
              Initial Restricted Stock Grant shall vest. If the Executive's
              employment terminates for any other reason while Time-Vesting
              Shares remain subject to the terms and conditions of the Initial
              Restricted Stock Grant, all such shares shall be forfeited at such
              termination.

         As to all Shares subject to the Initial Restricted Stock Grant:
         ---------------------------------------------------------------

         o    With respect to all shares of Common Stock subject to the Initial
              Restricted Stock Grant, the Executive shall be entitled to
              receive, and retain, all ordinary and extraordinary cash and stock
              dividends which may be declared on the Company's Common Stock
              after the date of grant and before any forfeiture thereof
              (regardless of whether a share later vests or is forfeited).

         o    All shares of Common Stock which vest under the Initial Restricted
              Stock Grant shall be subject to the Company's general policies
              regarding the sale of Common Stock by executives in effect from
              time to time.

During his employment with the Company, the Executive shall be eligible to
receive grants under the Company's Omnibus Stock Incentive Plan.

              (d) Withholding. All taxable compensation payable to Executive
pursuant to this Section 3 or otherwise pursuant to this Agreement shall be
subject to customary withholding taxes and such other excise or employment taxes
as are required under Federal law or the law of any state or governmental body
to be collected with respect to compensation paid by the Company to an employee.

         4.   BENEFITS AND PERQUISITES.

              (a) Retirement and Welfare Benefits. During the Term, Executive
will be entitled to all the usual benefits offered to employees at Executive's
level, including sick time, participation in the Company's medical, dental and
insurance programs, as well as the ability to participate in the Company's
401(k) retirement savings plan, subject to the applicable limitations and
requirements imposed by the terms of such benefit plans, in each case in
accordance with the terms of such plans as from time to time in effect. Nothing
in this Section 4, however, shall require the Company to maintain any benefit
plan or provide any type or level of benefits to its employees, including
Executive.

              (b) Life Insurance. During the Term, the Company will provide
Executive with basic life insurance benefits, calculated based on
one-and-one-half (1 1/2) times Executive's annual base salary being paid to the
Executive by ARC immediately prior to the Executive's entering into this
Agreement, up to a maximum of $550,000, at no cost to Executive.

              (c) Vacation/Paid Time Off. Notwithstanding anything to the
contrary in the Company's vacation or paid time off ("PTO") policies, for each
calendar year starting with 2007, Executive shall be entitled to four (4) weeks
(20 business days) vacation and paid time off under the Company's "PTO" plan for
each calendar year, and in the event Executive does not utilize all such four
(4) weeks during any calendar year, (a) Executive shall be paid for up to two
(2) weeks (10 business days) of such unused vacation/PTO at a weekly rate equal
to the then applicable Base Salary divided by 52, and (b) the remaining unused
days of vacation/PTO shall be deemed forfeited at the end of such calendar year.

              (d) Reimbursement of Expenses. The Company shall reimburse
Executive for any expenses reasonably and necessarily incurred by Executive in
furtherance of Executive's duties hereunder, including travel, meals and
accommodations, upon submission by Executive of vouchers or receipts and in
compliance with such rules and policies relating thereto as the Company may from
time to time adopt.

         5.   TERMINATION. Executive's employment shall be terminated at the
earliest to occur of the following: (i) at the end of the Term unless Executive
agrees to continue working for the Company, (ii) the date on which the Board
delivers written notice that Executive is being terminated for Disability (as
defined below), or (iii) the date of Executive's death. In addition, Executive's
employment with the Company (or its successors) may be terminated (i) by the
Company for "Cause" (as defined below), effective on the date on which a written
notice to such effect is delivered to Executive; (ii) by the Company at any time
without Cause, effective on the date on which a written notice to such effect is
delivered to Executive or such other date as is reasonably designated by the
Company; (iii) by Executive for "Good Reason" (as defined below) effective
thirty-one (31) days following the date on which a written notice to such effect
is delivered to the Company, or (iv) by Executive at any time, effective
fourteen (14) days following the date on which a written notice to such effect
is delivered to the Company (or its successors).

              (a) For Cause Termination. If Executive's employment with the
Company is terminated by the Company (or its successors) for Cause, Executive
shall not be entitled to any further compensation or benefits other than accrued
but unpaid Base Salary (payable as provided in Section 3(a)) and accrued and
unused vacation pay through the date of such termination (collectively, the
"Accrued Benefits"). If the definition of "Cause" set forth below conflicts with
such definition in any stock incentive plan or agreement of the Company or any
of its affiliates, the definition set forth herein shall control.

              (b) Termination by Company without Cause or by Executive for Good
Reason. (i) If Executive's employment is terminated by the Company (or its
successors) other than for Cause or by Executive for Good Reason prior to the
end of the Term hereof and not within twelve (12) months following a "Change of
Control" (as defined below), then Executive shall be entitled to, upon
Executive's providing the Company with a signed release of claims in a form
adopted by the Company's Board of Directors from time to time and subject to
Executive's continued compliance with the provisions of any restrictive
covenants in any other agreement or agreements between Executive and the Company
or to which Executive is a party, including, without limitation, any restricted
stock agreement between the Company and Executive: (A) the Accrued Benefits, (B)
an amount equal to six (6) months Base Salary payable in the same manner as
provided under Section 3(a), and (C) continuation of Executive's coverage under
the Company's medical plan until the earlier of (x) the date the Executive
becomes eligible for the medical benefits program of a new employer or (y) the
six-(6)-month anniversary of the date of such termination.

                  (ii) In the event of a Change of Control and termination of
the Executive's employment by the Company (or its successor) without Cause or by
Executive for Good Reason within twelve (12) months following such Change of
Control, then Executive shall be entitled to, upon Executive's providing the
Company with a signed release of claims in a form adopted by the Company's Board
of Directors from time to time and subject to Executive's continued compliance
with the provisions of any restrictive covenants in any other agreement or
agreements between Executive and the Company or to which Executive is a party:
(A) the Accrued Benefits, (B) an amount equal to twelve (12) months Base Salary
(at the rate in effect at the date of such termination, or if higher,
immediately prior to the Change of Control) payable in the same manner as
provided under Section 3(a), and (C) continuation of Executive's coverage under
the Company's medical plan or comparable medical plans to be paid by the Company
until the earlier of (x) the date Executive becomes eligible for the medical
benefits program of a new employer or (y) the twelve-(12)-month anniversary of
the date of such termination.

              (c) Death, Disability or Termination for other than Good Reason.
If Executive's employment is terminated by Executive for other than Good Reason
prior to the end of the Term, Executive shall not be entitled to receive any
further compensation or benefits under this Agreement or otherwise other than
the Accrued Benefits. If Executive's employment is terminated by reason of
Executive's death, or Disability prior to the end of the Term, in lieu of any
other payments or benefits, upon Executive's (or Executive's estate, as
applicable) providing the Company with a signed release of claims in a form
adopted by the Company's Board of Directors from time to time, Executive (or
Executive's beneficiary or estate, as applicable) shall be entitled to (i) the
Accrued Benefits, (ii) receipt of a monthly payment equal to the Executive's
then applicable annual Base Salary on the date of death or on the date of
termination for Disability divided by twelve (such monthly payment, the "Monthly
Severance Payment") payable for twelve (12) months following such date (the
"Benefits Period"), which Monthly Severance Payment shall be paid to the
Executive, or the Executive's beneficiary or estate, as applicable, and (iii) in
the case of termination due to Disability, continuation, at the Company's
expense, of the Executive's coverage in any group health plan (which may be
provided by payment of COBRA continuation coverage premiums), life insurance,
long term disability and other employee benefit plans or programs, to the extent
permissible under the terms of such plans or law until the end of the Benefits
Period.

              (d) Definitions. For purposes of this Agreement:

                  "Affiliate" means an affiliate of the Company (or other
          referenced entity, as the case may be) as defined in Rule 12b-2
          promulgated under Section 12 of the Exchange Act.

                  "Beneficial Owner" (or any variant thereof) has the meaning
          defined in Rule 13d-3 under the Exchange Act.

                  "Cause" means (i) conviction of, or guilty plea concerning or
         confession of any felony, (ii) any act of dishonesty committed by
         Executive in connection with the Company's or its subsidiaries'
         business, (iii) any material breach by Executive of this Agreement,
         after written notice thereof from the Board is given in writing and
         such breach is not cured to the satisfaction of the Company within a
         reasonable period of time (not greater than 30 days) under the
         circumstances; (iv) any material breach of any reasonable and lawful
         rule or directive of the Company; (v) the gross or willful neglect of
         duties or gross misconduct by Executive; and (vi) the habitual use of
         drugs or habitual, excessive use of alcohol to the extent that any of
         such uses in the Board's good faith determination materially interferes
         with the performance of Executive's duties under this Agreement.

                  "Change of Control" shall be deemed to have occurred if an
         event set forth in any one of the following paragraphs shall have
         occurred:

         (i) any Person other than any Permitted Transferee is or becomes the
         Beneficial Owner, directly or indirectly, of securities of the Company
         (not including in the securities beneficially owned by such Person any
         securities acquired directly from the Company or any of its affiliates
         as defined in Rule 12b-2 promulgated under Section 12 of the Securities
         Exchange Act of 1934, as amended, the "Exchange Act" ) representing 50%
         or more of the combined voting power of the Company's then outstanding
         securities; or

         (ii) there is consummated a merger or consolidation of the Company or
         any direct or indirect subsidiary of the Company with any other
         corporation, other than a merger or consolidation immediately following
         which the individuals who comprise the Board immediately prior thereto
         constitute at least a majority of the Board of the entity surviving
         such merger or consolidation or, if the Company or the entity surviving
         such merger is then a subsidiary, the ultimate parent thereof; or

         (iii) the stockholders of the Company approve a plan of complete
         liquidation or dissolution of the Company or there is consummated an
         agreement for the sale or disposition by the Company of all or
         substantially all of the Company's assets, other than (a) a sale or
         disposition by the Company of all or substantially all of the Company's
         assets to an entity, at least 50% of the combined voting power of the
         voting securities of which are owned by stockholders of the Company
         following the completion of such transaction in substantially the same
         proportions as their ownership of the Company immediately prior to such
         sale or (b) a sale or disposition of all or substantially all of the
         Company's assets immediately following which the individuals who
         comprise the Board immediately prior thereto constitute at least a
         majority of the board of directors of the entity to which such assets
         are sold or disposed or, if such entity is a subsidiary, the ultimate
         parent thereof.

Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the holders of the common
stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions. As used in the
foregoing definition of "Change of Control", the term "Company" shall not
include any successor of the Company.

                  "Disability" means, as determined by the Board of Directors in
         good faith, Executive's inability, due to disability or incapacity, to
         perform all of the Executive's duties hereunder on a full-time basis
         for (i) periods aggregating one hundred eighty (180) days, whether or
         not continuous, in any continuous period of three hundred and sixty
         five (365) days or, (ii) where Executive's absence is adversely
         affecting the performance of the Company in a significant manner,
         periods greater than ninety (90) days and Executive is unable to resume
         Executive's duties on a full time basis within ten (10) days of receipt
         of written notice of the Board's determination under this clause (ii).

                  "Good Reason" means either (i) the occurrence, without the
         express prior written consent of Executive, of any of the following
         circumstances, unless such circumstances are fully corrected by the
         Company within thirty (30) days following written notification by
         Executive (which written notice must be delivered within thirty (30)
         days of Executive's becoming aware of the occurrence of such
         circumstances) that the Executive intends to terminate the Executive's
         employment for one of the reasons set forth below: (A) the failure by
         the Company to pay to Executive any portion of Executive's Base Salary
         or Bonus within thirty (30) days of the date such compensation is due,
         or (B) the relocation of Executive's principal office at the Company to
         a location outside a fifty (50) mile radius from the Executive's
         present principal office location with ARC; or (C) Executive is
         assigned duties, compensation or responsibilities that are materially
         and significantly reduced with respect to the scope or nature of the
         duties, compensation and/or responsibilities associated with the
         Executive's position as of immediately after the Effective Date and,
         within ten (10) days following written notice by Executive to the
         Company of Executive's objection to such reduction, the Company fails
         to reinstate the Executive's duties, compensation and/or
         responsibilities so reduced; or (ii) the delivery by the Company to
         Executive of written notice indicating that it intends not to extend
         the Term hereof pursuant to Section 2 hereof. Notwithstanding the
         foregoing, a termination by Executive for "Good Reason" shall not be
         deemed to have occurred by virtue of changes in Executive's duties,
         benefits and responsibilities resulting upon (or shortly thereafter)
         the consummation of any transaction or series of integrated
         transactions immediately following which the holders of the common
         stock of the Company immediately prior to such transaction or series of
         transactions continue to have substantially the same proportionate
         ownership in an entity which owns all or substantially all of the
         assets of the Company immediately following such transaction or series
         of transactions.

                  "Permitted Transferee" shall mean, (i) any Affiliate ( a "FIG
         Affiliate") of Fortress Investment Group LLC, a Delaware limited
         liability company ("FIG"), (ii) any managing director, general partner,
         director, limited partner, officer or employee of any FIG Affiliate,
         (iii) any investment fund managed directly or indirectly by FIG or any
         of its Affiliates (a "FIG Fund"), or (iv) any general partner, limited
         partner, managing member or person occupying a similar role of or with
         respect to any FIG Fund.

                  "Person" shall have the meaning given in Section 3(a)(9) of
         the Exchange Act, as modified and used in Sections 13(d) and 14(d)
         thereof, except that such term shall not include (i) the Company, its
         Affiliates or any of their respective subsidiaries, (ii) a trustee or
         other fiduciary holding securities under an employee benefit plan of
         the Company or any of its Subsidiaries, (iii) an underwriter
         temporarily holding securities pursuant to an offering of such
         securities, or (iv) a corporation owned, directly or indirectly, by the
         stockholders of the Company in substantially the same proportions as
         their ownership of stock of the Company.

              (e) Resignation as Officer or Director. Upon the termination of
employment for any reason, Executive shall resign each position (if any) that
Executive then holds as an officer or director of the Company or any of its
subsidiaries.

              (f) Section 409A. To the extent required to comply with Section
409A of the Code, as determined by Executive's counsel, if requested by the
Executive, one or more payments under this Section 5 of this Agreement shall be
delayed to the six-month anniversary of the date of Executive's separation from
service, within the meaning of Section 409A of the Code. In addition, if and to
the extent required to prevent a violation of Section 409A of the Code as
determined by the Executive's counsel, if requested by the Executive, the
Executive will pay the entire cost of any health insurance benefits provided
under Section 5 of this Agreement for the first six (6) months after the
effective date of the termination, and the Company will reimburse the Executive
for the Company's share of such costs as provided in this Agreement on the
six-month anniversary of the Executive's "separation from service" as defined in
Section 409A of the Code.

         6. EXECUTIVE'S INVESTMENT OBLIGATION. Notwithstanding any other
provision of this Agreement, this Agreement shall not become effective and shall
be null and void ab initio, unless, as of the Effective Date, the Executive
invests the sum of $9,508,073 in shares of Common Stock, at a price of $38.07
per share. The number of shares of Common Stock to be so acquired shall be
determined by dividing the investment amount by the above-stated price per share
of Common Stock, and rounding down to the nearest whole number. The shares so
purchased (the "Purchased Shares") shall be subject to an eighteen-(18)-month
"Holding Period" described on Exhibit C hereto and shall at all times be subject
to the Company's general policies regarding sale of Common Stock by executives
then in effect.

         7. ASSIGNMENT. This Agreement, and all of the terms and conditions
hereof, shall bind the Company and its successors and assigns and shall bind
Executive and Executive's heirs, executors and administrators. No transfer or
assignment of this Agreement shall release the Company from any obligation to
Executive hereunder. Neither this Agreement, nor any of the Company's rights or
obligations hereunder, may be assigned or otherwise subject to hypothecation by
Executive. The Company may assign the rights and obligations of the Company
hereunder, in whole or in part, to any of the Company's subsidiaries, affiliates
or parent corporations, or to any other successor or assign in connection with
the sale of all or substantially all of the Company's assets or stock or in
connection with any merger, acquisition and/or reorganization, provided the
assignee assumes the obligations of the Company hereunder.

         8.   GENERAL.

              (a) Notices. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of one business day following
personal delivery (including personal delivery by telecopy or telex), or the
third business day after mailing by first class mail to the recipient at the
address indicated below:

                  To the Company:

                  General Counsel
                  Brookdale Senior Living Inc.
                  330 North Wabash Avenue
                  Suite 1400
                  Chicago, IL 60611

                  To Executive:

                  W. E. Sheriff
                  American Retirement Corporation
                  111 Westwood Place
                  Suite 200
                  Brentwood, TN  37027

or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.

              (b) Severability. Any provision of this Agreement which is deemed
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this paragraph be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.

              (c) Entire Agreement. This document together with all restrictive
covenants in any and all agreements between Executive and the Company or to
which Executive is a party, constitute the final, complete, and exclusive
embodiment of the entire agreement and understanding between the parties related
to the subject matter hereof and supersedes and preempts any prior or
contemporaneous understandings, agreements, or representations by or between the
parties, written or oral.

              (d) Counterparts. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.

              (e) Amendments. No amendments or other modifications to this
Agreement may be made except by a writing signed by all parties. No amendment or
waiver of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.

              (f) Choice of Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of Illinois without giving effect to principles of conflicts of law of
such state.

              (g) Survivorship. The provisions of this Agreement necessary to
carry out the intention of the parties as expressed herein shall survive the
termination or expiration of this Agreement.

              (h) Waiver. The waiver by either party of the other party's prompt
and complete performance, or breach or violation, of any provision of this
Agreement shall not operate nor be construed as a waiver of any subsequent
breach or violation, and the failure by any party hereto to exercise any right
or remedy which it may possess hereunder shall not operate nor be construed as a
bar to the exercise of such right or remedy by such party upon the occurrence of
any subsequent breach or violation. No waiver shall be deemed to have occurred
unless set forth in a writing executed by or on behalf of the waiving party. No
such written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.

              (i) Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.

              (j) Construction. The parties acknowledge that this Agreement is
the result of arm's-length negotiations between sophisticated parties, each
afforded representation by legal counsel. Each and every provision of this
Agreement shall be construed as though both parties participated equally in the
drafting of the same, and any rule of construction that a document shall be
construed against the drafting party shall not be applicable to this Agreement.

              (k) Arbitration. Except as necessary for the Company and its
subsidiaries, affiliates, successors or assigns or Executive to specifically
enforce or enjoin a breach of this Agreement (to the extent such remedies are
otherwise available), the parties agree that any and all disputes that may arise
in connection with, arising out of or relating to this Agreement, or any dispute
that relates in any way, in whole or in part, to Executive's services on behalf
of the Company or any subsidiary, the termination of such services or any other
dispute by and between the parties or their subsidiaries, affiliates, successors
or assigns, shall be submitted to binding arbitration in Chicago, Illinois
according to the National Employment Dispute Resolution Rules and procedures of
the American Arbitration Association. The parties agree that each party shall
bear its or his own expenses incurred in connection with any such dispute. This
arbitration obligation extends to any and all claims that may arise by and
between the parties or their subsidiaries, affiliates, successors or assigns,
and expressly extends to, without limitation, claims or causes of action for
wrongful termination, impairment of ability to compete in the open labor market,
breach of an express or implied contract, breach of the covenant of good faith
and fair dealing, breach of fiduciary duty, fraud, misrepresentation,
defamation, slander, infliction of emotional distress, disability, loss of
future earnings, and claims under the United States Constitution, and applicable
state and federal fair employment laws, federal and state equal employment
opportunity laws, and federal and state labor statutes and regulations,
including, but not limited to, the Civil Rights Act of 1964, as amended, the
Fair Labor Standards Act, as amended, the Americans With Disabilities Act of
1990, as amended, the Rehabilitation Act of 1973, as amended, the Employee
Retirement Income Security Act of 1974, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and any other state or federal law.

          9. EXECUTIVE REPRESENTATION AND ACCEPTANCE. By signing this Agreement,
Executive hereby represents that Executive is not currently under any
contractual obligation to work for another employer and that Executive is not
restricted by any agreement or arrangement from entering into this Agreement and
performing Executive's duties hereunder.




          IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND THEREBY, the
parties hereto have executed and delivered this Agreement as of the year and
date first above written.


                                BROOKDALE SENIOR LIVING INC.


                                By: /s/ Mark J. Schulte
                                   ----------------------------------
                                   Name:  Mark J. Schulte
                                   Title: Chief Executive Officer



                                EXECUTIVE

                                /s/ W. E. Sheriff
                                ---------------------------------
                                W. E. Sheriff

EX-10

                                                                    Exhibit 10.4
                                                                    ------------


                   Form of Employment Agreement for Executives

                          BROOKDALE SENIOR LIVING INC.
                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 12th day of May, 2006 by and between Brookdale Senior Living Inc., a
Delaware corporation (the "Company"), and [_________________] ("Executive").
Where the context permits, references to "the Company" shall include the Company
and any successor of the Company.

                              W I T N E S S E T H:

         WHEREAS, concurrently with the execution of this Agreement, the
Company, Beta Merger Sub Corporation and American Retirement Corporation ("ARC")
are entering into an Agreement and Plan of Merger dated as of May 12, 2006 (the
"Merger Agreement"); and

         WHEREAS, the Executive is currently employed by ARC;

         WHEREAS, the Company desires to secure the services of the Executive
from and after the "Closing Date" of the "Merger" (as such terms are defined in
the Merger Agreement); and

         WHEREAS, Executive desires to provide such services.

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, together with other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:

         1.       SERVICES AND DUTIES. Subject to Section 6 hereof, from and
after the Closing Date of the Merger (which shall be the "Effective Date" of
this Agreement), Executive shall be employed by the Company in the capacity of
Executive Vice President, or similar capacity; in such capacity Executive shall
report directly to the Company's Co-Chief Executive Officers. The principal
location of Executive's employment with the Company shall be the same as the
Executive's current principal location of employment with ARC, although
Executive understands and agrees that Executive may be required to travel from
time to time for business reasons. Executive shall be a full-time employee of
the Company and shall dedicate all of Executive's working time to the Company
and shall have no other employment and no other business ventures which are
undisclosed to the Company or which conflict with Executive's duties under this
Agreement. Executive will perform such duties as are required by the Company
from time to time and normally associated with Executive's position, together
with such additional duties, commensurate with Executive's position, as may be
assigned to Executive from time to time by the Co-Chief Executive Officers.
Notwithstanding the foregoing, nothing herein shall prohibit Executive from (i)
engaging in personal investment activities for the Executive and the Executive's
family that do not give rise to any conflict of interests with the Company or
its affiliates, (ii) subject to prior approval of the Company's Board of
Directors (the "Board"), accepting directorships unrelated to the Company that
do not give rise to any conflict of interests with the Company or its affiliates
and (iii) engaging in charitable and civic activities, so long as such outside
interests do not interfere with the performance of the Executive's duties
hereunder. The Company acknowledges and approves the current activities of
Executive as set forth on Schedule 1 hereto.

         2.       TERM AND WAIVER.

                  (a) Term. Subject to Section 6 hereof, Executive's employment
under the terms and conditions of this Agreement will commence on the Effective
Date. The term of this Agreement (the "Term") shall consist of the Initial Term
and a maximum of two (2) Renewal Terms which, in any case, may be earlier
terminated pursuant to Section 5; provided, that in no event shall the Term
extend beyond December 31, 2011. The initial term of this Agreement (the
"Initial Term") shall commence on the Effective Date and end on December 31,
2009. The Initial Term shall automatically renew for up to two (2) additional
one (1)-year periods (each such one-year period, a "Renewal Term") unless either
party delivers to the other party at least ninety (90) days prior to the end of
the Initial Term or the first Renewal Term a written notice indicating that it
intends not to extend the Term hereof. The delivery by the Company to Executive
of written notice indicating that it intends not to extend the Term as provided
in this Section 2 prior to the expiration of the Initial Term or the expiration
of the first Renewal Term (i.e., so that the Term would end before December 31,
2011) shall constitute "Good Reason" (as defined below) for purposes of this
Agreement. However, the delivery by the Company pursuant to this Section 2 of a
notice not to extend the Term shall not be deemed a termination of Executive's
employment by the Company without Cause for purposes of this Agreement. If the
Term expires on December 31, 2011, and Executive is employed by the Company
thereafter, such employment shall be "at-will" and this Agreement will be of no
further force and effect. Expiration of the Term upon December 31, 2011, shall
not be considered a termination of employment entitling Executive to severance
pay or benefits under Section 5(b) or 5(c) hereof.

                  (b) Waiver. The Executive hereby waives any right which he
might otherwise have, now or in the future, to have the transactions
contemplated in the Merger Agreement treated as a Change in Control, Potential
Change in Control, or any similar term with respect to him under any ARC
compensation or benefit plan, program, agreement or arrangement, other than the
ARC 1997 Stock Incentive Plan and award agreements entered into thereunder.
Without intending to limit the application of such waiver in any way, the
parties hereto agree and acknowledge that the waiver applies to the Amended and
Restated Executive Change in Control Severance Benefits Plan and the Executive
waives the right to benefit from any provision thereof, including, without
limitation, any right to reimbursement for any excise tax incurred under Section
4999 of the Internal Revenue Code of 1986, as amended from time to time (the
"Code").

         3.       COMPENSATION.

                  (a) Base Salary. In consideration of Executive's full and
faithful satisfaction of Executive's duties under this Agreement, the Company
agrees to pay to Executive a salary in the amount of [____________________]
dollars ($[_______]) per annum (the "Base Salary"), payable in such installments
as the Company pays its similarly placed employees (but not less frequently than
each calendar month), subject to usual and customary deductions for withholding
taxes and similar charges, and customary employee contributions to health,
welfare and retirement programs in which Executive is enrolled. The Base Salary
shall be reviewed on an annual basis in accordance with Executive's annual
performance evaluation and adjusted at the Company's sole discretion; provided,
however, in no event shall the Base Salary be reduced without Executive's
approval.

                  (b) Bonus Compensation. In addition to any salary payable
pursuant to Section 3(a) above, for the first fiscal year of the Company
commencing after the Effective Date, Executive shall be eligible to receive in
respect of such fiscal year a bonus (the "Bonus"), based on the achievement, as
determined by the Board in its sole discretion, of certain performance standards
as agreed to by Executive and the Board, with a target Bonus of
[________________] dollars ($[_________]) (the "Target Bonus"), payable in a
combination of 50% cash and 50% vested shares of common stock of the Company
("Common Stock") (the stock portion of any such Bonus, the "Bonus Stock Grant").
The number of shares comprising any Bonus Stock Grant shall be determined by
dividing the applicable portion of the Bonus being awarded in Common Stock by
the fair market value (as determined by the Board in good faith) of the Common
Stock on the date of grant. Any Bonus Stock Grant described in this Section may
be separately granted pursuant to the terms of a stock agreement, and this
Section is not intended to duplicate such grant.

In addition to any salary payable pursuant to Section 3(a) above, for each
succeeding fiscal year of the Company Executive shall also be eligible to
receive an annual bonus, based on achievement of certain performance standards,
as determined by the Board in its sole discretion, payable in a combination of
cash and vested shares of Common Stock, as determined by the Board in its sole
discretion, and to the extent permitted by law and applicable stock exchange
listing requirements; provided, however, that to the extent that any amount of
such annual bonus exceeds the Target Bonus, such excess amount may be paid in
the form of unvested Common Stock, as determined by the Board in its sole
discretion.

For calendar year 2006, Executive's bonus will be calculated according to the
2006 bonus formula of ARC in effect prior to the consummation of the Merger, as
adjusted as mutually agreed-upon by the Company and the former Chief Executive
Officer of ARC to give effect to the impact of the Merger (the "2006 Bonus").

         The cash portion of each Bonus, the 2006 Bonus and any other annual
bonus shall be paid to Executive within a reasonable time after the end of the
fiscal year, but in no event later than thirty (30) days (the "Outside Payment
Date") following completion of the Company's audit for the applicable fiscal
year, which the Company shall endeavor in good faith to complete within three
months of the last day of the applicable fiscal year; provided, however, that
the Outside Payment Date may not be later than the later of (i) two and one-
half (2-1/2) months after the end of the applicable fiscal year; and (ii) two
and one- half (2-1/2) months after the end of the calendar year; and the stock
grant portion, if any, of each Bonus shall be made on such date as the Board
determines in its discretion, though no later than the applicable Outside
Payment Date. Notwithstanding anything to the contrary contained herein, no
Bonus in respect of any fiscal year of the Company will be due to Executive
unless Executive is employed by the Company on the last day of the fiscal year
in respect of which the Bonus is awarded.

                  (c) Initial Restricted Stock Grant. As soon as practicable
after the Executive's purchase of shares of Common Stock pursuant to Section 6
hereof, the Company shall cause the Executive to be granted a number of shares
of Common Stock equal to the number of such shares the Executive has acquired
pursuant to Section 6 hereof. The grant shall be pursuant to the terms of, and
subject to the restrictions set forth in, a separate stock agreement (the
"Initial Restricted Stock Grant") under the Company's Omnibus Stock Incentive
Plan. Seventy percent (70%) of the restricted shares subject to the Initial
Restricted Stock Grant shall vest upon the attainment of performance goals (the
"Performance-Vesting Shares"). Thirty percent (30%) of the restricted shares
subject to the Initial Restricted Stock Grant shall vest based upon continued
employment (the "Time-Vesting Shares"). This Section 3(c) is not intended to
duplicate the Initial Restricted Stock Grant, which shall substantially
incorporate the following terms and conditions and the terms and conditions set
forth on Exhibit A hereto (Exhibit A's terms and conditions also being
incorporated in this Employment Agreement):

              As to Performance-Vesting Shares:
              ---------------------------------

              o   The first vesting date for the Performance-Vesting Shares
                  shall be December 31, 2008. Up to fifty percent (50%) of the
                  Performance-Vesting Shares may vest on that date, depending on
                  the degree to which a performance goal based on the cash
                  earnings of the Company during the fourth quarter of the
                  preceding fiscal year, 2007, has been met, in accordance with
                  the schedule set forth on Exhibit B hereto. Any of such shares
                  which do not vest on the first vesting date shall not be
                  forfeited, but shall remain subject to the terms and
                  conditions of the Initial Restricted Stock Grant.

              o   The second vesting date for the Performance-Vesting Shares
                  shall be December 31, 2009. Up to hundred percent (100%) of
                  the Performance-Vesting Shares still subject to the Initial
                  Restricted Stock Grant (including shares which failed to vest
                  at the first vesting date) may vest on the second vesting
                  date, depending on the degree to which a performance goal
                  based on the cash earnings of the Company during the fourth
                  quarter of the preceding fiscal year, 2008, has been met, in
                  accordance with the schedule set forth on Exhibit B hereto.
                  Any of such shares which do not vest on the second vesting
                  date shall be forfeited.

              o   If the Executive's employment shall be terminated by the
                  Company without Cause or by the Executive for Good Reason at
                  any time prior to the second vesting date, the shares of
                  Common Stock subject to the Initial Restricted Stock Grant at
                  the time of such termination shall remain subject to the
                  Initial Restricted Stock Grant until the vesting date which
                  immediately follows such termination. Upon such vesting date
                  the same number of shares shall vest as would have vested if
                  the Executive had remained employed by the Company on such
                  vesting date. If the Executive's employment terminates for any
                  other reason while shares of Common Stock remain subject to
                  the terms and conditions of the Initial Restricted Stock
                  Grant, all such shares shall be forfeited at such termination.

               As to Time-Vesting Shares:
               --------------------------

              o   Subject to the Executive's continuing to be employed by the
                  Company on the relevant vesting date, one-third (1/3) of the
                  Time-Vesting Shares shall vest on each of the following three
                  vesting dates: December 31, 2007, December 31, 2008, and
                  December 31, 2009; provided that, upon the occurrence of a
                  Change of Control, 100% of the Time-Vesting Shares that are
                  not vested at that time shall immediately vest.

              o   If the Executive's employment shall be terminated by the
                  Company without Cause or by the Executive with Good Reason at
                  any time prior to December 31, 2007, one-third of the
                  Time-Vesting Shares remaining subject to the Initial
                  Restricted Stock Grant shall vest and any remaining
                  Time-Vesting Shares shall be immediately forfeited. If the
                  Executive's employment is so terminated after December 31,
                  2007, and prior to December 31, 2008, one-half of the
                  Time-Vesting Shares remaining subject to the Initial
                  Restricted Stock Grant shall vest and any remaining
                  Time-Vesting Shares shall be immediately forfeited. If the
                  Executive's employment is so terminated after December 31,
                  2008, and prior to December 31, 2009, all of the Time-Vesting
                  Shares remaining subject to the Initial Restricted Stock Grant
                  shall vest. If the Executive's employment terminates for any
                  other reason while Time-Vesting Shares remain subject to the
                  terms and conditions of the Initial Restricted Stock Grant,
                  all such shares shall be forfeited at such termination.

              As to all Shares subject to the Initial Restricted Stock Grant:
              ---------------------------------------------------------------

              o   With respect to all shares of Common Stock subject to the
                  Initial Restricted Stock Grant, the Executive shall be
                  entitled to receive, and retain, all ordinary and
                  extraordinary cash and stock dividends which may be declared
                  on the Company's Common Stock after the date of grant and
                  before any forfeiture thereof (regardless of whether a share
                  later vests or is forfeited).

              o   All shares of Common Stock which vest under the Initial
                  Restricted Stock Grant shall be subject to the Company's
                  general policies regarding the sale of Common Stock by
                  executives in effect from time to time.

During his employment with the Company, the Executive shall be eligible to
receive grants under the Company's Omnibus Stock Incentive Plan.

                  (d) Withholding. All taxable compensation payable to Executive
pursuant to this Section 3 or otherwise pursuant to this Agreement shall be
subject to customary withholding taxes and such other excise or employment taxes
as are required under Federal law or the law of any state or governmental body
to be collected with respect to compensation paid by the Company to an employee.

         4.       BENEFITS AND PERQUISITES.

                  (a) Retirement and Welfare Benefits. During the Term,
Executive will be entitled to all the usual benefits offered to employees at
Executive's level, including sick time, participation in the Company's medical,
dental and insurance programs, as well as the ability to participate in the
Company's 401(k) retirement savings plan, subject to the applicable limitations
and requirements imposed by the terms of such benefit plans, in each case in
accordance with the terms of such plans as from time to time in effect. Nothing
in this Section 4, however, shall require the Company to maintain any benefit
plan or provide any type or level of benefits to its employees, including
Executive.

                  (b) Life Insurance. During the Term, the Company will provide
Executive with basic life insurance benefits, calculated based on
one-and-one-half (1 1/2) times Executive's annual base salary being paid to the
Executive by ARC immediately prior to the Executive's entering into this
Agreement, up to a maximum of $550,000, at no cost to Executive.

                  (c) Vacation/Paid Time Off. Notwithstanding anything to the
contrary in the Company's vacation or paid time off ("PTO") policies, for each
calendar year starting with 2007, Executive shall be entitled to four (4) weeks
(20 business days) vacation and paid time off under the Company's "PTO" plan for
each calendar year, and in the event Executive does not utilize all such four
(4) weeks during any calendar year, (a) Executive shall be paid for up to two
(2) weeks (10 business days) of such unused vacation/PTO at a weekly rate equal
to the then applicable Base Salary divided by 52, and (b) the remaining unused
days of vacation/PTO shall be deemed forfeited at the end of such calendar year.

                  (d) Reimbursement of Expenses. The Company shall reimburse
Executive for any expenses reasonably and necessarily incurred by Executive in
furtherance of Executive's duties hereunder, including travel, meals and
accommodations, upon submission by Executive of vouchers or receipts and in
compliance with such rules and policies relating thereto as the Company may from
time to time adopt.

         5.       TERMINATION. Executive's employment shall be terminated at the
earliest to occur of the following: (i) at the end of the Term unless Executive
agrees to continue working for the Company, (ii) the date on which the Board
delivers written notice that Executive is being terminated for Disability (as
defined below), or (iii) the date of Executive's death. In addition, Executive's
employment with the Company (or its successors) may be terminated (i) by the
Company for "Cause" (as defined below), effective on the date on which a written
notice to such effect is delivered to Executive; (ii) by the Company at any time
without Cause, effective on the date on which a written notice to such effect is
delivered to Executive or such other date as is reasonably designated by the
Company; (iii) by Executive for "Good Reason" (as defined below) effective
thirty-one (31) days following the date on which a written notice to such effect
is delivered to the Company, or (iv) by Executive at any time, effective
fourteen (14) days following the date on which a written notice to such effect
is delivered to the Company (or its successors).

                  (a) For Cause Termination. If Executive's employment with the
Company is terminated by the Company (or its successors) for Cause, Executive
shall not be entitled to any further compensation or benefits other than accrued
but unpaid Base Salary (payable as provided in Section 3(a)) and accrued and
unused vacation pay through the date of such termination (collectively, the
"Accrued Benefits"). If the definition of "Cause" set forth below conflicts with
such definition in any stock incentive plan or agreement of the Company or any
of its affiliates, the definition set forth herein shall control.

                  (b) Termination by Company without Cause or by Executive for
Good Reason. (i) If Executive's employment is terminated by the Company (or its
successors) other than for Cause or by Executive for Good Reason prior to the
end of the Term hereof and not within twelve (12) months following a "Change of
Control" (as defined below), then Executive shall be entitled to, upon
Executive's providing the Company with a signed release of claims in a form
adopted by the Company's Board of Directors from time to time and subject to
Executive's continued compliance with the provisions of any restrictive
covenants in any other agreement or agreements between Executive and the Company
or to which Executive is a party, including, without limitation, any restricted
stock agreement between the Company and Executive: (A) the Accrued Benefits, (B)
an amount equal to six (6) months Base Salary payable in the same manner as
provided under Section 3(a), and (C) continuation of Executive's coverage under
the Company's medical plan until the earlier of (x) the date the Executive
becomes eligible for the medical benefits program of a new employer or (y) the
six-(6)-month anniversary of the date of such termination.

         (ii) In the event of a Change of Control and termination of the
Executive's employment by the Company (or its successor) without Cause or by
Executive for Good Reason within twelve (12) months following such Change of
Control, then Executive shall be entitled to, upon Executive's providing the
Company with a signed release of claims in a form adopted by the Company's Board
of Directors from time to time and subject to Executive's continued compliance
with the provisions of any restrictive covenants in any other agreement or
agreements between Executive and the Company or to which Executive is a party:
(A) the Accrued Benefits, (B) an amount equal to twelve (12) months Base Salary
(at the rate in effect at the date of such termination, or if higher,
immediately prior to the Change of Control) payable in the same manner as
provided under Section 3(a), and (C) continuation of Executive's coverage under
the Company's medical plan or comparable medical plans to be paid by the Company
until the earlier of (x) the date Executive becomes eligible for the medical
benefits program of a new employer or (y) the twelve-(12)-month anniversary of
the date of such termination.

                  (c) Death, Disability or Termination for other than Good
Reason. If Executive's employment is terminated by Executive for other than Good
Reason prior to the end of the Term, Executive shall not be entitled to receive
any further compensation or benefits under this Agreement or otherwise other
than the Accrued Benefits. If Executive's employment is terminated by reason of
Executive's death, or Disability prior to the end of the Term, in lieu of any
other payments or benefits, upon Executive's (or Executive's estate, as
applicable) providing the Company with a signed release of claims in a form
adopted by the Company's Board of Directors from time to time, Executive (or
Executive's beneficiary or estate, as applicable) shall be entitled to (i) the
Accrued Benefits, (ii) receipt of a monthly payment equal to the Executive's
then applicable annual Base Salary on the date of death or on the date of
termination for Disability divided by twelve (such monthly payment, the "Monthly
Severance Payment") payable for twelve (12) months following such date (the
"Benefits Period"), which Monthly Severance Payment shall be paid to the
Executive, or the Executive's beneficiary or estate, as applicable, and (iii) in
the case of termination due to Disability, continuation, at the Company's
expense, of the Executive's coverage in any group health plan (which may be
provided by payment of COBRA continuation coverage premiums), life insurance,
long term disability and other employee benefit plans or programs, to the extent
permissible under the terms of such plans or law until the end of the Benefits
Period.

                  (d) Definitions. For purposes of this Agreement:

                  "Affiliate" means an affiliate of the Company (or other
          referenced entity, as the case may be) as defined in Rule 12b-2
          promulgated under Section 12 of the Exchange Act.

                  "Beneficial Owner" (or any variant thereof) has the meaning
          defined in Rule 13d-3 under the Exchange Act.

                  "Cause" means (i) conviction of, or guilty plea concerning or
         confession of any felony, (ii) any act of dishonesty committed by
         Executive in connection with the Company's or its subsidiaries'
         business, (iii) any material breach by Executive of this Agreement,
         after written notice thereof from the Board is given in writing and
         such breach is not cured to the satisfaction of the Company within a
         reasonable period of time (not greater than 30 days) under the
         circumstances; (iv) any material breach of any reasonable and lawful
         rule or directive of the Company; (v) the gross or willful neglect of
         duties or gross misconduct by Executive; and (vi) the habitual use of
         drugs or habitual, excessive use of alcohol to the extent that any of
         such uses in the Board's good faith determination materially interferes
         with the performance of Executive's duties under this Agreement.

                  "Change of Control" shall be deemed to have occurred if an
         event set forth in any one of the following paragraphs shall have
         occurred:

         (i) any Person other than any Permitted Transferee is or becomes the
         Beneficial Owner, directly or indirectly, of securities of the Company
         (not including in the securities beneficially owned by such Person any
         securities acquired directly from the Company or any of its affiliates
         as defined in Rule 12b-2 promulgated under Section 12 of the Securities
         Exchange Act of 1934, as amended, the "Exchange Act" ) representing 50%
         or more of the combined voting power of the Company's then outstanding
         securities; or

         (ii) there is consummated a merger or consolidation of the Company or
         any direct or indirect subsidiary of the Company with any other
         corporation, other than a merger or consolidation immediately following
         which the individuals who comprise the Board immediately prior thereto
         constitute at least a majority of the Board of the entity surviving
         such merger or consolidation or, if the Company or the entity surviving
         such merger is then a subsidiary, the ultimate parent thereof; or

         (iii) the stockholders of the Company approve a plan of complete
         liquidation or dissolution of the Company or there is consummated an
         agreement for the sale or disposition by the Company of all or
         substantially all of the Company's assets, other than (a) a sale or
         disposition by the Company of all or substantially all of the Company's
         assets to an entity, at least 50% of the combined voting power of the
         voting securities of which are owned by stockholders of the Company
         following the completion of such transaction in substantially the same
         proportions as their ownership of the Company immediately prior to such
         sale or (b) a sale or disposition of all or substantially all of the
         Company's assets immediately following which the individuals who
         comprise the Board immediately prior thereto constitute at least a
         majority of the board of directors of the entity to which such assets
         are sold or disposed or, if such entity is a subsidiary, the ultimate
         parent thereof.

Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the holders of the common
stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions. As used in the
foregoing definition of "Change of Control", the term "Company" shall not
include any successor of the Company.

                  "Disability" means, as determined by the Board of Directors in
         good faith, Executive's inability, due to disability or incapacity, to
         perform all of the Executive's duties hereunder on a full-time basis
         for (i) periods aggregating one hundred eighty (180) days, whether or
         not continuous, in any continuous period of three hundred and sixty
         five (365) days or, (ii) where Executive's absence is adversely
         affecting the performance of the Company in a significant manner,
         periods greater than ninety (90) days and Executive is unable to resume
         Executive's duties on a full time basis within ten (10) days of receipt
         of written notice of the Board's determination under this clause (ii).

                  "Good Reason" means either (i) the occurrence, without the
         express prior written consent of Executive, of any of the following
         circumstances, unless such circumstances are fully corrected by the
         Company within thirty (30) days following written notification by
         Executive (which written notice must be delivered within thirty (30)
         days of Executive's becoming aware of the occurrence of such
         circumstances) that the Executive intends to terminate the Executive's
         employment for one of the reasons set forth below: (A) the failure by
         the Company to pay to Executive any portion of Executive's Base Salary
         or Bonus within thirty (30) days of the date such compensation is due,
         or (B) the relocation of Executive's principal office at the Company to
         a location outside a fifty (50) mile radius from the Executive's
         present principal office location with ARC; or (C) Executive is
         assigned duties, compensation or responsibilities that are materially
         and significantly reduced with respect to the scope or nature of the
         duties, compensation and/or responsibilities associated with the
         Executive's position as of immediately after the Effective Date and,
         within ten (10) days following written notice by Executive to the
         Company of Executive's objection to such reduction, the Company fails
         to reinstate the Executive's duties, compensation and/or
         responsibilities so reduced; or (ii) the delivery by the Company to
         Executive of written notice indicating that it intends not to extend
         the Term hereof pursuant to Section 2 hereof. Notwithstanding the
         foregoing, a termination by Executive for "Good Reason" shall not be
         deemed to have occurred by virtue of changes in Executive's duties,
         benefits and responsibilities resulting upon (or shortly thereafter)
         the consummation of any transaction or series of integrated
         transactions immediately following which the holders of the common
         stock of the Company immediately prior to such transaction or series of
         transactions continue to have substantially the same proportionate
         ownership in an entity which owns all or substantially all of the
         assets of the Company immediately following such transaction or series
         of transactions.

                  "Permitted Transferee" shall mean, (i) any Affiliate ( a "FIG
         Affiliate") of Fortress Investment Group LLC, a Delaware limited
         liability company ("FIG"), (ii) any managing director, general partner,
         director, limited partner, officer or employee of any FIG Affiliate,
         (iii) any investment fund managed directly or indirectly by FIG or any
         of its Affiliates (a "FIG Fund"), or (iv) any general partner, limited
         partner, managing member or person occupying a similar role of or with
         respect to any FIG Fund.

                  "Person" shall have the meaning given in Section 3(a)(9) of
         the Exchange Act, as modified and used in Sections 13(d) and 14(d)
         thereof, except that such term shall not include (i) the Company, its
         Affiliates or any of their respective subsidiaries, (ii) a trustee or
         other fiduciary holding securities under an employee benefit plan of
         the Company or any of its Subsidiaries, (iii) an underwriter
         temporarily holding securities pursuant to an offering of such
         securities, or (iv) a corporation owned, directly or indirectly, by the
         stockholders of the Company in substantially the same proportions as
         their ownership of stock of the Company.

                  (e) Resignation as Officer or Director. Upon the termination
of employment for any reason, Executive shall resign each position (if any) that
Executive then holds as an officer or director of the Company or any of its
subsidiaries.

                  (f) Section 409A. To the extent required to comply with
Section 409A of the Code, as determined by Executive's counsel, if requested by
the Executive, one or more payments under this Section 5 of this Agreement shall
be delayed to the six-month anniversary of the date of Executive's separation
from service, within the meaning of Section 409A of the Code. In addition, if
and to the extent required to prevent a violation of Section 409A of the Code as
determined by the Executive's counsel, if requested by the Executive, the
Executive will pay the entire cost of any health insurance benefits provided
under Section 5 of this Agreement for the first six (6) months after the
effective date of the termination, and the Company will reimburse the Executive
for the Company's share of such costs as provided in this Agreement on the
six-month anniversary of the Executive's "separation from service" as defined in
Section 409A of the Code.

         6.       EXECUTIVE'S INVESTMENT OBLIGATION. Notwithstanding any other
provision of this Agreement, this Agreement shall not become effective and shall
be null and void ab initio, unless, as of the Effective Date, the Executive
invests the sum of $__________ in shares of Common Stock, at a price of $38.07
per share. The number of shares of Common Stock to be so acquired shall be
determined by dividing the investment amount by the above-stated price per share
of Common Stock, and rounding down to the nearest whole number. The shares so
purchased (the "Purchased Shares") shall be subject to an eighteen-(18)-month
"Holding Period" described on Exhibit C hereto and shall at all times be subject
to the Company's general policies regarding sale of Common Stock by executives
then in effect.

         7.       ASSIGNMENT. This Agreement, and all of the terms and
conditions hereof, shall bind the Company and its successors and assigns and
shall bind Executive and Executive's heirs, executors and administrators. No
transfer or assignment of this Agreement shall release the Company from any
obligation to Executive hereunder. Neither this Agreement, nor any of the
Company's rights or obligations hereunder, may be assigned or otherwise subject
to hypothecation by Executive. The Company may assign the rights and obligations
of the Company hereunder, in whole or in part, to any of the Company's
subsidiaries, affiliates or parent corporations, or to any other successor or
assign in connection with the sale of all or substantially all of the Company's
assets or stock or in connection with any merger, acquisition and/or
reorganization, provided the assignee assumes the obligations of the Company
hereunder.

         8.       GENERAL.

                  (a) Notices. Any notices provided hereunder must be in writing
and shall be deemed effective upon the earlier of one business day following
personal delivery (including personal delivery by telecopy or telex), or the
third business day after mailing by first class mail to the recipient at the
address indicated below:

                  To the Company:

                  General Counsel
                  Brookdale Senior Living Inc.
                  330 North Wabash Avenue
                  Suite 1400
                  Chicago, IL 60611

                  To Executive:

                  [________________]
                  _________________
                  _________________

or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.

                  (b) Severability. Any provision of this Agreement which is
deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this paragraph be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.

                  (c) Entire Agreement. This document together with all
restrictive covenants in any and all agreements between Executive and the
Company or to which Executive is a party, constitute the final, complete, and
exclusive embodiment of the entire agreement and understanding between the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral.

                  (d) Counterparts. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.

                  (e) Amendments. No amendments or other modifications to this
Agreement may be made except by a writing signed by all parties. No amendment or
waiver of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.

                  (f) Choice of Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of Illinois without giving effect to principles of conflicts of law of
such state.

                  (g) Survivorship. The provisions of this Agreement necessary
to carry out the intention of the parties as expressed herein shall survive the
termination or expiration of this Agreement.

                  (h) Waiver. The waiver by either party of the other party's
prompt and complete performance, or breach or violation, of any provision of
this Agreement shall not operate nor be construed as a waiver of any subsequent
breach or violation, and the failure by any party hereto to exercise any right
or remedy which it may possess hereunder shall not operate nor be construed as a
bar to the exercise of such right or remedy by such party upon the occurrence of
any subsequent breach or violation. No waiver shall be deemed to have occurred
unless set forth in a writing executed by or on behalf of the waiving party. No
such written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.

                  (i) Captions. The captions of this Agreement are for
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision hereof.

                  (j) Construction. The parties acknowledge that this Agreement
is the result of arm's-length negotiations between sophisticated parties, each
afforded representation by legal counsel. Each and every provision of this
Agreement shall be construed as though both parties participated equally in the
drafting of the same, and any rule of construction that a document shall be
construed against the drafting party shall not be applicable to this Agreement.

                  (k) Arbitration. Except as necessary for the Company and its
subsidiaries, affiliates, successors or assigns or Executive to specifically
enforce or enjoin a breach of this Agreement (to the extent such remedies are
otherwise available), the parties agree that any and all disputes that may arise
in connection with, arising out of or relating to this Agreement, or any dispute
that relates in any way, in whole or in part, to Executive's services on behalf
of the Company or any subsidiary, the termination of such services or any other
dispute by and between the parties or their subsidiaries, affiliates, successors
or assigns, shall be submitted to binding arbitration in Chicago, Illinois
according to the National Employment Dispute Resolution Rules and procedures of
the American Arbitration Association. The parties agree that each party shall
bear its or his own expenses incurred in connection with any such dispute. This
arbitration obligation extends to any and all claims that may arise by and
between the parties or their subsidiaries, affiliates, successors or assigns,
and expressly extends to, without limitation, claims or causes of action for
wrongful termination, impairment of ability to compete in the open labor market,
breach of an express or implied contract, breach of the covenant of good faith
and fair dealing, breach of fiduciary duty, fraud, misrepresentation,
defamation, slander, infliction of emotional distress, disability, loss of
future earnings, and claims under the United States Constitution, and applicable
state and federal fair employment laws, federal and state equal employment
opportunity laws, and federal and state labor statutes and regulations,
including, but not limited to, the Civil Rights Act of 1964, as amended, the
Fair Labor Standards Act, as amended, the Americans With Disabilities Act of
1990, as amended, the Rehabilitation Act of 1973, as amended, the Employee
Retirement Income Security Act of 1974, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and any other state or federal law.

          9.      EXECUTIVE REPRESENTATION AND ACCEPTANCE. By signing this
Agreement, Executive hereby represents that Executive is not currently under any
contractual obligation to work for another employer and that Executive is not
restricted by any agreement or arrangement from entering into this Agreement and
performing Executive's duties hereunder.



          IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND THEREBY, the
parties hereto have executed and delivered this Agreement as of the year and
date first above written.

                                    BROOKDALE SENIOR LIVING INC.

                                    By: __________________________________
                                        Name:
                                        Title:



                                    EXECUTIVE

                                    _____________________________________
                                    [__________________________]

EX-99

FOR IMMEDIATE RELEASE

Contact:

Brookdale Senior Living Inc.	American Retirement Corporation
Francie Nagy	Ross Roadman
Tel: 1-212-515-4625	Tel: 1-615-376-2412

Brookdale To Acquire American Retirement Corporation

In $1.2 Billion Cash Transaction and Become Largest Operator of

Senior Living Facilities in the United States

______________________________________________________

Chicago, IL and Nashville, TN. May 12, 2006 – Brookdale Senior Living Inc. (NYSE: BKD) and American Retirement Corporation Corp. (NYSE: ACR) today announced a definitive merger agreement under which Brookdale will acquire all of the outstanding shares of American Retirement Corporation for an aggregate purchase price of approximately $1.2 billion in cash, or $33.00 per share (on a fully diluted basis). The combination will create America's premier operator of senior living facilities. The boards of both companies unanimously approved the acquisition. The all-cash price of $33.00 per share represents an approximate 32% premium over the closing share price of American Retirement Corporation on May 12.

Brookdale has received a $1.3 billion equity commitment from an affiliate of Fortress Investment Group LLC. Brookdale has the option to reduce the amount of equity commitment up to $650 million through the proceeds of debt or equity within the next six months following the closing of the transaction.

Upon completion of the acquisition, American Retirement Corporation will become a wholly-owned subsidiary of Brookdale. The combined company will be the largest operator of senior living facilities in the United States based on total capacity with 535 facilities in 34 states and the ability to serve over 50,000 residents. The combined company will operate 73 independent living facilities with over 13,750 units, 413 assisted living facilities with over 21,640 beds, and 49 continuing care retirement communities with over 14,680 units/beds.

Commenting on the transaction, William B. Doniger, Vice Chairman of Brookdale, said, "This is an extraordinarily powerful combination of complementary businesses that creates the nation's largest operator of senior living facilities. American Retirement Corporation is a great strategic fit for us, and this combination creates, in our opinion, the highest quality portfolio of senior housing assets in the United States. The successful expansion of American Retirement Corporation’s ancillary services business at our facilities represents significant upside to our future operating prospects. Finally, their expertise in the CCRC sector will enable us to expand our already successful strategy of supplementing our organic cash flow with accretive acquisitions. This transaction, together with the previously announced $750 million of acquisitions, should be meaningfully accretive to our organic cash earnings in 2007.”

Mark J. Schulte, Chief Executive Officer of Brookdale continued, "We look forward to bringing the outstanding people and communities from American Retirement Corporation into the Brookdale family, and I especially look forward to welcoming Bill Sheriff to our management team as a true partner in our effort to provide our residents with the highest level of service and care in the industry. This is a great result for two outstanding organizations."

W.E. Sheriff, Chairman, President and Chief Executive Officer of American Retirement Corporation, added, "We have always taken our fiduciary responsibility to all of our shareholders very seriously and, with this merger, have demonstrated it again. We believe this is compelling for our shareholders and a great opportunity for our associates. Over the company’s 28 year history, we have built a first-rate platform of products and services that make a difference in people’s lives. We have achieved this success while creating and maintaining a corporate culture in which a commitment to quality and respecting our associates and residents is the top priority. We are excited about creating a national platform with a like-minded company that will provide incredible future growth opportunities. Our senior management team and I look forward to working side-by-side with Mark and his team to build a combined enterprise that is stronger than what either of our companies could accomplish on its own."

“After extensive due diligence, we believe that merging with Brookdale is the best path forward for our stakeholders. We believe it is a fair price for our shareholders and we support the creation of a company that will be able to offer a breadth and depth of services that will be unmatched in the industry,” commented Frank Bumstead, Lead Director of American Retirement’s Board of Directors.

Upon completion of the transaction, Mark J. Schulte and W.E. Sheriff will become co-Chief Executive Officers of the combined company.

The transaction is subject to customary closing conditions, including the approval by the shareholders of American Retirement Corporation and clearance under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is targeted to close in the third quarter of 2006.

Goldman, Sachs & Co. acted as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Brookdale while Bear, Stearns & Co. Inc. rendered an opinion to a special committee of the Brookdale board with respect to the equity financing for the

acquisition. Cohen & Steers Capital Advisors, LLC acted as financial advisor and Bass, Berry & Sims PLC acted as legal advisor to American Retirement Corporation.

A conference call to discuss the transaction will be held on Monday, May 15 at 11:00 AM EDT in conjunction with Brookdale’s first quarter earnings call.

About Brookdale Senior Living

Brookdale Senior Living Inc. is a leading owner and operator of senior living facilities throughout the United States. Brookdale is committed to providing an exceptional living experience through properties that are designed, purpose-built and operated to provide the highest-quality service, care and living accommodations for residents. Brookdale owns and operates independent, assisted and dementia-care facilities, with a total of 454 facilities in 32 states and the ability to serve approximately 34,900 residents.

About American Retirement Corporation

American Retirement Corporation is a national senior living and health care services provider offering a broad range of care and services to seniors, including independent living, assisted living, skilled nursing and Alzheimer's care. Established in 1978, the company believes that it is a leader in the operation and management of senior living communities, including independent living communities, continuing care retirement communities, Free-standing AL's, and the development of specialized care programs for residents with Alzheimer's and other forms of dementia. The company's operating philosophy is to enhance the lives of seniors by striving to provide the highest quality of care and services in well-operated communities designed to improve and protect the quality of life, independence, personal freedom, privacy, spirit, and dignity of its residents. The company currently operates 82 senior living communities in 19 states, with an aggregate unit capacity of approximately 15,350 units and resident capacity of approximately 17,100.

Where to Find Additional Information about American Retirement Corporation, Brookdale and the Merger

American Retirement Corporation intends to file a proxy statement in connection with the proposed merger. American Retirement Corporation shareholders should read the proxy statement and other relevant materials when they become available, because they will contain important information about American Retirement Corporation, Brookdale and the proposed merger. In addition to the documents described above, American Retirement Corporation and Brookdale file annual, quarterly and current reports, proxy statements and other information with the SEC. The proxy statement and other relevant materials (when they become available), and any other documents filed with the SEC by American Retirement Corporation or Brookdale are available without charge at the SEC's website, at www.sec.gov, or from the companies' websites at http://www.arclp.com and http://www.brookdaleliving.com, respectively.

American Retirement Corporation, Brookdale and their respective officers and directors may be deemed to be participants in the solicitation of proxies from American Retirement

Corporation shareholders in connection with the proposed merger. A description of certain interests of the directors and executive officers of American Retirement Corporation is set forth in the American Retirement Corporation proxy statement for its 2006 annual meeting which was filed with the SEC on April 17, 2006. A description of certain interests of the directors and officers of Brookdale is set forth in Brookdale's proxy statement for its 2006 annual meeting, which was filed with the SEC on April 21, 2006. Additional information regarding the interests of such potential participants will be included in the definitive proxy statement and other relevant documents to be filed with the SEC in connection with the proposed merger.

Forward Looking Language

Certain items in this press release may constitute forward-looking statements made by Brookdale or American Retirement Corporation (collectively, the "Companies") within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to, statements relating to our ability to close the acquisition, satisfaction of closing conditions, obtaining consents, and the timing of the closing of the acquisition. Words such as "expect(s)" and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. The Companies can give no assurance that their expectations will be attained. Factors that could cause actual results to differ materially from the Companies' expectations include, but are not limited to, whether conditions to the closing of the transaction will not be satisfied and other risks detailed from time to time in the Companies' respective SEC reports. Such forward-looking statements speak only as of the date of this press release. The Companies expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in their expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.